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TMI Blog2024 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed under Sections 147/143(3) of the Act, the AO made addition on account of difference of purchase price concerning purchases made by the assessee from M/s Gaja Nand Pardeep Kumar, in comparison to purchases made from other entities, on the same day. The application of mind on the part of the AO in the aforesaid assessment order is evident from the fact that the AO clearly held that in the enquiry conducted by issuance of summons and by calling for information from the Market Committee, Dabwali, the stated firm of M/s Gaja Nand Pardeep Kumar, Dabwali was found to be non existent. It was on these basis, that the AO held that it appeared that the assessee had made purchases from the grey market at prices much lower than that recorded in the books of account and that the assessee had obtained bogus higher rate purchase bills from the said party, in order to suppress gross/net profit. The AO, therefore, made addition on account of difference of purchase price and added an amount. It was only the profit element embedded in the entire purchases made, that could have been brought to tax, which is exactly what has been done by the AO following case Sathyanarayan P. Rathi [ 2013 (6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore untenable - HELD THAT:- Purchases having been duly accepted, adverse inference against the assessee was wrongly drawn with regard to sundry creditors u/s 68 of the Act. PCIT evidently erred in holding that the AO had failed to verify the genuineness and credit worthiness of the sundry creditors. PCIT further went wrong in observing, in the face of the evidence produced by the assessee, that the AO had not called for any ledger documents and confirmation of accounts of the sundry creditors. The ld. PCIT further went wrong in holding that the AO had failed to make any independent enquiry to verify the genuineness of the creditors. The impugned order in this regard is also set aside and reversed and the assessment order is revived with regard to the issue of sundry creditors also. Issue of payments made to partners - Where no disallowance with regard to either partners remuneration or interest paid to partners has suffered disallowance in the earlier years as well as in the immediately succeeding assessment year, in scrutiny assessment proceedings, no disallowance in the year under consideration is called for, in order to maintain consistency, too for the reason that adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has made cash purchases from open market as the sales have been confirmed; However AO has failed to acknowledge this fact and no disallowance were made as per provision of section 40A(3) of the Act" are factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. 2.2 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner, suggested without any independent evidence and, without any further enquiries by him, cannot be a basis for assumption of jurisdiction u/s 263 of the Act. 2.3 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries, had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court wherein the period of Covid-19 Pandemic was directed to be excluded for the purpose of limitation. It was, accordingly, submitted that the delay in filing the present appeal may be condoned. 4. The ld. DR did not raise any specific objection. 5. In view of the submissions made by both the parties, the delay is hereby condoned and appeal of the assessee is admitted for adjudication. 6. Ground Nos. 3, 4 and 4.1 are not pressed. Accordingly, these grounds are rejected. 7. Ground No.1 is general and needs no adjudication. 8. Apropos Ground Nos. 2 to 2.7, the facts are that the ld. PCIT issued a Show Cause Notice dated 06.08.2019 to the assessee u/s 262 of the Income Tax Act as follows : 2. The assessment record for the period under consideration was called upon and examined. On such examination, it has been noticed that you have made bogus purchases from M/s Gaja Nand Pardeep Kumar which is non-existent party. It was also confirmed by the third party enquiry i.e., Market Committee, Dabwali vide letter No.1527 dated 14.11.2018 that there is no firm registered by the name of M/s Gaja Nand Pardeep Kumar, Shop No. 209, NGM, Dabwali during the year 2010-11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have made further enquiries. