2019 (2) TMI 1623 - AT - Income Tax

Condonation of delay - delay of 179 days - reasonable cause - Mistake of counsel or wrong advice by counsel - HELD THAT - Assessee has accepted bonafide advice of the tax consultant who was regularly looking after its tax matters but subsequently other consultant advised for filing appeal. We are of the view that this is a reasonable cause as the assessee s tax Counsel herewith admitted in her affidavit that she advised not file appeal against revision order. Mistake of counsel or wrong advice by counsel constitutes reasonable cause. Hence we condone the delay and admit the appeal. as regularly looking after its tax matters but subsequently other consultant advised for filing appeal. We are of the view that this is a reasonable cause as the assessee s tax Counsel herewith admitted in her affidavit that she advised not file appeal against revision order. Mistake of counsel or wrong advice by counsel constitutes reasonable cause. Hence we condone the delay and admit the appeal. Revision u/s 263 - bogus purchases are not examined or enquired into by AO - assessment farmed by the AO as erroneous and prejudicial to the interest of the Revenue in the event that alleged - HELD THAT - We also noted that the CIT is of the view that the AO is erroneous and prejudicial to the interest of the revenue on account of the purchases made from these parties are bogus and if he hold such view before revising the assessment u/s 263 the CIT ought to have made some inquiry of his own and for instance CIT should have issued noticed u/s 133(6) to the concerned parties or CIT should have examine whether the said parties are declared as hawala parties by Sales Tax Authorities. This indicates that the order of CIT revising the assessment is without application of mind. We find that the assessee has submitted/ produced all the documents before the AO during the course of assessment proceedings namely invoices given details of stocks payments were made through the banking channels and subsequently the parties were confirmed the said transaction. Even the assessee has shown sales affected from these purchases and stock tally is matching and in such circumstances the parties cannot be held non-genuine. Hon ble Bombay High Court in the case of MOIL Ltd. vs. CIT 2017 (5) TMI 258 - BOMBAY HIGH COURT wherein held that if a query is raised during assessment proceedings and if the assessee responds to the said query merely because the said aspect is dealt with in the assessment would not lead to a conclusion that the AO has not applied his mind to the response of the assessee. Revision order passed by CIT is without any basis and the assessment order does not point out that the same is erroneous or prejudicial to the interest of the Revenue. Even the CIT could not prove that the assessment order is erroneous or prejudicial to the interest of revenue in the given facts and circumstances of the case. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the revision order under section 263 of the Income Tax Act.
3. Examination of alleged bogus purchases amounting to ?8,22,86,744/-.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was barred by a limitation of 179 days. The assessee filed a condonation petition, explaining that the delay was due to their regular tax consultant being unaware of the provisions of section 263 of the Act. The consultant advised not to challenge the revision order but to pursue the matter before the AO. An affidavit was filed, stating this position. The Tribunal found the explanation reasonable, condoned the delay, and admitted the appeal, citing that a mistake or wrong advice by counsel constitutes a reasonable cause.

2. Validity of the Revision Order under Section 263 of the Income Tax Act:
The main issue in this appeal was the revision order by the PCIT, which set aside the assessment framed by the AO, holding it as erroneous and prejudicial to the interest of the Revenue due to alleged bogus purchases not being examined. The assessee argued that the scrutiny assessment was conducted with due inquiry and investigation on the impugned issue. The Tribunal noted that the PCIT based his decision on the investigation wing's report without providing the assessee an opportunity to cross-examine or review the report. This was deemed as "borrowed satisfaction." The Tribunal cited the Hon’ble Bombay High Court's decision in "PCIT vs. Shodiman Investments (P.) Ltd." and "MOIL Ltd. vs. CIT," emphasizing that the AO had verified all necessary details during the original assessment. The Tribunal concluded that the PCIT's order was without any basis, quashed the revision order, and allowed the appeal.

3. Examination of Alleged Bogus Purchases Amounting to ?8,22,86,744/-:
The PCIT had issued a show cause notice, alleging that the assessee had taken accommodation entries of bogus purchases from Daksh Diamond & Jewel Diamond, which were part of the Bhanwarlal Jain Group, a group known for providing accommodation entries. The assessee provided all necessary evidence to support the genuineness of the purchases, including payment details through account payee cheques and stock records. The Tribunal noted that the AO had already scrutinized these details during the original assessment. The Tribunal found that the PCIT did not conduct any independent inquiry and relied solely on the investigation wing's report. The Tribunal held that the assessment order was not erroneous or prejudicial to the interest of the Revenue and quashed the revision order.

Conclusion:
The Tribunal allowed the appeal, quashing the revision order under section 263 of the Income Tax Act. The Tribunal emphasized that the PCIT's decision was based on borrowed satisfaction without independent inquiry, and the original assessment had duly scrutinized the relevant details. The Tribunal also condoned the delay in filing the appeal, finding the explanation reasonable. The appeal was allowed in favor of the assessee.