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2018 (11) TMI 504 - AT - Income TaxValidity of reassessment proceedings - purchase of material in the grey market - receipt of certain information from Sales Tax Department, Maharashtra regarding dealers indulging in bogus purchase bills and it was noted that the assessee stood beneficiary of such bogus purchase bills - Held that:- The original return was processed u/s 143(1) and therefore, the only requirement to initiate the reassessment proceedings was that AO had reasons to believe that certain income escaped assessment. The tangible material came in the possession of AO in the shape of information from Sales Tax Authority which suggested escapement of income. Therefore, the proceedings were validly initiated and we concur with the stand of lower authority in this regard. This ground of assessee’s appeal stand dismissed. So far as the merits concerned, there could be no sale without purchase of material since the assessee was engaged in trading activities. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee was in possession of primary purchases documents. At the same time, the assessee could not conclusively substantiate the delivery of material and failed to produce any of the party to confirm the transactions. Notices issued u/s 133(6) elicited no satisfactory response. All these factors cast a serious doubt on assessee’s claim. Therefore, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases, which Ld. CIT(A) has rightly done. - Decided against assessee.
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