M/S. G.H. VIJAPURA,,MUMBAI vs. THE DY.CIT, SABARKANTHA CIRCLE,, HIMATNAGAR

Assessee is in appeal before the Tribunal against order of ld.CIT(A)-2, Ahmedabad dated 19.8.2015 passed for the Asstt.Year 2009-10.

In the first ground of appeal, the assessee has challenged reopening of the assessment under section 147 of the Income Tax Act, 1961.

In response to the notice received under section 148 of the Act, the assessee filed a letter contending therein that the return submitted originally be treated as submitted in response to the notice under section 148 of the Act. The assessee thereafter filed objection to the reopening and contended therein that its purchases are genuineness. In case they are found to be non- genuine then at the most 0.5% of such purchases be treated as income escaped and chargeable to tax. This plea was raised with 3 an object of avoiding litigation with the Department. The ld.AO has rejected objections filed by the assessee and proceeded to pass assessment order under section 147 r.w.s. 143(3) of the Act. He found that purchases amounting to Rs.41,67,822/- were alleged to have been made from these bogus concerns. This fact was admitted by Shri Zahid H. Vijapura during a survey carried out at the company which was converted from the present partnership firm. Thus, on the basis of information collected from VAT department as well as non-production of any evidence by the assessee proved nature of the purchases being bogus. The ld.AO has made an addition of Rs.41,67,822/-.

Dissatisfied with the assessment order, the assessee carried the matter in appeal before the ld.CIT(QA). The ld.CIT(A) has upheld opening of the assessment and also confirmed the addition. The ld.counsel for the assessee while impugning the order of the ld.CIT(A) contended that there was no tangible material with the AO to form a belief that income has escaped assessment. He further contended that notice under section 148 was issued after expiry of four years from the relevant assessment year, and proviso appended to section 147 came to the rescue of the assessee because a scrutiny assessment was made in the present year, and the assessment can only be reopened on account of failure of the assessee to disclose all material fact fully and truly. According to the ld.counsel for the assessee there is no failure at the end of the assessee. It has also disclosed all the material facts fully and truly. In his second fold of submissions, he contended that there is no live-link between the information available with the AO vis-à-vis formation of belief. He also submitted that the AO has not annexed complete material while

On the other hand, the ld.DR supported orders of the Revenue authorities.

We have considered rival submissions and gone through the record. The first issue before us is validity of reopening of assessment by the AO under section 147 of the Act. We find that assessment was reopened on the basis of information received by the AO from the VAT Department of Mumbai, and therefore, the AO was having prima facie reasons to believe that income has escaped assessment. A perusal of the reasons recorded by the AO for initiating reassessment proceedings and ultimate finding of the AO that at the time of filing of the original return of income, never proved by the assessee that purchases recorded in the books of accounts were genuine. Rather, Shri Zahid H. Vijapura, in his statement recorded during the survey conducted on 18.1.2013 has admitted his inability to produce documentary evidence like gate, pass, lorry receipts, goods receipts note, octori and transportation invoice etc. regarding purchases made from the above parties. Therefore, the assessee has not disclosed fully and truly all the relevant material necessary for assessment of its 5 income. The ld.AO is thus, for valid reason has reopened the assessment on the basis of credible information received from VAT Department supported by the admission of Shri Zahid H.Vijapura, which cannot be said to be bad in law. The case laws relied on the assessee are distinguishable on facts, and are of no help to the assessee in the present case. We uphold reopening of the assessment under section 148 of the Act.

The second plea of the ld.counsel for the assessee is that only element of profit ought to be assessed from the alleged bogus purchase. In other words, right from the AO upto the ITAT, it has been submitted that 0.5% or any other amounts ought to be assessed as income of the assessee against the gross- disallowance of alleged bogus purchase. Qua the above submissions, we are of the view that we are conscious about the availability of large number of judgments, wherein it has been held that in case of bogus purchase only profit earned by the assessee by adopting such a modus operandi is to be assessed as an income. Percentage specified in these judgments varies between 5% to 25% depending upon nature of the business carried out by the assessee or purchases made by it. However, it is pertinent to observe that in those cases sales have been accepted. The assessees have proved the genuineness of the sales and quantification of stock. In other words, assessees have purchased from party “A”, but obtained bills from Party “B”. In that exercise assessees have avoided sales-tax, VAT etc., and that amount has been brought o tax. But if an assessee was not maintaining quantity details and unable to show the sales and only obtained bogus purchase bills, in such cases, 100% disallowance deserves to be made. This fact has been recognized in the case of 6 Swetambar Steels Ltd., ITO, 1075/Ahd/1997. This order of the ITAT has been upheld upto the Hon’ble Supreme Court. Considering the detailed finding of the ld.CIT(A) on both the aspects; the issue of reopening of the assessment as well as on merit, we do not find any error in the order of the Revenue authorities. The appeal of the assessee is thus devoid of any merit. It is dismissed.

In the result, appeal of the assessee is dismissed.