I-T - Information received by AO from DGIT (Inv) which in turn is based on incriminating inputs received from VAT constitutes new material to justify reopening of assessment: ITAT
By TIOL News Service
MUMBAI, NOV 29, 2018: THE ISSUE IS - Whether information received by the AO from DGIT(Inv) which in turn is based on incriminating information received from Maharashtra VAT constitutes new tangible material to necessitate reopening of assessment. YES IS THE VERDICT.
Facts of the case
The assesse a reseller in ferrous and non-ferrous metals, had filed return of income for relevant AY, which was processed by Revenue u/s 143(1) of the Act accepting the returned income. The information was received by AO from DGIT(Inv) Wing, Mumbai that there was a scam unearthed by the Maharashtra Sales Tax Department regarding alleged issue of hawala bills or accommodation entries by several parties from Mumbai and assessee was found to be one of the beneficiary of these alleged bogus purchases. This material incriminating information so received by the AO led to formation of a belief that income of the assessee has escaped assessment which led to the reopening of the assessment u/s 147 of the Act. The AO, quantified the profit element in these alleged bogus purchases by bringing 12.5% of the alleged bogus purchases of Rs. 3,83,34,602/- as profit element embedded in these alleged bogus purchases to be a reasonable etimation by adding the same to business income of the assessee which led to the additions to the tune of Rs. 47,91,826/- to the returned income in the hands of the assessee. On appeal, CIT(A) dismissed the appeal of the assessee and confirmed the additions.
Tribunal held that,
++ AO also got information from Maharashtra VAT authorities that these alleged bogus dealers are either not traceable or in case these parties are found, it was found by Maharashtra VAT department that these parties were not doing any business. This material and tangible incriminating information which was received by the AO from DGIT(Inv.), Mumbai which incriminating information in turn was based on information furnished by Maharashtra VAT authorities to Investigation wing led to formation of belief by the AO that income of the assessee has escaped assessment which led to the reopening of the assessment u/s. 147 of the Act by the AO wherein notice u/s. 148 was issued by the AO to the assessee which was stated by the AO to have been duly served on the assessee . Thus, it was a fresh material and tangible incriminating material which was the basis of having reasons to belief by the AO to reopen the concluded assessment within provisions of Section 147 of the Act. It is undisputed that originally the return of income was processed u/s 143(1) and no assessment u/s 143(3) was framed as well notices u/s 148 was issued within 4 years from the end of the assessment year. The first proviso to Section 147 is , thus, not applicable. The assessee was confronted with this incriminating information by the AO wherein assessee was called upon by the AO to explain the same . The assessee could not link the purchases with the corresponding sales. The assessee also could not produce books of accounts before the AO . The assessee could not produce these parties before the AO. The assessee requested the AO during the course of re-assessment proceedings to make reasonable additions with respect to the alleged bogus purchases which led AO to quantify additions of the profits embedded in these alleged bogus purchases which was quantified @ 12.5% of the alleged bogus purchases of Rs. 3,83,34,602/- which led to the additions to the tune of Rs. 47,91,826/- to the returned income in the hands of the assessee which was later confirmed by CIT(A) as the assessee still could not reconcile purchases with sales as also the assessee could not prove physical movement of material nor proof of delivery of material, transport challans , octroi receipts, GRN’s and goods inward register was also not produced before CIT(A). It was decided to uphold the validity of the reopening of assessment u/s 147 of the Act. The notice u/s 148 of the 1961 Act was issued within four years from the end of assessment and first proviso to Section 147 of the 1961 Act is not applicable. Further, fresh and new tangible and material incriminating information was received by the AO as detailed from DGIT(Inv.), Mumbai which in turn was based on incriminating information received from Maharashtra VAT authorities incriminating assessee to be beneficiary of alleged bogus purchases and accommodation entries which in our considered view keeping in view factual matrix of the case was sufficient to reopen the concluded assessment within parameters of Section 147 of the 1961 Act. Thus, it was decided to dismiss the appeal of the assessee.
(See 2018-TIOL-2272-ITAT-MUM)
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