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2020 (5) TMI 106 - AT - Income TaxRevision u/s 263 - disallowance of 5% of the total purchases - Reopening of assessment - HELD THAT - The issue on the basis which reopening has been done, has been examined by the A.O and after verifying the evidences, a conscious decision has been taken by the A.O when passing the assessment order on 11-3-2016. A perusal of the order u/s 263 passed by the CIT shows that in the show cause notice, Pr. CIT has mentioned that the disallowance of 5% of the total of such purchases is erroneous and prejudicial to the interest of revenue within the meaning of sec. 263 of the Act. However, when it came to the order passed u/s 263 he does not say as to how the said assessment order passed u/s 143(3) read with sec. 147 for the A.Y. 2010-11 dated 11-2-2016 is erroneous insofar as it is prejudicial to the interest of revenue. CIT also fails to answer the very primary question that if the purchases are going to be treated as bogus and the addition is going to be made of the entirety of the purchases what happens to the sales that have been disclosed, as also the stocks by treating the said purchases as bogus. Sales which have been disclosed cannot be touched. The stock statement of the assessee would also stands disturbed. A perusal of the assessment order however, shows that these have been examined by the A.O and after considering the facts the estimated addition of 5% of purchases have been made by the A.O. The issues have been examined by the A.O and just because the opinion as arrived by the A.O is at a variation of the opinion of the learned Pr. CIT, would not grant the learned Pr. CIT the powers of revision u/s 263 - Decided in favour of assessee.
Issues:
Reopening of assessment for examining alleged Hawala purchases; Validity of order passed under section 263 of the Income-tax Act, 1961. Analysis: 1. Reopening of Assessment for Alleged Hawala Purchases: The appeal was filed against the order of the Principal Commissioner of Income Tax (Pr. CIT) for the assessment year 2010-11, concerning alleged Hawala purchases by the assessee. The assessee, a partnership firm engaged in manufacturing, had purchased H.R. and C.R. sheets from a specific entity. The Assessing Officer (A.O) re-opened the assessment based on information indicating Hawala transactions. The A.O verified the transactions, finding them recorded in the books, but the alleged Hawala parties were not produced by the assessee. Consequently, 5% of the purchases were assessed as income. The Pr. CIT issued a show cause notice proposing revision under section 263, citing the Gujarat High Court decision. The assessee responded after the deadline, leading to the Pr. CIT setting aside the assessment for fresh determination of income, which was challenged in the appeal. 2. Validity of Order under Section 263: The Tribunal analyzed the Pr. CIT's order under section 263, noting the lack of specific reasons for considering the original assessment as erroneous and prejudicial to revenue. The Pr. CIT referred to the purchases as bogus based on unverified information, leading to the order setting aside the assessment. However, the Tribunal observed that the A.O had examined the issue, made a conscious decision, and added 5% to the purchases after considering the facts. The Tribunal found that differing opinions between the A.O and the Pr. CIT did not justify the revision under section 263. The Pr. CIT failed to address the impact on disclosed sales and stock if purchases were deemed bogus. Ultimately, the Tribunal allowed the appeal, setting aside the revisional order under section 263. In conclusion, the Tribunal held that the A.O's decision to add 5% of purchases as income was based on proper examination of facts, and the Pr. CIT's revision under section 263 lacked justification. The Tribunal emphasized that differing opinions do not warrant revision and upheld the original assessment for the assessment year 2010-11.
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