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2021 (3) TMI 148 - AT - Income TaxRevision u/s 263 - Estimation of income on bogus purchases - AO estimated addition of 3% against these purchases and added the same to the income of the assessee - HELD THAT - AO estimated an addition against the same @3%. It is notable that the sales were not doubted and there could be no sale without actual purchase of material. Therefore, there was no option but to estimate the additions to account for unaccounted profit which may have generated by the assessee in these suspicious transactions. The action of Ld. AO in estimating the addition could not be said to be arbitrary or perverse, in any manner. There was due application of mind by Ld. AO on the stated issue. Merely because, Ld. Pr.CIT did not agree with the aforesaid estimation, the same could not be sole ground to invoke revisional jurisdiction u/s 263 particularly when there is due application of mind to the issue by Ld. AO. Once a possible view has been taken by Ld. AO, the revisional jurisdiction u/s 263 would not be valid. Merely because the inquiries were not done in a particular manner, the same would not make assessment order expose to revisional jurisdiction u/s 263.- Decided in favour of assessee.
Issues:
Validity of revisional jurisdiction u/s 263 exercised by Pr. Commissioner of Income-Tax for AY 2014-15. Analysis: The appellant challenged the revisional jurisdiction exercised by the Principal Commissioner of Income-Tax under Section 263 for the Assessment Year 2014-15. The appellant contended that the CIT erred in setting aside the assessment order without fully appreciating the facts, not recording own satisfaction, and considering the appellant's submissions. The appellant argued that the CIT's action was a change of opinion and ignored judicial pronouncements. The Tribunal carefully considered the submissions, material on record, and judicial precedents cited during the hearing. The material facts revealed that the assessee, a resident firm engaged in diamond manufacturing & trading, faced an addition of ?7.40 Lacs on alleged bogus purchases during assessment under Section 143(3). The assessee had made purchases from an entity named M/s Prime Star, directed to substantiate these transactions. The assessee provided purchase invoices, ledger confirmations, financial statements, and bank statements to support the transactions, emphasizing the identification of goods purchased and sold. The Assessing Officer estimated an addition of 3% against these purchases based on documentary evidence and submissions, adding it to the assessee's income. Subsequently, the Principal Commissioner invoked Section 263, opining that the assessment order lacked proper inquiry, was erroneous, and prejudicial to revenue. The Principal Commissioner directed a fresh assessment considering the genuineness of purchases and sales from entities associated with accommodation entries. The Tribunal observed that the Assessing Officer had considered the issue of suspicious purchases, requested details, and received documentary evidence. The AO's estimation of 3% addition was based on due consideration of evidence, as there could be no sale without actual purchase. The Tribunal noted the application of mind by the AO and deemed the estimation reasonable. Disagreeing with the Principal Commissioner's view, the Tribunal held that the AO's decision was not arbitrary or perverse, warranting the quashing of the revisional order and allowing the appeal. In conclusion, the Tribunal found in favor of the appellant, quashing the revisional order and allowing the appeal against the validity of revisional jurisdiction exercised under Section 263 for the AY 2014-15. Order pronounced on 13th January 2021.
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