2019 (9) TMI 1174 - AT - Income Tax

Revision u/s 263 - Bogus purchases - estimating profit on the non genuine purchases - HELD THAT - Addition applying the gross profit rate is in consonance with various judicial precedents available on the issue. Therefore, it cannot be considered to be an erroneous view as it is a possible view. Moreover, the allegation of learned Principal Commissioner that the Assessing Officer has overlooked the material on record and has not made any enquiry which ought to have been made, appears to be on wrong assumption of facts, hence, not tenable. We hold that in the given facts and circumstances of the case, the assessment order passed cannot be held as erroneous and prejudicial to the interests of Revenue.That being the case, exercise of power under section 263 of the Act to revise the assessment order is neither justified nor valid. Accordingly, we are inclined to quash the impugned order passed by learned Principal Commissioner under section 263 of the Act. Ground raised by the assessee is allowed.

Summary

Issues:
Challenging three separate orders under section 263 of the Income Tax Act for assessment years 2009-10, 2010-11, and 2011-12.

Analysis:
- The appeals filed by the assessee contested the orders passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act for the three assessment years. The lead appeal for 2009-10 was considered, where the assessee, engaged in trading, faced a re-assessment due to suspicions of non-genuine purchases. The Assessing Officer added 4% of the non-genuine purchases to the income, which the assessee did not contest. However, the Principal Commissioner found the assessment order erroneous and prejudicial to revenue's interests, citing judicial precedents for 100% addition on non-genuine purchases.

- The assessee argued against the Principal Commissioner's decision, stating that the Assessing Officer had conducted a thorough enquiry into the purchases and that only the profit element should be added on non-genuine purchases. The assessee referenced a recent High Court decision supporting this view. The Departmental Representative supported the Principal Commissioner's decision, emphasizing that the 4% addition was inadequate and prejudicial to revenue.

- The Tribunal analyzed the facts and contentions. It noted that the Assessing Officer had diligently investigated the purchases, including issuing notices and conducting enquiries. The Tribunal found that the Principal Commissioner's reliance on specific judicial decisions for 100% addition was not universally applicable. It highlighted that different facts were involved in the present case compared to the cases cited. The Tribunal upheld the Assessing Officer's decision to estimate profit on non-genuine purchases, as supported by various judicial precedents, including the jurisdictional High Court's ruling. It concluded that the assessment order was not erroneous or prejudicial to revenue, thus quashing the Principal Commissioner's order under section 263.

- The Tribunal's decision in the lead appeal for 2009-10 was applied to the appeals for 2010-11 and 2011-12, as the issues were similar. Consequently, all appeals by the assessee were allowed, overturning the Principal Commissioner's orders.

In conclusion, the Tribunal ruled in favor of the assessee, quashing the Principal Commissioner's orders under section 263 for all three assessment years based on a detailed analysis of the facts, legal precedents, and the Assessing Officer's actions in the investigation of non-genuine purchases.