2019 (3) TMI 2055 - AT - Income Tax

Revision u/s 263 - assessee was subjected to reassessment proceedings u/s 147 - estimation of income on bogus purchases - assessee was saddled with estimated addition of 12.5% by AO - Pr.CIT noted that the assessee was not maintaining any quantitative register and could not substantiate the delivery of the material and therefore, the full disallowance was to be made as against 12.5% estimated by AO keeping in view the decision Hon ble Apex Court rendered in N.K.Proteins Ltd 2017 (1) TMI 1090 - SC ORDER - HELD THAT - We find that the co-ordinate bench of this Tribunal in the cited case of Rajal Enterprises 2018 (10) TMI 2028 - ITAT MUMBAI when the assessee was able to link the purchases with corresponding sales, the logical conclusion which one can arrived at is, the assessee might not have purchased goods from the declared source but from some other parties. In that event, only the profit element embedded in the bogus purchases can be considered for addition. Therefore, the decision of the AO to restrict the addition to 10% of the bogus purchases is in tune with the consistent view of the tribunal and different high courts in similar nature of cases. That being the case, in our view, the exercise of power under section.263 of the Act in the facts of the present case is invalid. Accordingly, the impugned order passed by the leaned PCIT under section 263 of the Act deserves to be quashed. Decided in favour of assessee.

Summary

Issues:
Validity of order invoking revisional jurisdiction u/s 263 for AY 2010-11.

Analysis:
The appeal challenges the invocation of revisional jurisdiction u/s 263 for the assessment year 2010-11 by the Principal Commissioner of Income-Tax-29, Mumbai. The Authorized Representative for the Assessee argued that a similar jurisdictional decision was overturned by the Tribunal in a previous case. The Departmental Representative did not provide any distinguishing facts. The initial assessment subjected the assessee to reassessment proceedings resulting in an estimated addition of 12.5% due to alleged bogus purchases. The Principal Commissioner observed the lack of proper documentation and ordered a full disallowance based on the Supreme Court decision in N.K.Proteins Ltd. vs. DCIT. The order was deemed erroneous and prejudicial to revenue interests under Section 263(1), leading to a set-aside for readjudication.

The Tribunal referred to a previous case where revisional proceedings under Section 263 were quashed due to the Assessing Officer's proper inquiry into the genuineness of purchases and the absence of relevant Supreme Court decisions during the assessment period. The Tribunal noted that the addition based on bogus purchases is a factual issue, varying case by case. In the absence of incriminating evidence as in the N.K. Proteins case, the Tribunal upheld the Assessing Officer's decision to restrict the addition to 10% of the bogus purchases. The Tribunal found no distinguishing features in the present appeal and followed the previous decision to quash the order under Section 263 and restore the Assessing Officer's order.

In conclusion, the Tribunal allowed the appeal, emphasizing the consistency in approach with previous decisions and the absence of substantial differences to warrant a different outcome. The order invoking revisional jurisdiction under Section 263 was quashed, reinstating the Assessing Officer's decision.

Order pronounced on 18th March 2019.