2019 (1) TMI 878 - AT - Income Tax

Revision u/s 263 - setting aside the assessment order u/s. 153A and directing the AO to make a fresh assessment order - bogus purchases - Held that - We find that the assessee, during the course of assessment proceedings, had supplied the party-wise details of purchases and a copy of the same has been placed in the paper-book. Upon perusal of the same, it could be gathered that the during impugned AY, the assessee had not made any purchase from M/s Realstone Exports Limited as wrongly noted by Ld. Pr.CIT. The said fact is also evidenced from the information provided by Audit wing & extracted wherein we find that the purchases from this entity are stated to be made during AY 2010-11 and not in 2009-10. Therefore, the assessment order, at least to that extent could not be termed as erroneous and prejudicial to the interest of the revenue from any angle and therefore, jurisdiction u/s 263, in this regard, could not be held to be valid. Regarding purchases made from other entity, AR has submitted that since complete details thereof were submitted during the course of assessment proceedings which were accepted by Ld. AO with due application of mind and therefore, proceedings u/s 263 were bad. We find that no discussion, whatsoever, on this aspect has been made in the assessment order. Nothing on record suggest that AO, during assessment proceedings, made further investigation, to verify the genuineness of the purchases made by the assessee from the aforesaid entity. This being the case, the submissions made by Ld. AR, in this regard, could not be accepted. The Ld. AR has relied on the case of Raja Bahadur Motilal (P) Ltd Vs ITO 1990 (3) TMI 60 - BOMBAY HIGH COURT for the same. However, we find that this decision has been rendered in the context of reassessment proceedings u/s 147 and therefore, do not apply to the case in hand. No opportunity of being heard was provided to the assessee in violation of principle of natural justice - Held that - We find that a show-cause notice was issued to the assessee and the same was duly replied to by the assessee wherein the assessee agitated the proposed proceedings and demanded further details from Ld. Pr.CIT without demonstrating as to how the figures were not matching. This being the case, we do not find any force in this argument raised by Ld. AR. We hold that the revisional jurisdiction u/s 263 invoked by Ld. Pr.CIT with respect to alleged bogus purchases made by assessee from M/s. Utkantha Trading Pvt. Ltd. were valid in law whereas the direction to verify the purchases made from M/s. Realstone Exports Ltd. were bad in law. The impugned order stand modified to that extent. The assessee s appeal stands partly allowed in terms of our above order.

Summary

Issues Involved:
1. Invocation of revisional jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr.CIT).
2. Alleged bogus purchases from M/s. Utkantha Trading Pvt. Ltd. and M/s. Realstone Exports Ltd.
3. Opportunity of hearing and principles of natural justice.

Issue-Wise Detailed Analysis:

1. Invocation of Revisional Jurisdiction under Section 263:
The assessee contested the invocation of revisional jurisdiction under Section 263 by the Pr.CIT for the Assessment Years 2009-10 and 2010-11. The Pr.CIT set aside the assessment order dated 28/03/2016 and directed the Assessing Officer (AO) to make a fresh assessment. The assessee argued that the Pr.CIT erred in passing the order without giving a proper, reasonable, and appropriate opportunity of hearing, which is against the principles of natural justice and equity. The Tribunal examined the facts and found that the Pr.CIT had issued a show-cause notice to the assessee, which was duly responded to. Therefore, the Tribunal did not find any violation of natural justice.

2. Alleged Bogus Purchases:
The Pr.CIT invoked Section 263 on the grounds that the assessee made alleged bogus purchases amounting to ?211.87 Lacs from M/s. Utkantha Trading Pvt. Ltd. and ?1247.51 Lacs from M/s. Realstone Exports Ltd. The Tribunal noted that the information regarding these bogus purchases was received from the DGIT (Investigation) and was available at the time of the exercise of revisional jurisdiction. The Tribunal relied on the judgment of the Hon’ble Apex Court in CIT Vs. Shree Manjunathesware Packing Products & Camphor Works, which clarified that the term 'record' includes all records available at the time of examination by the Commissioner. Therefore, the Pr.CIT was justified in considering this information to invoke Section 263.

3. Opportunity of Hearing and Principles of Natural Justice:
The assessee argued that the Pr.CIT did not provide the requisite details/information related to the alleged bogus purchases, which is against the principles of natural justice. However, the Tribunal found that the Pr.CIT had issued a show-cause notice and the assessee had responded to it. The Tribunal noted that the assessee did not demonstrate how the figures were not matching and thus did not find any violation of natural justice.

Separate Judgments:
For AY 2009-10, the Tribunal found that the assessee had not made any purchase from M/s. Realstone Exports Ltd. during the relevant year, as wrongly noted by the Pr.CIT. Therefore, the assessment order could not be termed erroneous and prejudicial to the interest of the revenue regarding this entity. However, the Tribunal upheld the revisional jurisdiction with respect to the alleged bogus purchases from M/s. Utkantha Trading Pvt. Ltd. Thus, the appeal for AY 2009-10 was partly allowed.

For AY 2010-11, the Tribunal upheld the revisional jurisdiction assumed by the Pr.CIT with respect to the alleged bogus purchases from M/s. Utkantha Trading Pvt. Ltd., as the facts and circumstances were identical to those in AY 2009-10. Therefore, the appeal for AY 2010-11 was dismissed.

Conclusion:
The appeal for AY 2009-10 (ITA No. 3503/Mum/2018) was partly allowed, while the appeal for AY 2010-11 (ITA No. 3504/Mum/2018) was dismissed.