Assessee did not filed its return of income and the case was reopened on the basis of information from investigation made by the CBI. The AO had disallowed entire purchases and also had made receipts reflecting in bank account and outstanding dues of loans/creditors.  The CIT(A), inter-alia restricted the addition on account of alleged bogus purchase to 12.50%.Assessee had, inter-alia, challenged the reopening and had also disputed the addition of 12.5% as sustained by the CIT(A). Hon’ble ITAT observed that Assesse was non-filer, the books of accounts were not maintained, the Assessee failed to file even basis details before the AO. AT the time of issuance of notice for reassessment; adequacy of the reasons recorded is not required to be tested. Investigation made  by the CBI was tangible material. Considering these facts persisting in the case; the re-assessment based on investigation made by CBI was held valid.

In regards to addition of 12.50% of bogus purchase; the Hon’ble Tribunal observed that it was a case where circular trading was entered by Assessee with related parties. The sales and purchase were not reliable as the goods were sold without movement of goods. The transaction were settled through journal entries. Accordingly, it was held that addition of 12.50% of the bogus purchases as sustained by the CIT(A) was justifiable. (AY. 2009-10)