2013 (9) TMI 1275 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the order passed by the Assessing Officer (A.O.) u/s 143(3) for A.Y. 2007-08.
2. Legitimacy of the order passed by the Assessing Officer (A.O.) u/s 143(3) r.w.s. 147 for A.Y. 2008-09.
3. Whether the Commissioner of Income Tax (CIT) was justified in invoking u/s 263 for both assessment years.

Summary:

Issue 1: Legitimacy of the order passed by the A.O. u/s 143(3) for A.Y. 2007-08

The assessee challenged the order passed by the CIT-I, Pune u/s 263, arguing that the A.O.'s order dated 31/12/2009 was after proper verification and application of mind. The A.O. had conducted a survey u/s 133A and found that certain purchases were bogus. The A.O. concluded that 20% of the non-genuine purchases should be treated as additional gross profit, leading to an addition of Rs. 28,61,640/-. The CIT, however, felt that the entire amount of Rs. 1,43,08,200/- should have been added. The Tribunal held that the A.O. had considered the Survey report and the explanation provided by the assessee, and thus, the order was not erroneous.

Issue 2: Legitimacy of the order passed by the A.O. u/s 143(3) r.w.s. 147 for A.Y. 2008-09

For A.Y. 2008-09, the assessee's return was re-opened based on the DDIT (Inv.) report. The A.O. treated 20% of the purchases as bogus and made an addition to the income. The CIT invoked u/s 263, directing the A.O. to re-examine the issue. The Tribunal found that the A.O. had considered the Survey report and the explanation given by the assessee and had made a reasoned decision. Thus, the order was not erroneous.

Issue 3: Whether the CIT was justified in invoking u/s 263 for both assessment years

The Tribunal emphasized that for exercising powers u/s 263, the order must be both erroneous and prejudicial to the interest of the Revenue. The CIT's disagreement with the A.O.'s view does not render the order erroneous. The A.O. had acted within the legal framework, considering the Survey report and the retraction of the statement by the Director. The Tribunal quashed the CIT's orders u/s 263 for both A.Y. 2007-08 and 2008-09, holding that the assessment orders were not erroneous.

Conclusion:

The Tribunal allowed both appeals, holding that the CIT's invocation of u/s 263 was not justified, and the orders passed by the A.O. were not erroneous. The orders passed by the CIT for A.Y. 2007-08 and 2008-09 were quashed.