2022 (7) TMI 943 - AT - Income Tax

Reopening of assessment u/s 147 - information of investigation wing Mumbai - bogus purchases - HELD THAT:- We find that in case Peass Industrial Engineers (P) Ltd [2016 (8) TMI 280 - GUJARAT HIGH COURT] while considering the validity of similar notice of reopening, which was also issued on the basis of information of investigation wing that they have searched a person who is engaged in providing accommodation entries, held that where after scrutiny assessment the assessing officer received information from the investigation wing that well known entry operators of the country provided bogus entries to various beneficiaries, and assessee was one of such beneficiary, assessing officer was justified in re-opening assessment. Similar view was taken by Hon’ble Jurisdictional High Court in Pushpak Bullion (P) LTD. [2017 (8) TMI 961 - GUJARAT HIGH COURT] - Therefore, respectfully following the order of Hon’ble High Court, we find that the assessing officer validly assumed the jurisdiction for making re-opening under section 147 on the basis of information of investigation wing Mumbai.

Mandatory Permission u/s 151 - The other objection raised by the ld AR of the assessee that no permissions as required under section 151 was obtained by the assessing officer. We find that the ld AR for the assessee raised this objection for the first time, however, no evidence to substantiate such submission is placed on record. Thus, in absence of any proof or evidence that no permission under section 151 was availed by assessing officer before making reopening has substance. Therefore, we do not find any merit in the ground No. 1 of appeal by assessee. Hence, the ground No. 1 in assessee’s appeal is dismissed.

Estimation of income for bogus purchases - As profit margin in the trade and business of assessee is ranging from 5% to 7% and the disallowances restricted by the assessing officer are at 12.5% of the disputed/ impugned purchase shown from the entry provider. Considering all disallowance restricted by Ld. CIT(A) is on higher side, keeping in view of the profit margin in the industry.

It is settled law that in case of disputed purchases shown from such hawala dealers only the profit element embedded in such transaction, to avoid the possibility of revenue leakage, is to be disallowed, and not the substantial part of the transaction. No doubt the assessee has shown extremely low G.P yet the disallowance at rate of 12.5% is on higher side. This combination in similar cases, wherein the purchases are shown from Bhanwarlal Jain, have restricted or enhanced the addition to the extent of 6% of impugned or disputed purchases. Therefore, taking the consistent the disallowance of purchases in the present case is also restricted to 6% of the disputed purchases. In the result, the grounds of appeal raised by assessee are partly allowed