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TMI Blog2019 (11) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has given details and furnished answers/replies which has been discussed CIT ought not to have taken a view that the AO s order is erroneous for lack of enquiry. It has to be kept in mind that since enquiry was conducted by AO even if inadequate that would not by itself gives an occasion to the Pr. CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the PrCIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then it is incumbent upon the ld. Pr CIT to himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his assessment order was unsustainable in law and therefore the order of the AO was erroneous. We note that the Ld. Pr. CIT has not taken any such exercise as discussed. Thus, in the light of the enquiry conducted by the AO on the issue on which the Ld. Pr. CIT has found fault with, the Ld. Pr. CIT s finding of fault cannot be sustained and, therefore, there was no basis to find fault with. Pr. CIT erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d filed return of income on 29.09.2009 declaring total income of ₹2,01,14,730/- (thus reported GP of 11.96%). The AO during the original assessment u/s 143(3) of the Act had issued notices u/s 133(6) of the Act against 15 parties from whom the assessee had purchased the goods and after satisfying himself about the genuinity of purchases, (refer order sheet placed at page 32 PB), the original assessment u/s 143(3) of the Act was framed on 31.12.2014 on an income of ₹2,13,13,570/-. 4. Thereafter re-opening of the assessment was carried out by the AO on receipt of information from the investigation wing of Maharashtra Sales Tax that the assessee was a beneficiary of Hawala bogus purchase transaction to the tune of ₹4.43 crores. After re-opening the assessment u/s 147 of the Act, the AO after making enquiry during reassessment was pleased to add 2.25% over and above the GP (i.e. 11.96% shown by the assessee at page 16 of Assessment Order) on the alleged bogus purchased goods of ₹4.43 crores by re-assessment order dated 07.01.2016. 5. This re-assessment order of the AO dated 07.01.2016 was desired to be interfere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied with the replies of the assessee, was pleased to set aside the order of the AO and directed him to make necessary investigation in the light of the bills, invoices, delivery challans concerning transportation and delivery alone and pass a fresh assessment order re-computing the assessee s income taking into consideration the reasons leading to the action u/s 263 of the Act. 7. Aggrieved by the aforesaid action of the Ld. Pr. CIT the assessee is before us. Assailing the action of the Ld. Pr. CIT, the Ld. Counsel for the assessee Shri Subash Agarwal, submitted that the AO in the original assessment as well as during the reassessment had made enquiries from the persons/entities from whom the assessee had purchased goods. According to the Ld. Counsel during the original scrutiny of assessment the assessee had duly furnished the list of purchases before the AO who properly issued Section 133(6) of the Act notices to all the vendors/purchasers and pursuant to the notices, the Vendors had confirmed the sale of goods to the assessee and taking note of the confirmation from the Vendors and taking note of the fact that all the Vendors were paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el the case of the assessee before the AO was that there were no transportation charges incurred by the assessee. For that the Ld. Counsel drew our attention to page 49 read with page 56 of the paper book which is the reply of assessee dated 30.11.2015 written to the AO during the reassessment proceedings wherein the assessee had given the list of suppliers from whom the Maharashtra Sales Tax wing has alleged that the assessee had purchased bogus purchases to the tune of ₹ 4.43 cr., which is placed at page 56-61 of the paper book. From a perusal of the same, it is shown that the mode of delivery and transportation goods is shown as Free delivery by truck . It was also brought to our notice that the assessee had brought to the notice of the Ld. Pr. CIT during revisional proceedings that the transportation charges was free (FOR) free on road or free of transportation charges which fact is evident from a perusal of page 24 of the impugned order wherein the assessee had submitted before the Ld. Pr. CIT that there were no expenses on transportation of these goods. However the Pr. CIT found fault with the AO on this issue that there was lack of enquiry in respect of delivery and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry-By Truck Total: 2,342,917.00 10. Thus we find that AO had made enquiry in respect of transportation of goods, so the action of AO cannot be termed a case of lack of inquiry . In order to understand the difference between lack of inquiry and inadequate inquiry and when it can be termed as erroneous, let us look at the judgment of the Hon ble Calcutta High Court in the case of CIT Vs J.L. Morrison (I) Ltd (366 ITR 593), wherein on similar facts circumstances, their Lordships explained the difference between the two as follows:- 14. The case of the CIT in his notice dated 26th November, 2009 under Section 263 of the Act reads as follows :-- 1. During the said A.Y., you have received a sum of ₹ 18.00 Crore from M/s. Beierdorf AG., Germany (BDF) as one-time settlement for termination of contracts of producing and selling of the products of the latter company in India as well as issuing a NOC for setting up a 100% subsidiary by them in India. The said receipt should have been considered as income in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en issued. The fact that all the requisite papers required by the Assessing Officer were duly furnished and the matter was discussed from time to time on the various days indicated above, appearing from the assessment records produced by Mr. Nizamuddin, leave no scope for any doubt as regards the fact that the Assessing Officer after satisfying himself passed the order dated 28th March, 2008. 