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TMI Blog2018 (9) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... ew taken by the CIT(A), it would show the gross profit of the assessee at 93.73% for the AY 2008-09 which in itself is quite an improbable on its face. So by estimating the gross profit of the assessee at 9% after disallowing the bogus purchasers the Ld. Assessing Officer had taken a pragmatic view which renders the issue not amenable to the Ld. CIT(A) to the jurisdiction u/s 263 of the Act. We are of the considered opinion that the exercise of jurisdiction under section 263 of the Act by the Ld. Principal Commissioner of Income Tax is not warranted, that such an order cannot be sustained and is liable to be quashed. - Decided in favour of assessee. - ITA Nos. 3825 to 3827/Del/2018 - - - Dated:- 5-9-2018 - Shri G.D. Agrawal, Hon ble President And Shri K. Narasimha Chary, Judicial Member For the Assessee : Sh. Pranjal Srivastav, Adv. Sh. Ashish Goel, CA For the Revenue : Smt. Shafali Swaroop, CIT DR ORDER PER BENCH Aggrieved by the orders dated 26/03/2018 passed under section 263 of the Income Tax Act, 1961 ( the Act ) for the assessment years 2008- 09 to 2010-11, assessee preferred these appeals. 2. Briefly stated, relevant facts, as could be cull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own findings. According to the Pr.CIT, having reached a conclusion that a particular amount represented the purchases from bogus suppliers, it was not incumbent upon the Assessing Officer to restrict the disallowance to a certain percentage which is less than the entire amount of such bogus purchases. The decision of the Learned Assessing Officer, to restrict the disallowance to a sum of ₹ 5,36,53,777/- out of the total amount of the bogus purchases claimed to have been made from Sharma group of ₹ 107 crore during the relevant assessment year 2008-09, was not sustainable in law. 6. Assessee challenged the impugned order both on the aspect of law and on merits stating that assessment made by Ld. AO does not fall within the provisions of Explanation 2(d) of Section 263(1) of the Act; that no order u/s 263 of the Act can be made when order sought to be revised is itself illegal being barred by limitation; that CIT has no jurisdiction u/s 263 to substitute his opinion for the opinion of the learned AO; that where two views are possible and one of the possible views has been taken by the Ld. AO in the order passed u/s 143(3), then provisions of section 263 cannot be invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (5) of section 139, whichever is later : Provided that in case the assessment year in which the income was first assessable is the assessment year commencing on or after the 1st day of April, 2004 but before the 1st day of April, 2010, the provisions of clause (a) shall have effect as if for the words two years , the words twenty-one months had been substituted : Section 153-B of the Act was reading that,- '153B. Time limit for completion of assessment under section 153A.- (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A, within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 or for requisition under section 132A was executed; xxx xxx xxx xxx xxx xxx (3) The provisions of this section, as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment or reassessment made bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153-B of the Act. 13. It is further clear from the above that the Learned Assessing Officer shall make the order of assessment within a period of two years from the end of the financial year in which the last of the authorizations for search under section 132 was executed and this period of two years shall be reckoned after excluding the period between the date on which application made before the Income Tax Settlement Commission and the date on which the order under sub section (1) of section 245-D was received by the Principal Commissioner or Commissioner under sub section two of that section. This is subject to the further rider that if after exclusion of this particular period, the period of limitation available to the Assessing Officer for making an order of assessment is less than 60 days, such remaining period shall be extended to 60 days and the aforesaid period of limitation shall be deemed to be extended accordingly. 14. Admittedly, in this case the search was conducted on 23/08/2012, assessee filed the return of income on 17/11/2014, application before the Income Tax Settlement Commission was filed on 18/02/2015, and order under section 245-D (2C) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of initiation of the original proceedings u/s 147 of the Act can be challenged. 18. While following the above decision of the ITAT, Mumbai, a Kolkata Bench of the Tribunal in the case of M/s. Classic Flour Food Processing Pvt. Ltd. Vs. CIT ITA Nos.764 to 766/Kol/2014, observed that: 10. The ITAT Mumbai bench made a reference to another decision of the Hon'ble Supreme Court in the case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193 and the decisions in the case of Indian Bank vs Manilal Govindji Khona (2015) 3 SCC 712. The ITAT Mumbai bench also held that if order of assessment passed u/s 147 of the Actwas illegal and nullity in the eyes of law then that order cannot be revised by invoking powers u/s 263 of the Actby CIT. The Mumbai Bench has in this regard placed reliance on the decision of Hon'ble Delhi bench of the Tribunal in the case of Krishna Kumar Saraf vs CIT in ITA NO.4562/Del/2007 order dated 24.09.2015 wherein it was held as follows :- 17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the Id. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial to the interest of the revenue, under explanation 2(d) to section 263 (1) of the Act, is incorrect inasmuch as the dismissal of an SLP cannot be taken to be the judgement of the Supreme Court referred to in such an explanation. He placed reliance on the decision reported in Kunhayammed Ors vs State Of Kerala, [2001] 245 ITR 360. 