Reopening Based on Information must be Reliable with Some Evidence to Believe Purchase as Bogus

Dove Consultants Pvt. Ltd. Vs DCIT (ITAT Delhi)

Reopening Based on Information must be Reliable and Some Evidence to Believe Purchase as Bogus, Proceedings Quashed By Delhi ITAT

We have considered the rival contentions of both the Ld. Representative of the parties. A perusal of the reasons recorded for reopening of the assessment (as reproduced above) would show that the Assessing Officer had only an information that the assessee M/s. Dove Consultants Pvt. Ltd. has made a transaction with M/s. Bhola Trading Company. However, there was no reliable information that the said transaction was a sham transaction. The assessee admittedly is engaged in the business of Electric Contractor. The assessee purchased electric cables from the said M/s. Bhola Trading Company. The Assessing Officer, however, doubted the said transaction. However, it has been noted by the Assessing Officer himself that during the investigation, ledger account of M/s. Bhola Trading Company in the books of assessee company was reflecting the aforesaid transaction of Rs 2,36,76,932/-. The purchase invoices were also produced before the investigation wing. The Assessing Officer further mentioned about the gross turnover of the assessee and observed that the income of the assessee company has considerably increased from AY 2008-09 to AY 2009-10. The Ld. Counsel, in this respect has  submitted that the assessment year under consideration is AY 2009-10 and the assessee’s income as per the reasons recorded has considerably increased. The sales / consumption of the material by the assessee has also not been doubted by the Assessing Officer. There is no mention of any evidence available before the AO to show that the aforesaid transaction was a bogus transaction. The assessing officer merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside. A perusal of the reasons recorded by the Assessing Officer does not show that the Assessing Officer had any credible information or evidence to believe that the aforesaid transaction made by the assessee was bogus, rather, a reading of the whole of the contents of the document containing reasons for reopening of the assessment would reveal that the reopening of the assessment has been made merely on the basis of suspicion. Even the sales / consumption of the material purchased through the aforesaid transaction has not been doubted. Even the turnover and gross profits of the assessee during the year have considerably increased.

We, therefore, do not find any justification on the part of the assessing officer for reopening of the assessment. The same being bad in law, the consequential assessment made by the assessing officer is quashed. The appeal of the assessee stands allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

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