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2020 (9) TMI 730 - AT - Income TaxRevision u/s 263 - issues mentioned in reasons recorded in writing while re-opening the original assessment - bogus purchases - HELD THAT - AO in the instant case has taken a view of taxing only 20% of bogus purchase, which cannot, by any standard, be construed as a non-plausible view. Pune benches of the Tribunal in Vinod Bhagwan Patil vs. Pr. CIT 2020 (9) TMI 692 - ITAT PUNE has quashed the order u/s 263 of the Act in similar circumstances. We, therefore, set-aside the impugned order on this score. We now accentuate the other point of view taken by the ld. Pr. CIT that the AO failed to examine sundry creditors shown by the assessee, details of other purchases, valuation of stock and various expenses as claimed in the Profit and loss account in the reassessment proceedings. DR has categorically submitted that the direction of the ld. Pr.CIT for examining the creditors and purchase accounts etc. along with valuation of stock was connected with the bogus purchases only and not de hors the same. We find this position to be amply emerging from the immediately next line in Para 6.1 of the impugned order to the effect that Since assessee s computation of profit are dependent on all the above issues and when bogus purchases have come to his notice, it was imperative on the part of the AO to verify all these aspects while completing the assessment. That apart, we find that the ld. Pr.CIT has not indicated anything amiss in these items independent of the issue of bogus purchases. - Decided in favour of assessee.
Issues:
1. Revision u/s 263 of the Income-tax Act, 1961. 2. Validity of additional ground raised by the assessee. 3. Examination of bogus purchases and sundry creditors. Issue 1: Revision u/s 263 of the Income-tax Act, 1961 The appeal was against the order passed by the Pr. Commissioner of Income-tax-3, Pune u/s.263 of the Act for the assessment year 2010-11. The Pr.CIT held that the AO's addition of only 20% of the bogus purchase price was unjustified. The Tribunal observed that the power of revision does not extend to debatable issues and that the AO's decision was supported by a judgment. The Tribunal held that the assessment order was not erroneous and prejudicial to the interest of Revenue, as the AO's action was in line with legal principles. Issue 2: Validity of additional ground raised by the assessee The assessee raised an additional ground challenging the Pr.CIT's direction to examine sundry creditors and other expenses beyond the reasons for reassessment. The Tribunal admitted the additional ground, noting it raised a pure question of law. However, the Tribunal dismissed the ground as no assessment had taken place prior to the reassessment, and the additional ground lacked merit. Issue 3: Examination of bogus purchases and sundry creditors The AO added 20% of the bogus purchases amounting to ?6,93,574 based on reduced gross profit ratio. The Pr.CIT held the AO's assessment to be erroneous for not fully taxing the hawala purchases. The Tribunal disagreed, citing a judgment that supported the AO's approach. The Tribunal also noted that the Pr.CIT's direction to examine sundry creditors and other expenses was related to the bogus purchases issue. As such, the Tribunal set aside the Pr.CIT's order, allowing the appeal on merits. In conclusion, the Tribunal allowed the appeal, finding that the AO's assessment was not erroneous and prejudicial to the interest of Revenue. The Tribunal upheld the AO's decision to tax only 20% of the bogus purchases and set aside the Pr.CIT's direction to examine sundry creditors and other expenses, as they were connected to the bogus purchases issue.
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