2023 (4) TMI 279 - AT - Income Tax

Revision u/s 263 by CIT - Estimation of income - bogus purchases - HELD THAT - As per the provisions of section 263(1), Explanation 1(c) of the I.T. Act, inter alia, where any order referred to in section 263(1) of the I.T. Act, and passed by the AO, had been the subject matter of any appeal filed before 1.6.1988, the powers of the PCIT or Commissioner under section 263(1) shall extend to such matters as had not been considered and decided in such appeal. In the case at hand, addition made by the AO by applying the GP rate, had been challenged by the assessee by way of appeal. The purchases qua which such addition had been made were, therefore, subject matter of appeal before the ld. CIT(A) and the ld. CIT(A) had passed his order on 15.4.2021. The show cause notice under section 263 of the I.T. Act had, on the other hand, been issued only on 17.3.2022, i.e., almost a year later. That being so, given the provisions of Explanation 1(c) to section 263(1) of the I.T. Act, the revisional jurisdiction under section 263 of the I.T. Act, by issuance of such show cause notice, could not have been assumed. CIT vs. Bholenath Poly Feb Pvt. Ltd. 2013 (10) TMI 933 - GUJARAT HIGH COURT and PCIT vs. Rishabhdev Technocable Ltd. 2020 (2) TMI 662 - BOMBAY HIGH COURT are eloquent in this regard. The view taken by the Assessing Officer was a possible view, due to which, invocation of powers under section 263 of the I.T. Act could not have been done. Appeal of the assessee is allowed. 22. We find that the Assessing Officer, therefore, had carried out a thorough enquiry and examination of the purchases in question and it was only after such enquiry and examination that the addition was made by the Assessing Officer, by applying GP rate. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Legitimacy of the purchases from M/s Yuvraj Enterprises and M/s Shakti Enterprises.
2. Jurisdiction of PCIT under Section 263 of the Income Tax Act after settlement under the Direct Tax Vivad Se Vishwas Act, 2020.
3. Adequacy of the Assessing Officer's investigation during the assessment proceedings.

Summary:

Legitimacy of the Purchases:
The Principal Commissioner of Income Tax (PCIT) issued a show cause notice under Section 263 of the Income Tax Act, 1961, stating that the assessee's purchases from M/s Yuvraj Enterprises and M/s Shakti Enterprises were not genuine. The PCIT noted that the Assessing Officer (AO) had reopened the case under Section 147 and completed the assessment with an addition of Rs.1,48,165 by applying a GP rate of 1.03% on total bogus purchases of Rs.1,43,85,000. The statement of Shri Gaurav Pathak/Thakur, proprietor of the two enterprises, confirmed that no actual business was conducted, and the amounts received by cheque were returned in cash. The PCIT concluded that the AO had not conducted adequate enquiries and allowed expenses without verification, rendering the assessment order erroneous and prejudicial to the interests of the Revenue.

Jurisdiction of PCIT under Section 263:
The assessee contended that the issue had already been settled under the Direct Tax Vivad Se Vishwas Act, 2020, and could not be revisited under Section 263. The Tribunal noted that a Certificate in Form No.5 was issued under the Vivad Se Vishwas Act, confirming the full and final settlement of tax arrears. Section 5(3) of the Vivad Se Vishwas Act explicitly states that no matter covered by such an order shall be reopened in any other proceedings under the Income Tax Act or any other law. The Tribunal referred to multiple judicial precedents, including "Gopalkrishan Rajkumar vs. PCIT" and "PCIT vs. Manju Osatwal," which held that proceedings initiated under Section 263 after a settlement under the Vivad Se Vishwas Act are not sustainable.

Adequacy of AO's Investigation:
The Tribunal observed that the AO had conducted a thorough enquiry into the purchases in question and made an addition by applying a GP rate. The purchases were entered in the stock register maintained by the assessee, and the AO had taken a plausible view. Therefore, the PCIT's invocation of Section 263 was not justified. The Tribunal also noted that the issue of purchases had been subject to appeal before the CIT(A), and the PCIT could not assume jurisdiction under Section 263 for matters already considered in the appeal.

Conclusion:
The Tribunal quashed the order passed by the PCIT under Section 263 of the Income Tax Act, holding that the matter had been conclusively settled under the Direct Tax Vivad Se Vishwas Act, 2020, and the AO had conducted adequate enquiries during the assessment proceedings. The appeal of the assessee was allowed.