2023 (9) TMI 691 - HC - Income Tax

Revision u/s 263 by CIT - Validity of re-assessment proceedings - Bogus purchases - Tribunal had set aside the order passed by the present appellant by observing that the same could not be held to be erroneous or pre-judicial to the interest of the revenue as the AO had made proper verification during the assessment proceedings and the question of bogus purchases could not be enquired multiple times - HELD THAT - On assessment of the record, it emerges that so far as the observation to the effect that the appellant who was the revisional authority could not revise the order of AO as it was approved by an officer of the same rank concerned, the same cannot be held to be correct in view of the fact that infact there is no bar for the Principal Commissioner to invoke powers under Section 263 of the Act to examine an assessment order passed by the AO by issuing notice after seeking approval from Principal Commissioner and such power can certainly be exercised by the revisional authority. However, so far as an argument as raised by the appellant that the AO had failed to make proper verification of the record during assessment proceedings concerned and the Tribunal had wrongly held so is concerned, we are unable to accept the same. AO had framed assessment after reopening of the same pursuant to notice issued under Section 148 of the Act on the ground that there was escapement of income as information had been received from the Excise and Taxation Department regarding bogus purchases of husk being made by the respondent. The AO in his order Annexure A-1 had clearly mentioned that the books of accounts, vouchers, audit report along with audited Trading, Profit and Loss account along with balance sheet of the respondent-assessee had been examined. The order as passed by the AO might not be a detailed one but it stands revealed from the same that he had conducted due inquiry in the matter. It is well settled proposition of law that if there was an inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass an order under Section 263 of the Act merely because he had different opinion in the matter. In the instant case, the order (Annexure A-1) as passed by the AO might not be a detailed order, however, it cannot be stated that he had not verified the documents with books of account of assessee and had not applied his mind on the question of bogus purchases. The learned Tribunal while passing the impugned order had observed that a office note which was prepared by the AO while conducting re-assessment proceedings revealed that he had duly verified the documents and had applied his mind on the question of bogus purchases also. Thus re-assessment proceedings were concluded by the AO by taking into consideration the material available on record and it could not be stated that the same had not been appreciated and examined by him. The same issue was again sought to be inquired into by the appellant-revisional authority which could not be allowed to be inquired multiple times. The order passed by the AO as such could not be stated to be erroneous and since as per the re-assessment, no income was held to have escaped assessment by the AO and as appellant also could not bring any such material on record, therefore, the assessment order cannot be held to be pre-judicial to the interest of revenue as well within the meaning of Section 263 - Decided in favour of assessee.

Summary

Issues:
The appeal challenges the order passed by the Income Tax Appellate Tribunal setting aside the order of the Principal Commissioner of Income Tax-2 under Section 263 of the Income Tax Act, 1961, regarding alleged bogus purchases made by the respondent-assessee.

Factual Matrix:
The respondent, a proprietor of a trading firm, filed a return for the assessment year 2009-10. Subsequently, a notice under Section 148 of the Act was issued, and the assessment was re-opened. The Principal Commissioner of Income Tax initiated proceedings against the assessee based on information received, alleging bogus purchases. The AO re-assessed the income, and the PCIT set aside the order, directing a fresh inquiry. The Tribunal allowed the appeal against the PCIT's order.

Arguments and Analysis:
The appellant argued that the Tribunal failed to properly consider the discrepancies in purchase figures and erred in setting aside the PCIT's order. The Court referred to Section 263 of the Act, emphasizing the Commissioner's power to revise orders prejudicial to revenue. The Court cited legal precedents to highlight the conditions for invoking Section 263.

Judgment:
The Court analyzed the Tribunal's decision and found that the AO had conducted due inquiry during re-assessment proceedings. The Court held that even if the AO's order was not detailed, it showed verification and application of mind. The Court noted that the Tribunal observed the AO had verified documents and applied his mind regarding alleged bogus purchases. The Court concluded that the re-assessment was based on available material and could not be deemed erroneous. As no income was found to have escaped assessment, the Court upheld the Tribunal's decision, dismissing the appeal.

Conclusion:
The Court found no grounds to interfere with the Tribunal's decision, as the AO had appropriately considered the relevant evidence during re-assessment. The appeal was dismissed, and no costs were awarded.