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of "Quality Steel", 395 ITR 1 (S.C), wherein, it has been held that where two views are possible and the AO had taken one view and the CIT revised the said order on the ground that he did not agree with the view taken by the AO, the assessment order could not be treated as an erroneous order or prejudicial to the interests of the Revenue; that the reason is simple, i.e., that while exercising the revisionary jurisdiction, the CIT is not setting in appeal. The assessee also relied on "Malabar Industries Co. Ltd. Vs CIT", (2000) 243 ITR 83 (S.C), wherein it was held that jurisdiction u/s 263 of the Act cannot be assumed in respect of a debatable issue. As per the assessee, this was reiterated in "CIT Vs Max India Ltd." (2007) 295 ITR 282 (S.C); "Mohammad Haji Adam &Co.", (2019) 2 TMI 1632 Bombay High Court; "Paramshakti Distributors Pvt. Ltd." (2019) 7 TMI 832 Bombay High Court. 9.1 The ld. PCIT, however, was not satisfied with the reply of the assessee. He observed that it had been noticed that the assessee had submitted documents which had already been fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as either erroneous or prejudicial to the interests of the Revenue; that it was only because the ld. PCIT had an opinion different from that held by the AO, that the impugned order was passed illegally, without establishing as to how the view of the AO was an impossible view in any manner; that the ld. PCIT has failed to appreciate that under the provisions of Section 263 of the Act, an order of assessment cannot be set aside simply to make further enquiries and to thereafter pass a fresh order; that the ld. PCIT has failed to appreciate that surmises, conjectures and suspicion could not be a valid basis to invoke the provisions of Section 263 of the Act; that the ld. PCIT has erred in acting beyond the Show Cause Notice issued u/s 263 of the Act and, therefore, findings, observations and material relied on but not referred to in the Show Cause Notice, but made part of order, could not have been made the basis for assumption of jurisdiction u/s 263 of the Act. 9.4. The ld. DR, on the other hand has placed strong reliance on the impugned order. It has been contended that the ld. PCIT has correctly observed that the assessee did not produce on record any documents other tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of State Bank of Patiala towards purchase of cotton made on 23.10.2010 from M/s Gaja Nand Pardeep Kumar. Copies of account of M/s Gaja Nand Pardeep Kumar and bank statements were enclosed. On 30.03.2018, a notice (APB 57) u/s 148 of the Act was issued to the assessee. Then, notice u/s 142(1) was issued on 27.08.2018 (APB 64). On 31.10.2018, a summon (APB 65) was issued to Shri Pardeep Kumar, Proprietor M/s Gaja Nand Pardeep Kumar u/s 131 of the Act. On 26/31.10.2018, notice (APB 66-67) was issued to the Market Committee, Dabwali, u/s 133(6) of the Act. On 14.11.2018, a reply (APB 68) was filed by the Market Committee, Dabwali, before the AO, stating that as per their office record available, there was no firm registered as M/s Gaja Nand Pardeep Kumar, Shop No.209, New Grain Market, Dabwali during the year 2010-11. On 11.12.2018, a reply (APB 69-78) was filed by the assessee before the AO alongwith copies of ledger (APB 110) of M/s Gaja Nand Pardeep Kumar in the audited books of account, purchase bill and transportation bilty of tansporter (APB 111-125) and C-Form issued to M/s Gaja Nand Pardeep Kumar. Vide order dated 21.12.2018, the AO made a further addition of Rs. 1,86,110/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per information received from ITO (Investment), Gurugram, the DDIT (Investigation), Hissar afforded too many opportunities to Shri Pardeep Kumar to appear or file any written reply as regard to purchase made with the parties, but he has neither appeared nor filed any written reply. A letter was sent to him by Registered Post on his residential address i.e., ……..2875, Gandhi Memorial Vidhalya, Abohar by specifically mentioning that the entries in the account will be treated as his income from other sources and action will be initiated against him as per provisions of Income Tax Act, but no reply furnished by him. As Shri Pardeep Kumar has not submitted any reply or clarified his credit entries in his bank account, it is clear that he is not doing any business activity but merely an entry provider. As per reply submitted by the counsel of the assessee on 26.03.2016 stated that they have made purchases from M/s Gaja Nand Pardeep Kumar, Dabwali to the tune of Rs. 58,42,590/-. As M/s Gaja Nand Pardeep Kumar, is found to be a non existing entity, total purchases of the assessee are bogus purchases and only bills have been raised. The assessee thus, found to have concealed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er who had lifted the goods from M/s Gaja Nand Pardeep Kumar, have been filed at APB 111-125. Copies of sale bills have also been enclosed. Copy of ledger of M/s Gaja Nand Pardeep Kumar in the books of the assessee, for the period from 01.04.2010 to 31.03.2011, has been filed at APB 110. 