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TMI Blog2019 (2) TMI 1623X X X X Extracts X X X X X X X X Extracts X X X X ..... condone the delay and admit the appeal. Revision u/s 263 - bogus purchases are not examined or enquired into by AO - assessment farmed by the AO as erroneous and prejudicial to the interest of the Revenue in the event that alleged - HELD THAT:- We also noted that the CIT is of the view that the AO is erroneous and prejudicial to the interest of the revenue on account of the purchases made from these parties are bogus and if he hold such view, before revising the assessment u/s 263, the CIT ought to have made some inquiry of his own and for instance CIT should have issued noticed u/s 133(6) to the concerned parties or CIT should have examine whether the said parties are declared as hawala parties by Sales Tax Authorities. This indicates that the order of CIT revising the assessment is without application of mind. We find that the assessee has submitted/ produced all the documents before the AO during the course of assessment proceedings namely invoices, given details of stocks, payments were made through the banking channels and subsequently the parties were confirmed the said transaction. Even the assessee has shown sales affected from these purchases and stock tally is matching a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah advised not to challenge the revision order rather pursue the matter before the AO. Affidavit of M/s Aarthi Shah partner of M/s Pradeep Kumar singhi and his Associates was also filed by assessee, wherein she stated the above said position and the relevant Para 6 to 8 of the affidavit reads as under: - "6. That our firm generally handles tax matters only upto assessment/ first appellate proceedings and therefore we were not much conversant about the provisions under the Act that the said revision order under section 263 could be appealed before the Tribunal. 7. That I was also under an honest and bonafide belief that the consequential order that would be passed by the AO as per the direction of the PCIT only could be challenged in appeal. 8. That while complying with/drafting reply to the notice under section 142(1) dated 25 October 2018 issued by the AO for giving effect to s. 263 order and received by the assessee on 29 October 2018, the matter was again discussed with other tax experts and it was advised that the appeal can be filed against the said revision order." 3. It was further contended by the learned Counsel for the assessee Shri Yogesh Thar that when they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T erred in setting aside the order of the AO and directing him to examine the purchases to the tune of ₹ 8,22,86,744/- The appellant prays that it be held that the purchases made by the Appellant be held as genuine and no re-examination/ disallowance / adjustment is warranted." 6. Briefly stated facts are that the assessee filed its return of income for the relevant AY 2013-14 on 02.09.2013 and the same was processed under section 143(1) of the Act. Subsequently, assessment was completed under section 143(3) of the Act vide order dated 04.09.2015. The assessee is engaged in the business of manufacturing and trading of loose, cut and polished demands and demands studded jewellery. Subsequently, the PCIT-19 Mumbai issued show cause notice vide show cause No. Pr. CIT-19/Vishal Gems/2016-17 dated 07.06.2016 stating that during the year under consideration assessee had not made any purchase but has taken accommodation entries of bogus purchases from Daksh Diamond & Jewel Diamond amounting to ₹ 8,22,86,744/-. According to the show cause notice, Daksh Diamond and Jewel Diamond are the concerns of Bhanwarlal Jain Group, which was searched by the investigation wing on 03.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before Tribunal by pages 75 to 100 of assessee's paper book. It was claimed by the assessee before PCIT that all these details were scrutinized during the original assessment proceedings framed by the AO under section 143(3) of the Act i.e. the details filed in response to notice issued under section 143(2) of the Act. But the PCIT without going into the details, the details which is filed before AO in respect of purchase made from Daksh Diamond & Jewel Diamond amounting to ₹ 8,22,86,744/- directed the AO to examine the purchases claimed from the above mentioned parties. According to PCIT, non-examination of the claim of purchases of ₹ 8,22,86,744/- from the above two parties makes assessment order erroneous so far as it is prejudicial to the interest of the Revenue. The relevant finding for the same by PCIT reads as under: - "7. I have considered the submissions of the assessee and the record. It is not disputed by the assessee that the two parties from whom purchases of ₹ 8,22,86,744/- have been claimed belong to the Bhanwarlal Jain Group. The exhaustive investigation of the investigation wing has shown that the entries taken from Bhanwarlal Jain Group are on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided to the AO vide letter dated 17.08.2015 and the relevant Para 7 of the letter reads as under: - "7. Details of inventory Details of inventory indicating opening stock, purchase, sales and closing stock along with yield percentage along with soft copy is enclosed vide : "Annexure G". the assessee firm has drawn yield of 36% from the raw materials." 