SUBHASH VITAL KANEKAR,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, 28(3), MUMBAI

Aggrieved by confirmation of certain addition of alleged bogus purchases of Rs.14.66 Lacs for Assessment Year 2012-13, the assessee is in further appeal before us. The assessment was framed u/s 143(3) r.w.s. 147 on 26/03/2015 which was confirmed by Ld. CIT(A)-26, Mumbai vide impugned order dated 28/06/2019. The assessee being resident individual is stated to be engaged in the business of printing and supply of offset printed banners. The original return was processed u/s 143(1) which was reopened vide notice u/s 148 dated 31/10/2013.

The Ld. AR assailed the order of Ld. AO on legal grounds by submitting that the case was reopened on mere suspicion / guess-work and therefore, the reopening was invalid. On merits, Ld. AR submitted that the additions may be estimated at 15% as accepted by assessee in AYs 2010-11 & 2011-12. The Ld. DR, on the other hand, submitted that Ld. AO had sufficient reasons to reopen the case and the additions were quite justified. Our adjudication would be as given in succeeding paragraphs. 3.1 The perusal of reasons recorded to reopen the case of the assessee would show that as per information received from DGIT (Inv.), it transpired that the assessee made suspicious purchase in AYs 2010- 11 & 2011-12 which ultimately culminated into certain additions in the hands of the assessee. These additions have been accepted by the assessee. On the basis of said information, Ld. AO formed an opinion that the assessee would have taken bogus bills in AY 2012-13 also to suppress profits. Another reason of reopening was that there was difference in TDS figures reflected by the assessee in the return of income vis-à-vis figures available with the department. Accordingly, the case was reopened as per due process of law. The assessee objected to the same However, the objections were disposed-off by speaking order dated 16/01/2015. 3.2 During assessment proceedings, it transpired that the assessee made suspicious purchases of Rs.14.66 Lacs from 6 entities as detailed in para-4 of the assessment order. Since the assessee could not substantiate the purchases to the satisfaction of Ld. AO, the same were added to the income of the assessee. 3.3 Upon further appeal, Ld. CIT(A) upheld the reopening by observing that at the initiation stage, what was required is only a reason to believe and not the established fact of escapement of income. At the stage of issue of notice, the only question to be considered was whether there was relevant material on which a reasonable person could have formed a requisite belief that income has escaped assessment. Based on precise information as received from DGIT(Inv.), Ld. AO had this belief and reopened the case. Therefore, the same was perfectly valid in the eyes of law. On merits, the quantum addition was confirmed. Aggrieved, the assessee is in further appeal before us. 4. So far as the validity of reassessment proceeding is concerned, it could be gathered that the original return was processed u/s 143(1). Subsequently, upon receipt of certain information from DGIT (Inv.), it transpired that the assessee made suspicious purchase in AYs 2010-11 & 2011-12. On the basis of said information, Ld. AO formed a belief that assessee would have taken bogus bills in AY 2012-13 also to suppress profits. Another reason of reopening was the fact that there was difference in TDS figures. On the given facts, in our opinion, the presence of this material / information was quite enough to reopen the case and no infirmity could be found in reopening the case of the assessee. The legal grounds, thus raised, stand dismissed. 5. Regarding quantum of additions, Ld. AR has submitted that similar issue arose in AYs 2010-11 & 2011-12 wherein Ld. AO estimated addition of 15% in set-aside proceedings. Since the same has been accepted by both the sides, similar estimation may be made in this year.