2023 (7) TMI 371 - AT - Income Tax

Revision u/s 263 - disallowance of purchases - AO had disallowed only a partial sum - Assessee applied for VSV scheme - HELD THAT - Once the conclusion is reached that M/s Meet Enterprises was engaged in providing accommodation entries in the form of providing bogus sale bills, the ld. AO ought to have disallowed the entire purchases made by the assessee from the said party. Strangely the ld. AO had disallowed only a partial sum representing payments made to M/s Meet Enterprises during the year. The ld. AO had ignored the fact that though the payment was made only for Rs 73,45,040/-, the assessee herein had claimed deduction for purchases to the tune of Rs 1,06,80,540/-. This is a grave error committed by the ld. AO in his assessment. Though the assessee had sought to settle the dispute arising out of reassessment order under VSV scheme, it would be limited only to the extent of disallowance / addition made in the said reassessment . The assessee is not given any blanket immunity so as to prevent the revenue from looking into other matters relating to such assessment year. We hold that the ld. PCIT was duly justified in invoking his revisionary jurisdiction u/s 263 of the Act by cancelling the reassessment framed by the ld. AO as erroneous and prejudicial to the interest of the revenue. Accordingly, the grounds raised by the assessee are dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income-tax Act, 1961.
2. Limitation and validity of the revisionary proceedings under section 263.
3. Examination of the reassessment order regarding alleged bogus purchases from M/s Meet Enterprises.
4. Impact of the Direct Tax Vivad se Vishwas Act, 2020 (VsV) on the revisionary proceedings.

Summary:

1. Jurisdiction of PCIT under Section 263:
The core issue was whether the PCIT was justified in invoking revisionary jurisdiction u/s 263 of the Act concerning the disallowance of purchases amounting to Rs 33,35,500/-. The assessee argued that the impugned order dated 27.03.2021 passed by the PCIT was without jurisdiction, illegal, bad in law, and void-ab-initio. The Tribunal held that the PCIT was justified in invoking his revisionary jurisdiction u/s 263, as the Assessing Officer (AO) had committed a grave error by disallowing only Rs 73,45,040/- instead of the entire amount of Rs 1,06,80,540/- from M/s Meet Enterprises.

2. Limitation and Validity of Revisionary Proceedings:
The assessee contended that the order passed by the PCIT was barred by limitation under section 263(2) of the Act and that the reassessment order had attained finality under the VsV Act. The Tribunal found that the PCIT's action was within the permissible time frame and that the reassessment order was erroneous and prejudicial to the interests of the Revenue, thus justifying the invocation of section 263.

3. Examination of Reassessment Order:
The AO had initially disallowed Rs 73,45,040/- towards bogus purchases from M/s Meet Enterprises, which was found to be non-existent and engaged in providing accommodation entries. The PCIT observed that the AO should have disallowed the entire purchase amount of Rs 1,06,80,540/-. The Tribunal upheld the PCIT's view, stating that the AO's partial disallowance was a serious error that caused prejudice to the Revenue.

4. Impact of VsV on Revisionary Proceedings:
The assessee argued that the dispute was settled under the VsV scheme, limiting the disallowance to Rs 73,45,040/-. The Tribunal clarified that the settlement under the VsV scheme did not grant blanket immunity and was limited to the specific disallowance made in the reassessment. The PCIT was within his rights to reconsider the remaining amount of Rs 33,35,500/-.

Conclusion:
The Tribunal held that the PCIT was justified in invoking revisionary jurisdiction u/s 263, directing the AO to reconsider the disallowance of Rs 33,35,500/-. The appeal of the assessee was dismissed, and the order pronounced in the open court on 08.06.2023.