11. The learned Counsel for the assessee argued that the complete inventory of closing stock and day to day stock was produced before the AO during the original assessment proceedings and nothing was there relating to bogus purchases. The learned Counsel for the assessee stated that the assessee has paid VAT. The learned Counsel for the assessee was confronted that the decision of jurisdictional High court in the case of Shoreline Hotel (P.) Ltd. vs. CIT (2018) 259 Taxman 49, which upheld the order of revision under section 263 of the Act in case of alleged bogus purchases. The learned Counsel for the assessee has distinguish and the distinction is tabulated as under: - Particulars Decision of the Shoreline Hotel (P.). ltd. v. CIT In the Assessee's case Remarks Nature of Business Engaged in Business of runnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the Assessment In the case before the Bombay High Court, the Assessee could not produce the parties and hence agreed for a GP Addition. Since the Assessee has agreed for GP addition, the AO did not further apply his mind as to whether the situation calls for entire addition or only GP addition is find. Besides, in this case, the commodities were non trading items and hence GP addition was evidently erroneous In the present case, the assessee has not agreed to any addition whatsoever. Also, a complete stock tally was given the CIT ought to have given some minimum finding as to how despite the stock tally and other details submitted by the Assessee, the order is erroneous In view of the following decisions where it is held that when the purchases are supported by documents and the payments are through account payee cheques, the purchase cannot be regarded as bogus, the order passed by the AO cannot be said to be erroneous: a.PCIT v. Tejua Rohitkumar Kapadia (Tax Appeal No. 691 of 2017) b.Dismissal of Department's SLP by SC Cross Examination of the Parties In the case before the Hon. Bombay High court, the Assessee did not ask for cross examination of the allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent the depreciation was claimed in excess has not been undertaken by the PCIT. 12. Mr. Asheesh Jain then volunteered that the PCIT had exercised the second option available to him under Section 263 (1) of the Act by sending the entire matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the PCIT undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case." 14. We find that the assessee has submitted/ produced all the documents before the AO during the course of assessment proceedings namely invoices, given details of stocks, payments were made through the banking channels and subsequently the parties were confirmed the said transaction. Even the assessee has shown sales affected from these purchases and stock tally is matching and in such circumstances the parties cannot be held non-genuine. 15. The case law relied on by the learned counsel for the assessee of Hon'ble Bombay High Court in the case of MOIL Ltd. vs. CIT [2017] 396 ITR 244 (Bombay) wherein Hon'ble Bombay High court held that if a query is raised during assessment proceedings and if the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or totally. In respect of the claim for the Corporate Social Responsibility and some other claims that were allowed by the Assessing Officer, the Assessing Officer has not made a specific reference in the assessment order. It is apparent from the assessment order that the Assessing Officer has expressed in detail about the claims that were disallowable. Where the claims were allowable, as we find from the reading of the assessment order, the Assessing Officer has not referred to those claims. The Corporate Social Responsibility claim is one of them. It is apparent from the notice under Section 142 (1) of the Act that a specific query in regard to the claim pertaining to the Corporate Social Responsibility was made and a detailed note after giving bifurcation of the expenses under different heads was sought. We have perused the response in respect of this query which is exhaustive. We find that the assessee has given the details, as are sought under query no.9 in the notice under Section 142 (1) of the Act. If that is so, the judgments, reported in Fine Jewellery (India) Ltd. (supra) and Nirav Modi (supra) and on which the learned Counsel for the assessee has placed great reliance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Corporate Social Responsibility was exhaustively answered and the appellant - assessee had provided the data pertaining to the expenditure under each head of the claim in respect of Corporate Social Responsibility, in detail. The Tribunal was not justified in holding that the reply/explanation of the assessee was not elaborate enough to decide whether the expenditure claim was admissible under the provisions of the Income Tax Act. The Assessing Officer is not expected to raise more queries, if the Assessing Officer is satisfied about the admissibility of claim on the basis of the material and the details supplied. In the facts and circumstances of the case, we answer the question of law in the negative and against the Revenue." 16. In view of the above facts and circumstances, we are of the view that the revision order passed by CIT is without any basis and the assessment order does not point out that the same is erroneous or prejudicial to the interest of the Revenue. Even, the CIT could not prove that the assessment order is erroneous or prejudicial to the interest of revenue in the given facts and circumstances of the case. Respectfully following the above cited case laws o ..... 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