2019 (11) TMI 1181 - AT - Income Tax

Condonation of delay - delay of 194 days in filing this appeal - HELD THAT - AR of the assessee who represented before the Ld. Pr. CIT was not aware that the impugned order of Ld. Pr. CIT passed u/s 263 is appealable before this Tribunal. Later when the assessee consulted a senior Counsel, he advised him to file the appeal and then only the assessee realized that the assessee could have preferred an appeal before this Tribunal, thus, the delay happened and thereafter once the brief had been handed over to the Counsel he filed the appeal within 10 days. Due to the said reason delay of 194 days happened when assessee filed this appeal, which according to him is not intentional and pleads that delay be condoned. Since there is no quarrel in-respect of the facts which led to the delay we are of the opinion that the assessee should not be penalized for the ignorance of the AR as discussed. Revision u/s 263 - Bogus purchases u/s 69C - AO adding the 2.25% GP in respect of the alleged bogus purchase - HELD THAT - AO has made enquiries and the assessee has given details and furnished answers/replies which has been discussed CIT ought not to have taken a view that the AO s order is erroneous for lack of enquiry. It has to be kept in mind that since enquiry was conducted by AO even if inadequate that would not by itself gives an occasion to the Pr. CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the PrCIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then it is incumbent upon the ld. Pr CIT to himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his assessment order was unsustainable in law and therefore the order of the AO was erroneous. We note that the Ld. Pr. CIT has not taken any such exercise as discussed. Thus, in the light of the enquiry conducted by the AO on the issue on which the Ld. Pr. CIT has found fault with, the Ld. Pr. CIT s finding of fault cannot be sustained and, therefore, there was no basis to find fault with. Pr. CIT erred in usurping the jurisdiction without satisfying the jurisdictional condition precedent as stipulated in sec. 263 and, therefore, we are inclined to quash the impugned order of the Ld. Pr. CIT. Appeals of the assessee are allowed.

Issues Involved:
1. Delay in filing the appeal.
2. Legitimacy of the revisional jurisdiction exercised under Section 263 of the Income Tax Act, 1961.
3. Adequacy of the Assessing Officer's (AO) inquiry into alleged bogus purchases.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 194 days. The assessee's Authorized Representative (AR) was unaware that the order passed under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT) was appealable before the Income Tax Appellate Tribunal (ITAT). Upon consulting a senior counsel, the assessee realized the possibility of an appeal and filed it within 10 days after handing over the brief to the counsel. The Tribunal condoned the delay, referencing the Supreme Court decision in 167 ITR 471 (SC), and opined that the assessee should not be penalized for the AR's ignorance.

2. Legitimacy of the Revisional Jurisdiction Exercised Under Section 263:
The main grievance was against the Pr. CIT's action of exercising revisional jurisdiction under Section 263. The Pr. CIT issued a show cause notice (SCN) stating that the AO did not properly verify the transportation and delivery of goods allegedly purchased from bogus dealers. The Pr. CIT set aside the AO's reassessment order and directed further investigation into the transportation and delivery of the goods.

3. Adequacy of the Assessing Officer's Inquiry into Alleged Bogus Purchases:
The AO initially conducted an assessment under Section 143(3) and later reopened the assessment under Section 147 based on information from the Maharashtra Sales Tax Department about bogus purchases amounting to ?4.43 crores. The AO made inquiries, issued notices under Section 133(6), and added 2.25% over the gross profit (GP) shown by the assessee on the alleged bogus purchases.

The Tribunal noted that the AO had made adequate inquiries during the reassessment proceedings. The assessee provided details of purchases, including the mode of delivery and transportation, which were "Free Delivery by Truck." The AO accepted the purchases as genuine based on confirmations from vendors and payments made through account payee cheques.

The Tribunal emphasized the difference between "lack of inquiry" and "inadequate inquiry." It held that if the AO made inquiries, even if inadequate, it would not justify the Pr. CIT's interference under Section 263. The Pr. CIT should have conducted his own investigation and recorded clear findings if he deemed the AO's inquiry insufficient.

The Tribunal referenced the Calcutta High Court's decision in CIT Vs J.L. Morrison (I) Ltd (366 ITR 593) and the Supreme Court's decision in the case of CIT-7 Vs. M/s. Odeon Builders Pvt. Ltd., Civil Appeal No. 9604-9605 of 2018, which upheld the view that only the profit element of bogus purchases should be added when payments are made through banking channels and sales are accepted.

The Tribunal concluded that the AO's action of adding 2.25% over the GP shown by the assessee was a plausible view and not unsustainable in law. The Pr. CIT's direction to investigate transportation charges was found to be erroneous, as the assessee had not claimed any transportation expenses.

Conclusion:
The Tribunal quashed the Pr. CIT's order under Section 263, holding that the AO's reassessment was neither erroneous nor prejudicial to the interest of the revenue. It allowed the appeals of the assessee.

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