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TMI Blog2022 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... one proper verification. Issue that Explanation (2) to Section 263 of the Act could be invoked only in a very gross case of inadequacy in enquiring or where the mandatory enquiries are not conducted has reached finality. AO in the given case has conducted enquiry and perused the details submitted and has taken decision to make addition of bogus purchases recorded in the books accounts with proper application of mind. Therefore in our considered view, that the PCIT is not justified in revising the order of the AO. Accordingly, the impugned order of the PCIT is quashed. Appeal of assessee allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... and having applied their mind and considering the facts the order of assessment has been passed. Hence on the very same issue no action can be taken under Section 263 of the Act as the actions of the Assessing Officer is pursuant to applying his mind to the matter and in accordance with law, on the facts and circumstances of the case. 7. Without further prejudice the learned Principal Commissioner of Income tax failed to appreciate that the impugned order of assessment passed by the learned assessing officer under section 143[3] r.w.s. 153C of the Act dated 19/12/2019 is subject matter of appeal before the learned Commissioner of Income-tax [Appeal}, thus as per the Explanation [c] to sub-section [1] of section 263 of the Act the power are restricted to exercise the jurisdiction to the matter which was a subject matter of appeal, on the facts and circumstances of the case. 8. The learned Principal Commissioner of Income tax failed to appreciate that it is settled position of law that mere consent alone cannot confer jurisdiction and consequently, the authorities have to independently examine the claim of the Appellant before making any assessment based on any declaration by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to show cause why the difference of Rs.77,82,870 should not be added to the income of the assessee. Sl.No Name of the Bogus Supplier Purchases as per books Admitted u/s.132(4) Admitted in return u/s.153C 4 Raghav Poojari 8,64,276 44,04,412 8,64,276 5 Abdul Rasheed 15,63,500 66,88,221 - 6 Sayeed Ebrahim 8,27,700 60,72,877 - 7 Katakeriv Ebrahim Sayeed 53,91,670 53,91,670 - Total 86,47,146 2,25,57,180 8,64,276 14. The assessee filed a reply before the AO stating that the confirmation from the parties could not be obtained during the course of search proceedings and hence the additional income was offered to tax to buy peace and to cooperate with the department. The assessee submitted confirmation from some of the parties and stated that only for that part of the purchases for which confirmations could not be obtained were offered to tax in the return filed in response to notice u/s.153C. The assessee therefore prayed the income offered to buy peace cannot be treated as concealment of income and that no further income need to be added. 15. The AO did not agree with the contentions of the assessee and concluded the assessment adding Rs.77,82,870 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee, as here the accountant and the director had confirmed on the date of search itself that no materials were received in respect of the bills issued by these parties. * Relying on the case law, the contention of the assessee is that there cannot be sales without purchases and since sales is not disproved there cannot be inflated purchases. * This argument is not acceptable because in the case of the assessee the purchase is raw fish and the sale is fish meal, fish oil and fish paste which is variable due to many factors like protein content, quality, moisture and wastage depending on the breed and other manufacturing variables. 7.2 In view of the position of these alleged suppliers being under the control of the employers, the assessee was able to get their signature on the required papers and the amounts were credited to their accounts and withdrawn by one Sri. Ismail, relative of the partner. This fact has been admitted in the statement by the accountant and has been confirmed by the partner Harris during the search proceedings. 7.3 In the statement recorded on 09.02.2018 the partner Sri K Mohammed Harris declared additional income of Rs. 2,25,57,18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on such admission. 7.7 In the case of B. Kishore Kumar vs. Deputy Commissioner of Income-tax, Central Circle-IV (1), Chennai the Hon'ble High Court of Madras in [2014] 52 taxmann.com 449 (Madras) held that where assessee himself stated in sworn statement during search and seizure about his undisclosed income, same was to be levied tax on basis of admission even without scrutinizing documents. 7.8 The Hon'ble Supreme Court of India has upheld the decision of the Hon'ble Madras High Court and the SLP was dismissed as reported in [2015] 62 taxmann.com 215 (SC)/[2015] 234 Taxman 771 (SC). 7.9 The important issue to be observed is that because the assessee had made the aforesaid surrender, the revenue had refrained from making any further enquiries into the matter. It was, therefore, not open to the assessee to retract from the earlier statement at the time of adjudication. 7.10 The issue relevant here is that the evidences point out the modus operandi of the assessee, confirmed by the partner himself during survey proceedings and the quantum being partly declared by him in the return of income substantiates the finding of purchase inflation as a mode to divert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is not erroneous. Further the assessee stated that an appeal is filed before the Commissioner of Income Tax (Appeals) Panaji against the order of the AO and hence the revision proceedings cannot be initiated. 