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2017 (12) TMI 1000 - ITAT KOLKATARevision u/s 263 - AO had not examined the addition to be made in the light of the provision of section 69C for bogus purchases - Held that:- In the present case, the assessee has shown the expenditure on purchases in the books of accounts and explained the source of payment through banking channels. In such circumstances, there was no basis to say that applicability of the provisions of sec.69C of the Act were not enquired into by the AO while concluding the assessment. The Hon’ble Allahabad High Court in the case of Pr. CIT vs Ram Shankar Yadav (2017 (8) TMI 858 - ALLAHABAD HIGH COURT) held that provisions of Sec.69C of the Act are not mandatory and the AO has discretion to add or not to add unexplained expenditure based on sound judicial principles. In the impugned order, the CIT has observed that the AO ought to have made enquiries from the alleged bogus purchase bill/entry providers and held that purchases were bogus. The AO has already held that the purchases were bogus and the only question before him was as to whether the entire purchases ought to be added as income or only a portion of the purchases towards inflated cost. CIT has made reference to Explanation-2 to Sec.263 of the Act introduced by the Finance Act, 2015. Explanattion-2 so introduced sets out cases in which order of the AO can be deemed as erroneous. The said explanation does not dispense with compliance or existence of (i) there being no enquiry made by the AO; (ii) the AO’s conclusion being contrary to CBDT Circular or (iii) against decision of Jurisdictional High Court or Supreme Court. In the present case the CIT in the impugned order has not brought facts to show the existence of absence of enquiry especially when the AO has already concluded that the purchases by the assessee from four parties mentioned by the DGIT(Investigation) Mumbai in its report were bogus. Thus the orders of the AO were not erroneous and prejudicial to the interest of the revenue for failure to make enquiry on the applicability of Sec.69C of the Act. We, therefore, quash the orders u/s 263 of the Act and allow the appeals of the assessee.
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