9.13 Copies of relevant pages of bank statement of the assessee, pertaining to State Bank of Patiala has been filed at APB 127-128 and that concerning Punjab National Bank, has been filed at APB 129-132. These bank statements show payments made by the assessee to M/s Gaja Nand Pardeep Kumar against purchases made from M/s Gaja Nand Pardeep Kumar/ 9.14 The copy of C-Form issued by the assessee to M/s Gaja Nand Pardeep Kumar has been filed at APB 126. 9.15 Details of purchases made from M/s Gaja Nand Pardeep Kumar, in the form of bilty number, have been placed at APB 111, 114, 117, 123 and 120. The details with regard to the sales, in the shape of ledger account of the party, are at APB 137-138 concerning Fertichem Cotspin Ltd. and at APB 136, concerning Cheema Spintex Ltd. The respective bills have been placed at APB 113-116, 119, 125 and 122. The relevant pages of the Purchase Book and Sale Book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at much lower price than the price disclosed in the books of account. The assessee has shown purchased (sic) of 570.26 qtl. Cotton from M/s Gaja Nand Pardeep Kumar for Rs. 58,42,590/-. Out of total purchased, it notice (sic) that assessee has purchased 175.86 qtl. (89.46 + 86.41) cotton J-34 @ Rs. .10931.14 from M/s Gaja Nand Pardeep Kumar, Dabwali on 01.11.2010 and also purchased same type of cotton @ Rs. 9872.85 from M/s Neelkamal Industries, Jaitsar on the same day i.e., 01.11.2010. Therefore, it is clear that assessee has purchased cotton on higher rate of Rs. 1058.29 from M/s Gaja Nand Pardeep Kumar in comparison to the other party. 5. The matter was discussed with the counsel of the assessee on the above issues and after discussion and taking a reasonable view, difference on account of above discrepancy has been worked out (sic) Rs. 186110 [cotton 175.86 qtl. X Rs. 1058.29 {10931.14 - 987285}]. Therefore, an addition of Rs. 1,86,110/- is made towards the taxable income of the assessee……………." 9.17 The application of mind on the part of the AO in the aforesaid assessment order is evident from the fact that the AO clearly held that in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made were bogus. The purchases themselves were not bogus. It was concluded that the entire quantity of opening stock, purchases and the quantity manufactured during the year had been sold by the assessee, and that therefore, the entire 102514 meters of cloth purchased were sold during the year. Thus, the Tribunal accepted the assessee's contention that the finished goods were, in fact, purchased by the assessee, though not from the parties shown in the accounts. The Tribunal held that it was not the entire amount of purchases, but the profit margin embedded therein, which would be subjected to tax. On appeal, the Hon'ble Gujrat High Court held that the Tribunal had committed no error; that whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus, was essentially a question of fact; that the Tribunal, having examined the evidence on record, had come to the conclusion that the assessee did purchase the cloth and sold the finished goods; that as a natural corollary, it was not the entire amount covered under such purchase, but the profit element embedded therein, which would be subject to tax. 9.20 Reliance ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly Fab (P) Ltd. vi) 152 ITD 874 (Ahd) Dineshbhai Dhansukhlal Mithaiwala vs. ITO vii) ITA No. 2446 & 2447/Mum/2015 DCIT v. Allied Blendes and Distillers (P) Ltd. viii) ITA NO. 5313/Mum/2013 Vishal P. Mehta v. DCIT 9.22 Further, in "Vaghasiya Exports", order dated 27.07.2021 passed by the Mumbai Bench of the Tribunal in ITA No.2288/Mum/2019, it was found that the only addition made was with regard to suspicious purchases made by the assessee from various entities of a tainted group. Specific queries had been raised by the AO requiring the assessee to substantiate the purchased under suspicion. The assessee furnished their requisite details and documentary evidences before the AO. Such evidence included stock record and quantitative details of opening stock, closing stock, purchase, sale etc. The assessee also demonstrated before the AO, the corresponding sales made against the purchases. In support of