INCOME TAX DEPARTMENT, MUMBAI vs. PERRY IMPEX, MUMBAI

Facts

The assessee firm was allegedly taken over, and it was contended that reassessment notices and orders were issued to a non-existent entity. The AO initiated reassessment proceedings based on information that the assessee made purchases from parties providing accommodation entries for bogus sales. The AO estimated income by adding a percentage of these bogus purchases.

Held

The Tribunal held that the reassessment proceedings were validly initiated. While the reassessment notice was initially issued to a non-existent entity, the assessee continued to participate in the proceedings. The Tribunal also upheld that the purchases were indeed accommodation entries. However, the profit estimation was reduced from 5% to 2.5% of the bogus purchases, considering the nature of the diamond business and established norms.

Key Issues

Whether the reassessment proceedings were validly initiated against a non-existent entity, and the correct estimation of profit on bogus purchases.