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TMI Blog2020 (1) TMI 1669X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) TMI 256 - ITAT CALCUTTA-C] The assessee produced all necessary details of purchases, sales, audited books of account, quantity details as mentioned above. The assessee books of accounts were audited by Chartered Accountant. Quantity details were given in respect of opening stock, purchases, sales, closing stock AO did estimate and further added 3% as possible profit on the alleged purchases over and above the GP rate 4.63% shown by the assessee in the audited books of account. The quantity details shown by assessee in the audit report reflects sales quantity 4,64,632 Kg and corresponding purchases 4,30,650 Kg. No discrepancy was found between purchase shown by assessee and the sales declared. Purchase cannot be rejected without disturbing the sales. Recognized principle of accountancy and tax jurisprudence hold that no sales can take place without purchase. AO has passed order consciously after applying his mind after conducting the enquiry and added further 3% on bogus purchase over and above GP rate 4.63% declared by the assessee inclusive of the said purchase. Thus we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in course of assessment proceedings, the books of account including stock register which were duly audited and no defect has been found in such books of account. 6. For that apparently the revision proceedings having been initiated at the behest of the Ld. AO, therefore the entire reassessment proceedings are bad in law. 7. For that under the facts and circumstances, the action of disallowance of 3% of the purchases by the Ld. AO implies that the Ld. AO took a considered view which is not an impossible view and therefore the order passed by the Ld. AO is neither erroneous nor prejudicial to the interest of the revenue. 8. For that under the facts and circumstances of the case, the revision order passed by the Ld. PCIT is liable to be quashed and the appellant be given relief as prayed for. 9. For that the appellant craves to leave, add, alter or withdraw any ground(s) of appeal on or before hearing of the appeal. 5.By way of these appeals, these three assessees have challenged correctness of the order passed by the ld Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act. 6. The facts of the case may be stated quite s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncement of the Apex Court in the case of N. K. Proteins Ltd. vs. Deputy Commissioner of Income Tax Special Leave to Appeal (C ) No. 769 of 2017 January 16,2017, as reported in [2017] 84 taxmann.com 195 (SC), wherein the High Court s decision to add back the entire bogus purchase as per the fictitious invoices debited to trading account holding that percentage disallowance of bogus purchases goes against principle of Sec 68 and 69C of the Act, was upheld by the Apex Court. Since the AO failed to make addition of entire bogus purchases therefore ld PCIT held that assessment order passed by the AO is erroneous and prejudicial to the interest of Revenue.Accordingly the ld. PCIT directed the Assessing Officer to re-assess the income of the assessee for the relevant A.Y. 2010-11 on the issue as discussed above. 10. Aggrieved by order of ld. PCIT, the assessee is in appeal before us. 11. Learned Counsel for the assessee submitted before the Bench that these assessee`s were engaged in trading activities as well as manufacturing activities The ld PCIT relied on the judgment of Apex Court in the case of N. K. Proteins Ltd. vs. Deputy Commissioner of Income Tax, Special Leave to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,07,205 kg.; which is not possible against sale / quantity consumed at 38,29,322 kg; therefore, stand taken by the Ld. PCIT is not correct. Likewise in case of Binod Kumar Tekriwal HUF the alleged purchase quantity as per CIT is 2,77,000 kg., which is not possible against sale quantity consumed at 4,64,032 kg; therefore, stand taken by ld. PCIT is not correct. Coming to Sandeep Kumar Tekriwal HUF, we note that assessee submitted quantity details of Trading goods of MS Plate. Assessee submitted opening stock in quantity, then he added purchase quantity, then after he deducted sales quantity and shortage quantity and then resulted closing stock at 36,8955 kg was disclosed. The assessee computed gross profit ratio @ 6.37%. The assessee explained that purchase quantity as per CIT is 13,50,420 kg which is not possible against sales quantity of 19,05,276 kg. Therefore, in the light of the factual position narrated by ld. Counsel and taking into account reconciliation of quantity filed by the assessee before Assessing Officer, the stand taken by the ld. PCIT, is not tenable. We note that Assessing Officer after taking into account, the quantity reconciliation and other detailed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above. In the assessee`s case, the assessee submitted before the AO audited books of accounts, details of purchases, details of sales, detail of quantity purchased, used in manufacturing activity ( in case of one assessee), opening stock, closing stock detail and reconciliation of quantity, as mentioned above, these facts were not there in case of N. K. Proteins Ltd (supra), thus distinguishable on facts. Therefore, considering these peculiar facts the AO applied his mind and made 3% more addition, based on his best estimate, over and above the GP rate declared by the assessee. Therefore, in these circumstances, order passed by the AO can not be termed erroneous. 15. We note that Hon`ble High Court of Calcutta in the case of Subarna Rice Mill,[2018] 96 taxmann.com 286 (Calcutta) held that in case of unexplained expenditure on Purchases, only profit embedded in transaction which can be added to total income. Findings of the Hon`ble court is given below: 9. According to the Appellate Tribunal the value of the entire quantity of additional stocks that were discovered in course of the survey operation could not be regarded as the additional income of the assessee and amenable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- So far as the question regarding addition of Rs.3,70,78,125/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in setting aside an assessment is large and wide, but that cannot be exercised to allow the A.O. to make up the deficiency of his case. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedings. We note that AO after taking into account all the quantity details, as mentioned above took a decision that over and above the gross profit rate shown by the assessee, a gross profit @3% may be added, which is logical and reasonable considering the facts of the case that some of the assessee`s were doing manufacturing activities also. We note that Ld. Pr. C.I.T. on analysis of assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression record as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order is based. At the same time, if any infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w : The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law . 17. It is a settled position in law that provisions of sec. 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of erroneous nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. revenue authorities that the evidences produced were fictitious or invented, thus accepted the authenticity of the same. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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