2017 (10) TMI 772 - AT - Income Tax

Revision u/s 263 - unexplained bogus purchases - inadequate or no enquiry - Held that - Assessing Officer has not gone into the aspects, as has been observed in the impugned order and the information received from the investigation wing was not properly investigated. It is also noted that the Ld. Assessing Officer did not make any enquiry with respect to remaining four parties from where the assessee claim to have made bogus purchases amounting to ₹ 2,30,89,345/-. It is also noted that these parties filed an affidavit before the Sales Tax Authorities that they were involved in bogus transactions/bogus sales, without effecting the actual delivery of goods. The assessee also did not produce these parties for examination to the satisfaction of the Assessing Officer. The Ld. Assessing Officer without making any enquiry with respect to these parties simply accepted the claim of the assessee, meaning thereby, the Ld. Assessing Officer mechanically accepted the claim of the assessee without application of mind or due enquiry, therefore, certainly the assessment order is erroneous as well as prejudicial to the interest of Revenue, causing loss to the Revenue. The Ld. Assessing Officer was expected to make detailed enquiry into the matter, which was not done. Totality of facts, clearly indicates that the assessment order has been framed without full enquiries, therefore, the ld. Commissioner justifiably invoked revisional jurisdiction. Commissioner has merely directed the Assessing Officer to make proper enquiries and after affording opportunity to the assessee decide in accordance with law, therefore, principally; the assessee should not feel aggrieved, because, if the assessee is in a position to explain the factual matrix, no grievance will be caused to the assessee. At the same time, the mandate of Article 265 of Constitution of India is to levy and collect due taxes. In view of this factual matrix, we affirm the stand of the ld. Commissioner. - Decided against assessee.

Summary

Issues Involved:
1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Legitimacy of bogus purchases and the corresponding assessment.
3. Adequacy of enquiry conducted by the Assessing Officer.
4. Whether the assessment order was erroneous and prejudicial to the interest of Revenue.

Issue-wise Detailed Analysis:

1. Invocation of Revisional Jurisdiction under Section 263:
The assessee challenged the invocation of revisional jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT), arguing that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT invoked Section 263 on the grounds that the Assessing Officer (AO) did not make any enquiry regarding the purchases from four specific parties, which were later found to be involved in providing accommodation entries without actual business transactions. The Tribunal upheld the Pr. CIT’s invocation of Section 263, noting that the AO failed to conduct necessary enquiries, rendering the assessment order erroneous and prejudicial to the Revenue.

2. Legitimacy of Bogus Purchases and Corresponding Assessment:
The case involved bogus purchases from multiple parties. The AO initially made additions based on these purchases, which were later restricted to 12.5% by the Commissioner of Income Tax (Appeal). The Tribunal subsequently deleted this addition. However, new information revealed additional bogus purchases from four more parties, which were not examined by the AO during the assessment proceedings. The Tribunal found that these purchases were indeed bogus, as the parties involved had provided accommodation entries without actual delivery of goods.

3. Adequacy of Enquiry Conducted by the Assessing Officer:
The AO’s enquiry was found lacking as it did not cover the four additional parties involved in bogus transactions. The Tribunal emphasized that there is a difference between lack of enquiry and inadequate enquiry. In this case, the AO’s failure to investigate the additional parties amounted to a lack of enquiry, justifying the invocation of Section 263 by the Pr. CIT. The Tribunal cited various judicial pronouncements to support the necessity of thorough enquiries by the AO to ensure the assessment order is neither erroneous nor prejudicial to the Revenue.

4. Whether the Assessment Order was Erroneous and Prejudicial to the Interest of Revenue:
The Tribunal analyzed Section 263 and concluded that an order is deemed erroneous and prejudicial to the interest of the Revenue if it is passed without necessary enquiries or verification. The AO’s failure to investigate the additional bogus purchases from the four parties rendered the assessment order erroneous and prejudicial to the Revenue. The Tribunal upheld the Pr. CIT’s direction for a fresh assessment after conducting appropriate enquiries, affirming that the original assessment order caused a loss to the Revenue due to the AO’s oversight.

Conclusion:
The Tribunal dismissed the assessee’s appeal, upholding the Pr. CIT’s invocation of revisional jurisdiction under Section 263. The Tribunal affirmed that the AO’s failure to investigate the additional bogus purchases rendered the assessment order erroneous and prejudicial to the interest of the Revenue. The Tribunal directed the AO to conduct a fresh assessment after making proper enquiries and providing the assessee an opportunity to be heard. The order was pronounced in the open court on 21/08/2017.