2022 (3) TMI 1033 - AT - Income Tax

Reopening of assessment u/s 147 - estimation of income on bogus purchases - retention of the addition to the extent of 12.5% of the bogus purchases - whether such notice has been received by the assessee in time or not? - HELD THAT:- The notice for assessment year 2010 – 11 could have been issued up to 31st of March 2017. Though the notice have been issued on 7/10/2016 but as it has been served on the assessee on 16/2/2017, we do not find any infirmity in the reopening proceedings. Accordingly we uphold the reopening of the assessment made by the learned holding that assessee has e been served notice u/s 148 of the Act in time.

Assessee has not been served the notice as there was no reference that notice u/s 148 of the act on 16/2/17 have been served on whom - The signature placed on the above notice as well as the signature of the assessee completely matches, we are of the opinion that notice u/s 148 of the act has been served on the assessee himself on 16/2/2017.

Assessee has challenged that the approval was mechanical - AR could not show that there is any infirmity in the reasons recorded. The satisfaction has been recorded by the learned principal Commissioner of income tax as per performa at serial number 12 has clearly recorded his satisfaction which shows that he has gone through the reasons recorded by the learned assessing officer and then he is satisfied with the proposal of issuing notice u/s 148 and thereafter he granted his approval. Naturally, when reasons recorded are sound enough to stand on its own legs, clear, unassailable, manner or language of recording approval does not matter much. More so, as there is no specific manner and language of recording such approval prescribed by law, therefore approval granted if shows application of sound mind, deserves to be upheld. All decision cited before us shows flawed reasons and consequently approval also failed. In view of this, we are not in agreement with the argument of the learned authorised representative that the approval granted by the learned principal Commissioner of income tax is cryptic and does not show application of mind. - Decided against assessee.

Bogus purchases - The amount of purchase consideration paid to above 4 parties are through account payee cheques and the sale consideration received by assessee from bill Power Ltd is also through account payee cheques. As held by the honourable Bombay High Court in case of principal Commissioner of income tax versus Muhammad Haji Adam and Co and others [2019 (2) TMI 1632 - BOMBAY HIGH COURT] that when compared the purchases and sale statement of the assessee, revenue accepted the sale, there is no reason to reject the purchases because without purchases there could not have been sale of goods. As the fact of purchases from hawala parties is not disputed, the additions limited to the extent of bringing the gross profit rate on purchases at the same rate of other genuine purchases were upheld. In the present case, the gross profit rate on total purchases of ₹ 1,064,411,721 at the rate of 0.35%

We direct the learned assessing officer to retain the addition in the hands of the assessee on account of the bogus purchases of ₹ 906,090 against the addition confirmed by ld CIT (A) of ₹ 32,819,832/–. Accordingly, ground number 2 of the appeal of the assessee is partly allowed.