the purchase transaction, copies of purchase invoices sales ledger extracts were furnished. It was on considering all these evidences, that the AO came to a conclusion that since sales had been offered and adequate quantitative details had been produced by the assessee, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Rakesh Prabhu Das Doshi Vs PCIT", vide order dated 02.11.2018, passed by the Mumbai Tribunal in ITA No. 4056/Mum/2018, the Tribunal observed that it had been found from the record that while passing order u/s 143(3) read with Section 147 of the Income Tax Act, the AO had considered the factual position with regard to the assessee having made purchases from different persons, who had made additions of Rs. 6,26,847/-. It had been found that the completed assessment had been reopened on the ground of information received from the Investigation Wing of the Department that the assessee had made purchases from alleged bogus suppliers. The AO, after having made detailed enquiry and investigation, found that the corresponding sales had been duly accounted for by the assessee in its books. The AO found that accordingly, the entire purchases could not be added. He, as such, estimated extra profit of 6% on such purchases and added the same to the assessee's income. The Tribunal held that it had also considered the various decisions wherein under identical facts and circumstances, 2% additions on bogus purchases had been made; that since the additions in such type of cases depend on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y having conducting due enquiry to ascertain the genuineness of the purchases made by the assessee, but had also made addition on account of bogus purchases in accordance with the judicial proceedings; that the PCIT had held the assessment order to be erroneous and prejudicial to the interests of the Revenue, primarily for two reasons; firstly, due to non consideration of the decision of the Supreme Court in the case of "N.K.Proteins" (supra) and secondly due to lack of proper enquiry ; that the Tribunal did not agree with the view of the PCIT that it was a case of lack of proper enquiry to find out the genuineness of the purchases; that as regards the PCIT's allegation of non consideration of the decision in "N.K. Proteins" (supra), the said decision had been rendered by the Hon'ble Supreme Court on 16.01.2017, much after the date of the passing of the assessment order, i.e., 02.03.2016; that this being so, there was no occasion for the AO to consider "N.K. Proteins" (supra); that this being the case, exercise of power u/s 263 of the Act for the alleged non consideration of the Supreme Court decision in "N.K. Proteins", was wholly misconceived; that in any case, addition to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the open market does not have anything on record to support it. Such finding is based merely on surmises and conjectures. This being so, there was no occasion for the ld. PCIT to conclude that the AO had not made disallowances as per the provisions of Section 40A(3) of the Act. In this regard, in "Shri Ganapat Raj A Sanghavi Vs ACIT", vide order dated 05.11.2014, passed in ITA No. 2826/Mum/2013, the Mumbai Bench of the Tribunal held that the copies of bank account collected by the AO showed the assessee to have made the payments to the stated parties by way of account payee cheques, showing that the transactions had been routed through bank accounts; that also, it was not the case of the AO that the assessee had indulged in accounting of bogus purchases; that when the assessee submitted that he could not effected the sales when making corresponding purchases, the AO took the view that the assessee could have effected purchases from the grey market; that such a conclusion was, in fact, not supported by any material; that it was under this impression only, that the AO had further expressed the view that the assessee would have purchased the materials by paying cash, thus, viola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axing authorities in the assessment and re-assessment, nor were they called into question by the ld. PCIT in the revisional proceedings. The assessee produced the relevant bank statements depicting the payments made to M/s Gaja Nand Pardeep Kumar (APB 127- 132) against purchases made from M/s Gaja Nand Pardeep Kumar. The assessee had shown delivery of the goods and payment of consideration for such delivery, which are the two things required to establish the purchases made. In the absence of any evidence on record to the contrary, purchases amounting to Rs. 58,42,492/- could