2016 (2) TMI 1281 - AT - Income Tax

Revision u/s 263 - Bogus purchases - no inquiry v/s inadequate inquiry - According to CIT AO has not made any enquiry with Sales Tax authorities whether the concerns were registered with them or obtained copy of their Sales Tax Returns to verify the transactions shown therein - Departmental Representative submitted that in Gujarat VAT/ST is 4% and the amount of VAT/ST shown to be debited in their profit and loss account by the concerns casts doubt about the genuineness of the transactions undertaken by these concerns - HELD THAT - So-called bogus purchase in show-cause notice wherein there was no such finding/show cause notice in reference to the seized material found and survey taken place as well as various finding given by the CIT in a finding portion of the order. In the show-cause notice paragraph 4 regarding Avadhesh International and Harsh Fashion, in reference to non-filing of invoices, it was said that no such invoices was asked for because the payment has been made by account payee cheques as per assessee s bank account submitted and as per the confirmation and address filed during the course of original assessment. Regarding the CIT order with regard to the advances from debtors/creditors, there was no such showcause notice in reference to this finding. In view of the above, the order passed by the CIT u/s 263 is prejudicial to the interest of assessee, more particularly, when CIT has given contradictory finding in the order passed in comparison to the show-cause notice issued. Various evidences and seized materials have not been relied upon in the show-cause notice. In such situation, action u/s 263 is not justified. The enquiry has been made by the Assessing Officer at the relevant point of time. It is not the case of no enquiry but it is a case of insufficient enquiry. In the absence of any adverse material, except a statement recorded under s. 133A(3)(iii) the view taken by the Assessing Officer could not be said to be a view impermissible in law and hence, it could not also be said that the order passed by the Assessing Officer was prejudicial to the interest of the Revenue. All details with regard to the purchases were filed before the lower authorities, as held by the Hon ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd, 2009 (9) TMI 633 - DELHI HIGH COURT . Since all the parties are assessed to tax, inquiries were made, confirmations were filed and the order was passed u/s 143(3) after considering the survey report and other material; in such situation invoking provisions of Section 263 of the Act are not justified. - Decided in favour of assessee.

Summary

Issues Involved:
1. Invocation of revisionary powers under Section 263 of the Income Tax Act.
2. Jurisdiction of the Commissioner of Income Tax (CIT) to invoke Section 263.
3. Adequacy of the Assessing Officer's (AO) inquiry during the assessment proceedings.
4. Validity of the CIT's findings and directions.
5. Consideration of the assessee's objections and case laws cited.

Issue-wise Detailed Analysis:

1. Invocation of Revisionary Powers under Section 263:
The primary issue revolves around whether the CIT correctly invoked revisionary powers under Section 263. The assessee argued that the CIT's initiation of revisionary powers was based on a proposal from the AO, which is not permissible. The Tribunal referred to the case of Ashokkumar Shivpuri vs. CIT, where it was held that revision proceedings initiated on the basis of a proposal from the AO without independent application of mind by the CIT are invalid. The Tribunal found that the CIT initiated the proceedings based on the recommendation from the AO, which was not justified.

2. Jurisdiction of the CIT to Invoke Section 263:
The assessee contended that the CIT lacked jurisdiction to invoke Section 263 as the AO had already conducted a thorough inquiry and adopted a possible opinion. The Tribunal observed that the CIT's action was based on the survey conducted under Section 133A and the subsequent findings. However, the Tribunal noted that the AO had already considered these findings during the original assessment. Thus, the CIT's invocation of Section 263 was deemed unjustified as it amounted to a change of opinion rather than addressing an erroneous order.

3. Adequacy of the AO's Inquiry During the Assessment Proceedings:
The Tribunal examined whether the AO had conducted sufficient inquiries during the assessment proceedings. It was noted that the AO had issued various notices, including under Section 133(6), and had considered the detailed replies and documents submitted by the assessee. The Tribunal emphasized that the AO's inquiries, although possibly insufficient, were not non-existent. Citing the case of Sunbeam Auto Ltd, the Tribunal held that inadequate inquiry does not justify invoking Section 263.

4. Validity of the CIT's Findings and Directions:
The CIT had set aside the assessment order, directing the AO to conduct a fresh assessment. The Tribunal scrutinized the CIT's findings, particularly concerning the alleged bogus purchases and job work payments. It was found that the AO had already considered these issues during the original assessment, and the CIT's directions were based on the same survey findings. The Tribunal concluded that the CIT's order was based on a re-evaluation of the same facts, which is not permissible under Section 263.

5. Consideration of the Assessee's Objections and Case Laws Cited:
The assessee argued that the CIT did not adequately consider the objections and case laws cited in their submission. The Tribunal agreed, noting that the CIT had only abstracted part of the assessee's objections and failed to address them comprehensively. This oversight was deemed prejudicial to the assessee's interest and against the principles of natural justice. The Tribunal emphasized that the CIT must consider all objections and provide a reasoned order.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the CIT's order under Section 263. It was determined that the CIT's invocation of revisionary powers was unjustified, as it was based on a proposal from the AO without independent application of mind. Furthermore, the AO had conducted sufficient inquiries during the original assessment, and the CIT's directions were based on a re-evaluation of the same facts, which is not permissible. The Tribunal also highlighted the importance of considering all objections and case laws cited by the assessee to ensure a fair and just decision.