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TMI Blog2018 (5) TMI 2102X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes a debatable one. As such, the AO has taken one prevailing view in this matter. Therefore, thrusting another view by the Pr.CIT in his revision order in our view is outside the scope of provisions of section 263. Therefore, it is not a clear cut case of erroneous assumption of law as made out by the Pr.CIT. Hence, the revision order on this issue is unsustainable in law. Accordingly, relevant grounds raised by the assessee on this aspect are allowed. Regarding the other issue of sundry creditors issue was not at all taken up in the re-assessment proceedings. The reasons recorded by the AO supports the same. Normally, such issues are taken up in the regular assessment u/s.143(3) of the Act. In this case, there is no such order passed by the AO at the relevant point of time. Further, it is not the case of the Revenue that the issue of sundry creditors was not examined by the AO. Therefore, we find the issues above narrated by the Pr.CIT are general and casual. It is not the case of the Pr.CIT that the above issues were allowed by the AO after due process of verification of scrutiny of the account. As such, AO is not under any mandate to examine sundry creditor acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. CIT invoked section 263 of the Act against the AO s order adding only 20% of the bogus purchases in the reassessment. Assessee argues that AO s decision constitutes one of the plausible views in the matter and a debatable issue. Further, Ground No.2 also raises the issue of AO s failure in conducting enquiries with regard to the claim relating to sundry creditors balances and other claims in the return of income. 3. Briefly stated relevant facts for the A.Y. 2009-10 are that the assessee is a company and is engaged in the business of cables, electrical, electronic and telephonic goods as a dealer. Assessee filed the original return of income on 31-10-2009 declaring total income of ₹ 2,51,15,300/-. There is no scrutiny assessment in this case u/s.143 of the Act. On receipt of information from the DG (Investigation), Pune regarding Hawala/Bogus purchases as supplied by the Sales Tax Department, AO noticed that the assessee is one of beneficiary of the same and made purchases of goods from 19 of the parties whose name appear in the list of bogus purchases. The total of such purchases works out to ₹ 3,47,78,546/- for the A.Y. 2009-10. As per procedure laid down in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed. a. First method is adding the whole amount of such bogus purchases which comes out to be ₹ 3,47,48,546/-. This is also unreasonable because bogus purchase is nothing but inflated purchase shown in the accounts to reduce the actual profit earned. b. Second method is calculating 20% of the total turnover of the assessee for the year under consideration, i.e. 20% of ₹ 1,21,31,76,927/- which comes out to be ₹ 24,26,35,385/-. This is not reasonable as the bogus purchases are only 2.8% of the total turnover. c. Third method is calculating 20% of such bogus purchases which comes out to be ₹ 69,55,709/-. I am of the opinion that 20% of the total purchases made from such alleged parties is needed to be added back to the income as it is the most reasonable amount amongst all. Accordingly, after due verification of facts and the judgmental laws, the AO restricted the addition to 20% of the said purchases. Thus, the assessment attained the finality. 5. Subsequently, the Pr.CIT-3, Pune verified the assessment records of the assessee and analysed the above narrated facts of the case relating to bogus purchases and a issued show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he years under consideration. Further, bringing our attention to various paragraphs of the re-assessment order, Ld. Counsel submitted that every aspect of the issue of bogus purchases was thoroughly examined by the AO before making an adhoc addition of 20% of the bogus purchases of ₹ 69,55,709/-. In doing so, AO relied on various decisions to support the GP additions only and not the entire such purchases. Therefore, according to Ld. AR for the assessee, the view taken by the AO is one plausible view. Further, mentioning that the issue of making entire addition is again a debatable issue, Ld. AR submitted that making addition on account of GP ratio is also a matter of huge debate and relied on various decisions on the issue. Further, justifying the addition @20% of the bogus purchases made by the AO in the re-assessment, Ld. Counsel submitted that there are various decisions to support the addition made by the AO. Therefore, there is no erroneous assumption of law in this case. Further, he submitted that when the trail of goods are satisfactorily explained along with the transactions of payment for the purchase of goods, the assessee cannot be found fault on these bogus pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, on debatability of the issue relating to bogus purchases, Ld. DR has nothing to mention. 10. We heard both the parties and perused the orders of the Revenue on the issue of bogus purchases and the need for making addition of entire such purchases, copies of decisions etc. We have also gone through the purchase bills, other documents filed in the form of paper book by the assessee. The case of the Pr.CIT in the revision order is that the AO failed to make enquiries before completing the assessment on the claims relating to bogus purchases and the sundry creditor balances. We shall take up all the issues in the subsequent paras. 11. Regarding the allegation of the Pr.CIT relating to bogus purchases, we find the AO has taken up this issue in the re-assessment proceedings u/s.148 of the Act and called for details relating to the purchase of goods, delivery of goods and payment details for the said purchases. At the end of the scrutiny or investigation, AO came to the conclusion of making GP addition of the bogus purchases @20% would meet the ends of justice. AO relied on various decisions for arriving at this decision. Accordingly, AO made addition @20% amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. As such, AO is not under any mandate to examine sundry creditor account. Further, it is also not the case of the Pr.CIT that there is something erroneous about the sundry creditor account and therefore, the AO failed to make proper/adequate enquiries on this issue. In our opinion, the Pr.CIT s finding is too general and the same is unsustainable. He failed to make out a case that allowing claims of the assessee on this issue amounts to erroneous order of the AO in so far as it is prejudicial to the revenue. In the absence of any categorical finding on erroneous assumption of law/fact leading to loss of revenue, the finding of the Pr.CIT is not sustainable. Therefore, we are of the opinion that the directions given by the Pr.CIT are liable to be quashed. Accordingly, the re-assessment order of the AO is restored. The grounds raised by the assessee are allowed. 13. In the result, appeal of the assessee is allowed. ITA Nos. 1169 1170/PUN/2017 A.Yrs. 2010-11 2011-12 14. Since the facts, issues, decision of the AO/Pr.CIT, arguments and counter arguments are same as that of appeal ITA No.1168/PUN/2017 for A.Y. 2009-10, the decision given in the said A.Y. 2009-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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