2023 (7) TMI 1514 - AT - Income Tax

Revision u/s 263 - bogus purchases - HELD THAT - Apart from purchase vouchers, the assessee also furnished transport built is in respect of these purchases to show that these were genuinely purchased and received at its business premises. AO, on the basis of such evidences, got satisfied and also discussed the issue in the assessment order. AO recorded that the assessee was called upon to produce books of accounts, bills/vouchers of purchases and sales. The same were produced by the assessee and duly verified on test check basis. AO, further recorded that the assessee furnished purchase register along with purchase bills and transportation details , which were verified by him and found to be correct. As against this, the ld. CIT revised the order on the ground that The order was passed without due verification of the above information , namely, accommodation entries were obtained from the five parties. It is, therefore, evident that the initiation of revision proceedings on this score is not valid. Not only, no such transactions were entered into with the first 4 parties, the genuineness of the 5th party, whose purchases were recorded, was also substantiated with relevant purchase bills and transportation details. Such details were produced before the AO, who recorded this fact in the assessment order and also the correctness of the assessee s claim. As manifest that the assessment order cannot be construed as erroneous much less prejudicial to the interest of the Revenue. We, therefore, overturn the impugned order.

Summary

Issues: Assessment order challenged under section 263 for alleged erroneous assessment based on Hawala purchase bills.

Analysis:
The appeal was against an order passed under section 263 of the Income-tax Act, 1961, relating to the assessment year 2011-12. The Assessing Officer (AO) had initiated reassessment proceedings due to alleged Hawala purchase bills totaling Rs. 2,08,20,445 from five parties. However, no addition was made during the assessment under section 143(3) r.w.s. 147. The Principal Commissioner of Income Tax (Pr. CIT) found the assessment order erroneous and prejudicial to the Revenue's interest as the AO did not examine the issue. The Tribunal reviewed the facts and submissions, noting that the AO had verified and accepted the genuineness of the purchases from the fifth party, Classic Enterprises, based on relevant documents. The Pr. CIT's revision was based on the assumption of accommodation entries, which was found invalid as the purchases were substantiated with bills and transportation details. The Tribunal concluded that the assessment order was not erroneous or prejudicial to the Revenue, overturning the Pr. CIT's decision.

The AO had sought necessary evidence during the assessment proceedings, and the assessee provided a detailed reply denying purchases from the first four parties but confirming purchases from Classic Enterprises. The AO verified the purchase register, bills, and transportation details, finding them correct. The Pr. CIT's revision was based on the lack of due verification, which was unfounded as the AO had indeed verified the details and accepted the genuineness of the purchases. The Tribunal emphasized that the assessment order was based on verified information, and the purchases were adequately substantiated, rendering the revision proceedings invalid.

The Tribunal's decision highlighted the importance of proper verification of information by the AO, which was done in this case, contrary to the Pr. CIT's assertion. The Tribunal found no error in the assessment order and ruled in favor of the assessee, allowing the appeal. The judgment emphasized the significance of substantiating claims with relevant documents and the AO's role in verifying the accuracy of information provided during assessment proceedings. The decision serves as a reminder of the importance of thorough examination and verification by tax authorities before deeming an assessment order as erroneous or prejudicial to the Revenue's interest.