79. Mr. Poddar also drew our attention to the impugned judgment of the learned Tribunal which reads as follows:-- Therefore, on combined reading of the assessment order for the assessment year under consideration along with the order sheet entries, it can be said that the A.O. had carried out such enquiry as the circumstances warranted and permitted before accepting the claim of the assessee and passing assessment order accordingly. It was an entirely different matter that the Commissioner did not agree with the conclusion derived by the A.O. from the enquiries made. Failure to carry out an enquiry is one thing and in such cases the commissioner would be justified in saying that the mere failure to make any enquiry was erroneous and prejudicial to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment in the case of S.S Gadgil v. Lal Co. [1964] 53 ITR 231, wherein the Apex Court held as follows :- - A proceeding for assessment is not a suit for adjudication of a civil dispute. That an income tax proceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The Income Tax authorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State: they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income, and to assess tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the State. 83. He also drew our attention to the judgment in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 /71 Taxman 585 (Bom.) 'The Income-tax Officer in this case had made enquiries in regard to the nature of the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, we are unable to uphold the action taken by him under section 263 of the Act. 86. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time. In deciding the question Court has to bear in mind the presumption in law laid down in Section 114 Clause - e of the Evidence Act:-- that judicial and official acts have been regularly performed; 87. Therefore, the Court has to start with the presumption that the assessment order dated 28th March 2008 was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced before him did not show that the assessing officer had considered the double taxation avoidance agreement on the basis whereof the claims were made by the assessee. Therefore, that was a clear case to show that the assessment order was passed without considering the relevant pieces of evidence. 93. The judgment in the case of Anusayaban. A. Doshi (supra) does not apply because the High Court in that case was dealing with the need on the part of the learned Tribunal to give reasons in support of its order. 94. The judgment in the case of Hindusthan Tin Works Ltd. (supra) also does not apply because there the Delhi High Court was dealing with the duty of the learned Tribunal to disclose reasons in support of its appellate order. 95. The judgment in the case of S.N. Mukherjee (supra) is clearly distinguishable. The point for consideration in that case was whether it was incumbent for the Chief of Army Staff while confirming the findings and the sentence of the General Court Martial, and for the Central Govt. while rejecting the post confirmation petition of the appellant, to record reasons for the orders passed by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry on the part of the AO in not enquiring about the transportation and delivery of the goods alleged to have been purchased from the bogus accommodation entry providers. In this context we find that there is a clear distinction between lack of enquiry and inadequate enquiry . If there is an enquiry, even if inadequate, that would not by itself give occasion to the ld. PrCIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the ld. Pr CIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then the ld. Pr CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law and therefore the order of the AO was erroneous. In addition, the ld. Pr CIT should also prima facie show that the erroneous order caused prejudice to the Revenue and thereby twin conditions prescribed by Section 263 are satisfied. If even one condition is not satisfied, then it is open for the ld. CIT to usur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers, the details of transaction and the mode of transportation from the assessee and entire details has been given in a tabular format from page 56 to 61 a sample has been reproduced in para 9 (supra). Thus, the conclusion drawn by the Ld. Pr. CIT that the assessee failed to produce relevant material and offered explanations in pursuance of the notice issued u/s. 142(1) as well as section 143(2) which led to non-consideration of the relevant material is contrary to evidence on record. So we find that the ld. Pr. CIT s SCN para 4 where he alleges the AO s failure to enquire about the mode of transportation is per se erroneous and therefore, his final direction to AO to enquire to re-compute the expenditure incurred for transportation of goods from the alleged hawala dealers is fraught with infirmities, viz., when the assessee has not claimed any expenditure on account of transport of these goods, we wonder as to how it can be computed by the AO or there was any material in the hands of ld Pr CIT to state that assessee had booked any expenditure on account of transport of these goods. We note that the AO during reassessment proceedings after reopening on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir Income Tax Return. In view Of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for ₹ 19,39,60,866/-, is directed to be deleted. The ITAT by its judgment dated 16th May, 2014 relied on the self- same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. In these circumstances, the Review Petitions are dismissed . 13. As discussed the AO has taken a plausible view after enquiry in the first round as well as in the second round and had appreciated the facts that assessee had shown the purchases in his stock register and had given the details of the opening stock of goods, purchases, sales and closing stock of the goods (both quantity as well as the value) and when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished answers/replies which has been discussed supra from para 8 to 10 the Ld. Pr. CIT ought not to have taken a view that the AO s order is erroneous for lack of enquiry. It has to be kept in mind that since enquiry was conducted by AO even if inadequate that would not by itself gives an occasion to the Ld. Pr. CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the ld. PrCIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then it is incumbent upon the ld. Pr CIT to himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his assessment order was unsustainable in law and therefore the order of the AO was erroneous. We note that the Ld. Pr. CIT has not taken any such exercise as discussed. Thus, in the light of the enquiry conducted by the AO on the issue on which the Ld. Pr. CIT has found fault with, the Ld. Pr. CIT s finding of fault cannot be sustained and, therefore, there was no basis to find fault with. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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