18. The PCIT rejected the contentions of the assessee by stating that the AO did not make any verification and the appeal pending before the CIT(A) Panaji is for the addition of Rs.77,82,870 whereas the revision proceedings are initiated for the difference amount of Rs.1,39,10,034. The PCIT therefore set aside the order of the AO by stating that - "11. During survey proceedings, it was seen that the assessee had been inflating the expenses by claiming bogus expenses and total bogus purchases was worked out at Rs.2,25,57,180/- for AY 2017-18. In the assessment order an amount of Rs.86,47,146/- is brought to tax as bogus expenses. There is no enquiry or verification done by the AO during assessment proceedings on this issue. During the course of current proceedings, the assessee has submitted details in this regard which require thorough verification and enquiries by the Assessing Officer. The assessee is claiming that there was higher income assessed to tax for AY 2016-17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO, has accorded the approval as well. Consequently, two officers having applied their mind, there is no lack of enquiry or inadequate enquiry in concluding the assessment proceedings passed under section 143[3] r.w.s. 153C of the Act and thus, the very assumption of jurisdiction under section 263 of the Act fails and consequently the impugned order of revision passed under section 263 of the Act deserves to be quashed on this score itself. 21. It is further submitted that for the purpose of invoking the provisions of section 263 of the Act two basic twin conditions has to be satisfied:- [a]. The order passed by the Assessing officer sought to be revised should be erroneous; & [b]. The order passed by the AO is prejudicial to the interests of the revenue. 22. It is submitted that in the instant case the order passed by the AO u/s. 143 [3] r.w.s. 153C of the Act is neither erroneous nor prejudicial to the interests of the revenue. Reliance is placed on the decision of the Hon'ble Apex Court in the case of Malabar Industrial Co., Ltd., Vs. CIT, reported in 243 ITR 83, wherein it is held as under:- " …….. The scheme of the Act is to levy and collect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared. The AO has confronted each of the submissions of the assessee and has listed out his conclusions as can be seen from the order. With regard to the PCIT's contention that the details of previous assessment was not brought to the notice of the AO, we find that in the assessment order the AO has tabulated the list of names against whose names bogus purchases were recorded from assessment years 2016-17 to 2018-19. Further the AO in page 8 of the assessment order has given a specific finding that the purchases booked in the name Syed Ibrahim has been offered to tax as bogus purchase in assessment year 2018-19. In view of these facts which is clearly coming out of the AO's order, we see no merit in the conclusion of the PCIT that the AO has not examined the facts and not done proper verification. 27. With regard to the argument that the assessee's case needs to be considered in the light of the explanation (2) to Section 263 of the Act, we notice that the Hon'ble Gujarat High Court in the case of Shreeji Prints (P) Ltd. (130 taxmann.com 293 - Guj) while considering the explanation of Section 263 of the Act has held that : - "4. Being aggrieved by the order passed by the PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer had made full enquiries of unsecured loans by raising the queries and calling for the all information in respect of the loan taken along with details evidences in support thereof and the same were also duly replied by the assessee and on receipt of all the details of evidences, the unsecured loans received by the assessee were accepted by the Assessing Officer and the assessment was finalised u/s.143(3) of the Act on 15-3-2016. We also note that there was audit objection in the case of the assessee. The language of audit objection and show-cause notice under section 263 is same meaning thereby that the show cause notice u/s.263 has been issued by the PCIT Without going through assessment records and without exercising his own application of his mind. The assessee has not only filed complete details of Income-tax Return, audited balance sheet, profit and loss account and bank statement. The assessee further explained that both the these unsecured loans stands fully repaid as on the date and there is no capital creation by the assessee on this count. In view of these facts and circumstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the High Courts have held that before reaching the conclusion that the order of the Assessing Officer is erroneous prejudicial to the interest of Revenue. The CIT himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of Revenue. The ld. Counsel relied on the decision of M/s. Amira Pure Foods Pvt. Ltd., v. PCIT in ITA No.3205/Del/2017 and Ahmedabad Tribunal in the case of Torrent Pharmaceuticals Ltd. v. DCIT [2018] 97 taxmann.com 671 (Ahd. - Trib.). it is clear from the enquiries made by the Assessing Officer and submissions made by the assessee that the Assessing Officer has taken the plausible view which is valid in the eyes of law. The Assessing Officer was satisfied consequent to making enquiry and after examining the evidences produced by the assessee, he accepted the assessee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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