Facts of the Case

The assessee, engaged in the business of running a brick kiln, filed returns of income for the relevant assessment years. The original assessments were completed. Subsequently, the Assessing Officer reopened the assessments under Sections 147/148 on the basis of information suggesting that certain purchases were allegedly bogus or non-genuine.

The reassessment proceedings resulted in additions to income on account of such purchases, which were confirmed by the Commissioner of Income Tax (Appeals). Aggrieved by the orders of the CIT(A), the assessee filed appeals before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the reopening of assessment under Sections 147/148 was valid in law.
  2. Whether additions made on account of alleged bogus purchases were sustainable.
  3. Whether reassessment proceedings were based on proper application of mind and independent inquiry by the Assessing Officer.

 Petitioner’s Arguments (Assessee)

  • The reopening was based merely on third-party information without independent verification.
  • There was no fresh tangible material warranting reassessment.
  • Purchases were genuine and supported by books of account and relevant records.
  • The Assessing Officer failed to establish that the transactions were non-genuine.
  • The reassessment proceedings amounted to a change of opinion, which is impermissible in law.

Respondent’s Arguments (Revenue)

  • The reopening was justified based on credible information regarding bogus transactions.
  • The assessee failed to satisfactorily substantiate the genuineness of purchases.
  • The additions were rightly made to prevent revenue leakage.
  • The orders of the lower authorities were valid and should be upheld.

Court Order / Findings (ITAT)

The Tribunal examined the material on record and found that the reassessment proceedings lacked proper legal foundation. It observed that reopening cannot be sustained merely on borrowed satisfaction or unverified third-party information without independent application of mind.

The Tribunal held that the Assessing Officer did not establish any concrete evidence to prove that the purchases were bogus. Consequently, the additions made were unsustainable.

Accordingly, the Tribunal allowed the appeals of the assessee and set aside the orders of the CIT(A) as well as the reassessment orders.

Important Clarification

The decision reiterates that:

  • Reopening of completed assessments must be based on tangible material.
  • Independent inquiry by the Assessing Officer is essential.
  • Additions cannot be sustained solely on suspicion or third-party allegations.
  • Jurisdictional requirements for reassessment must be strictly complied with.

 Link to download the order - 

https://itat.gov.in/public/files/upload/1674476614-ITA%20No.%2013%20to%2015%20Alld%202022%20Paras%20Brick%20Field.pdf

Link to download the order - 

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