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2022 (9) TMI 789 - AT - Income TaxRevision u/s 263 by CIT - unexplained source of the purchase expenditure u/s 69C - HELD THAT - This is not a fit case for initiation of proceedings under 263 for the following reasons. Firstly, we observe that from the facts before us, simply because TCS has not been collected on certain purchases does not automatically imply that the said purchase is non-genuine/bogus. Assessee has brought on record sufficient evidence to prove the genuineness of transactions so conducted with the seller. Secondly, we observe from the memo of appeal before CIT(Appeals) filed by the assessee against the original assessment order that the issue whether the purchase is bogus or not is also the subject matter of appeal before Ld. CIT(Appeals). It is well-settled law that once the proceedings are before CIT(Appeals) in respect of certain issues, then the same issue again cannot be re-agitated by taking recourse to proceedings under section 263 as held in VAM RESORTS HOTELS PVT. LTD. 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT and SMT. RENUKA PHILIP 2018 (12) TMI 129 - MADRAS HIGH COURT where it is not held that when an appeal is pending before Commissioner (Appeals), exercise of jurisdiction under section 263 by Principal Commissioner would be barred. Thirdly, it is a well-settled law that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to interests of Revenue. As in the instant facts, if the AO after giving due application of mind on the issue before him during the course of assessment proceedings has disallowed 30% of the expenditure by invoking the provisions of 40(a)(ia) then the Principal CIT cannot, in our view, resort to proceedings u/s 263 of the Act on the basis that the AO ought to have disallowed the entire expenditure u/s 69C of the Act and erred in invoking 40(a)(ia) of the Act. Therefore, in our considered view in the light of the facts/legal position discussed above, this is not a fit case for invoking the provisions of section 263 of the Act. In the result, appeal of the assessee is allowed.
Issues:
1. Jurisdiction under section 263 of the Income Tax Act. 2. Correct application of law by the Assessing Officer. 3. Examination of the impugned issue during assessment proceedings. 4. Pending appeal before the Commissioner (Appeals). 5. Validity of the revisionary proceedings. Jurisdiction under section 263 of the Income Tax Act: The appeal involved a challenge to the jurisdiction under section 263 of the Income Tax Act by the Principal Commissioner. The Principal CIT initiated proceedings based on the non-deduction of TCS on purchases, treating them as bogus. The AO disallowed 30% of the purchases under section 40(a)(ia) of the Act. The Principal CIT contended that the entire purchase amount should have been treated as unexplained expenditure under section 69C. However, the Tribunal noted that the absence of TCS did not automatically render the purchases non-genuine. The assessee provided evidence of the genuineness of transactions, and the issue was also under appeal before the CIT(A). The Tribunal held that the proceedings under section 263 were not justified in this case. Correct application of law by the Assessing Officer: The Principal CIT set aside the assessment order, stating that the AO did not conduct inquiries into the genuineness of purchases. However, the Tribunal found that the AO had considered the issue during assessment proceedings. The Tribunal observed that the AO had disallowed 30% of the expenditure under section 40(a)(ia) after due application of mind. It held that the Principal CIT could not revise the assessment order based on a different interpretation of the law. The Tribunal concluded that the AO's decision was not erroneous, and the proceedings under section 263 were unwarranted. Examination of the impugned issue during assessment proceedings: The Tribunal noted that the issue of genuineness of purchases was examined by the AO during assessment proceedings. The assessee provided detailed submissions and evidence to support the legitimacy of transactions. The Tribunal found that the AO had considered the issue adequately, and there was no need for revision under section 263. Pending appeal before the Commissioner (Appeals): The assessee argued that since the issue was under appeal before the CIT(A), the Principal CIT's revisionary proceedings were not justified. The Tribunal agreed, citing precedents that prevent re-agitation of issues under appeal in section 263 proceedings. It held that the pending appeal before the CIT(A) was a valid reason to reject the Principal CIT's order. Validity of the revisionary proceedings: The Tribunal ultimately allowed the appeal of the assessee, finding that the proceedings under section 263 were not warranted. It emphasized that the AO's decision, based on a possible interpretation of the law, did not justify revision by the Principal CIT. The Tribunal concluded that the assessment order was not erroneous and prejudicial to the revenue's interests, thus rejecting the Principal CIT's order. In conclusion, the Tribunal ruled in favor of the assessee, highlighting the adequacy of the AO's examination of the issue, the pending appeal before the CIT(A), and the lack of justification for revisionary proceedings under section 263.
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