21. On this aspect Ld. DR submits that in view of the decision of the Hon ble Gujarat High Court in the case of NK Proteins Ltd Vs. DCIT 2016 TIOL 3165 HC AHM IT, as approved by the Hon ble Apex Court in SLP, the learned principal Commissioner of Income Tax is justified in directing the learned Assessing Officer to make the addition of the entire bogus purchase to the income of the assessee. 22. We have gone through the record in the light of the decisions relied upon by either side. Ld. Commissioner of Income Tax, on examination of record, found that having reached a conclusion that a particular amount represented alleged purchases from bogus suppliers, it was not incumbent upon the Learned Assessing Officer to restrict the disallowance to certain percentage which is less than the entire amount of the bogus purchases. 23. Learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the Hon ble Supreme Court, in Kunhayammed Ors vs State Of Kerala, [2001] 245 ITR 360, Hon ble Supreme Court held that,- .......The Supreme Court cannot and does not reverse or modify the decree or order appealed against while deciding a petition for special leave to appeal. What is impugned before the Supreme Court can be reversed or modified only after granting leave to appeal and then assuming appellate jurisdiction over it. If the order impugned before the Supeme Court cannot be reversed or modified at the SLP stage obviously that order cannot also be affirmed at the SLP stage. To sum up our conclusions are :- (i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. First stage is upto the disposal of praye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before Supreme Court the jurisdiction of High Court to entertain a revew petition is lost thereafter as provided by sub-rule (1) of Rule (1) of Order 47 of the C.P.C. 27. Having thus made the law clear, Hon ble Apex Court proceeded to observe that, - The earlier order of the High Court was sought to be subjected to exercise of appellate jurisdiction of Supreme Court by the State of Kerala wherein it did not succeed. The prayer contained in the petition seeking leave to appeal to this Court was found devoid of any merits and hence dismissed. The order is a non- speaking and unreasoned order. All that can be spelled out is that the Court was not convinced of the need for exercising its appellate jurisdiction. The order of the High Court dated 17.12.1982 did not merge in the order dated 18.7.1983 passed by this Court. So it is available to be reviewed by the High Court. 28. In view of the above authoritative pronouncement of the Hon ble Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two views are possible and one of the possible views has been taken by the learned AO, the provisions under section 263 cannot be invoked by the Learned Principal Commissioner of Income Tax to substitute his opinion for the opinion of the learned AO. 31. In this respect Ld. DR argued that in the assessment order while referring to the statements made by Sharma, it was recorded that all the circumstances discussed in the assessment order lead to the only conclusion that the material purchased from the Sharmas was bogus. Assessee never challenged the factual findings rendered by the learned AO in his order by preferring any appeal against the same. Inasmuch as the assessee accepted such factual findings, she submits that, it is not open for the assessee now to contend that in this matter no interference is required at the end of the Learned Principal Commissioner of Income Tax. When the learned AO reached a factual conclusion that the entire purchase relating to the earth material from Sharmas was bogus, it was not incumbent upon the learned AO to restrict the disallowance to a particular percentage instead of adding the value of entire bogus purchases to the income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions of the assessee, Learned Assessing Officer reached a conclusion that the material purchased from the Sharma s was bogus, and since the assessee itself offered rate of gross profit in business at approximately 8%, however, to recover any further leakage of revenue 0.25% was to be added to the rate offered by the assessee. Basing on this premise, Learned Assessing Officer recalculated the gross profit at 9% of the sales turnover by rejecting the books of accounts of the assessee under section 145 of the Act. According to the AO, the difference between 9% of the turnover, the aggregate amount of the gross profit already declared by the assessee and the additions made during the earlier assessment under section 153-A of the Act had to be added. 35. Such a fact is evident from the notice dated 03/02/2015 to be found at page number 212 to 215 of the paper book, wherein vide para No. 4 thereof, Learned Assessing Officer noted that in the relevant assessment year the assessee had made a payment of approximately ₹ 623.90 crores to Sh. Guruprasad Sharma, Sh. Dhir Chandra Sharma, Smt. Geeta Sharma and Smt. Vinay Sharma on account of purchase of earth and grit material t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taining the details and other evidences, was satisfied and hence accepted the contention of the assessee. Thus AO, being satisfied after the reply, the Prl. Commissioner of Income Tax cannot sit over the judgment of AO to review the order under section 263 of the Act. It is not the case of lack of enquiry or a matter of inadequate enquiry so as to trigger the jurisdiction under section 263. 38. Our this view is fortified by the decision of the Hon ble Jurisdictional High Court in the case of ITO vs. D.G. Housing Projects Ltd. (2012) 343 ITR 329, CIT vs. New Delhi Television Ltd. (2014) 360 ITR 44 (Delhi), Tirupati Infraprojects Pvt. Ltd. vs. Principal CIT in ITA No. 3316/Del/2015, CGG Marine Resources vs. DCIT (2012) 51 SOT 141 (Delhi). No doubt, Section 263 of the Act confers power on the Principal Commissioner of Income Tax to examine an assessment order so as to ascertain whether it is erroneous insofar as prejudicial to the interests of the Revenue, but it shall not be construed to have conferred jurisdiction upon him to substitute his opinion for the opinion of the Assessing Officer when the Ld. Assessing Officer, being satisfied with the record, passes the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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