not be said to be bogus purchases calling for disallowance. In fact, neither the AO, nor the PCIT disputed either the delivery of goods, or the payment of the consideration for such delivery. Rather, remarkably, the sales and closing stock had been accepted in the assessment proceedings, both in the original assessment proceedings as well as the re-assessment proceedings. It is also not in question that the consideration paid as flowed from the bank account of the assessee. It has also not even been contended, much less proved that the amount of the consideration had been ploughed back to the bank of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were bogus; that mere reliance on the information obtained from the Sales Tax Department, or on the statements/affidavits of the twelve parties before the Sales Tax Department, or on the fact that these parties did not respond to notices issued u/s 133(6) of the Act, would not, by itself lead to the conclusion that the purchases were to be treated as bogus, making addition u/s 69C of the Act; that in case the AO doubted the genuineness of the purchases, it was incumbent upon him to cause further enquiries so as to ascertain the genuineness or otherwise all these transactions; that in the absence of further enquiries in respect of the purchases, the AO could not make addition u/s 69C of the Act by merely relying on the information obtained from the Sales Tax Department, the statements/affidavits of the third party without affording opportunity of cross-examination of these persons to the assessee, for not having responded to the requirements of providing of information u/s 133(6) of the Act. It was observed that the AO had failed to make any enquiry to establish his suspicion that the purchases were bogus, whereas the assessee had produced on record documentary evidence to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwal Vs ACIT" passed in ITA No. 1459/Kol/2010, are to the same effect. 12.6 In the case of "Tejua Rohit Kumar Kapadia", the Hon'ble Gujrat High Court, in ITA No. 691 of 2017, dismissed the appeal of the Department as bearing no question of law, holding that the purchases made by the assessee were duly supported by bills and payments were made by account payee cheque and there was no evidence to show that the amount was recycled back to the assessee, particularly when it was found that the assessee, the trader, had also shown sales out of purchases made which also were accepted by the Department. The SLP filed by the Department was dismissed vide theory No. 12670/2018. 13. In the following decisions, it has been settled that where purchases are duly recorded in the books of account, payment has been made through account payee cheques and the sales/closing stock are accepted, no disallowance can be made : i) M/s Fancy Wear Vs ITO, 167 ITD 621 (Mum) ii) CIT Vs Oswal Chemical & Fertilizers Ltd. 200 taxman 170 (Del) iii) CIT Vs Nikunj Exim P. Ltd. 372 ITR 619 (Bom) iv) Ramanand Sagar Vs DCIT 256 ITR 134 (Bom) v) Babulal C Borana V ITO 282 ITR 251 (Bom) vi) CIT Vs M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT 68 ITD 65 CHD, and viii) Rupesh Chiman Lal V ITO, order dated 30.01.2017 in ITA Nos. 6179-6182/Mum/2016 13.5 Then, it is well settled that the assessee cannot be expected to be after the person with whom he has entered in the business transactions and the assessee's onus is to establish the identity of the party and once the payment has been made through account payee cheque, that identity is well established. 13.6 The following decisions are eloquent on this issue : i) Addl.CIT, Bihal Vs Hanuman Agarwal 151 ITR 150 (Patna) ii) Mather & Platt (I) Ltd. V CIT 168 ITR 493 (Cal) iii) Addl. CIT V Bahri Bros P.Ltd. 154 ITR 244 iv) Order of the Mumbai Bench of the Tribunal in the case of Prabhat Gupta V ITO in ITA No. 271/Mum/2017 and in M/s Vision Advertising P Ltd. V CIT, order dated 12.08.2018, in ITA No. 890/Mum/2015 13.7 Then, it has rightly been contended that the AO has passed the order after making all possible enquiries and the ld. PCIT has gone wrong in holding it to be a case of lack of enquiry, attracting the provisions of Section 263 of the Act. 13.8 As discussed, it is patent that during the assessment proceedings, the AO had made all possible enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order could not be termed as erroneous and prejudicial to the interests of the Revenue; that where two views are possible and the AO has taken a view with which the PCIT does not agree, the assessment order cannot be held to be erroneous and prejudicial to the interests of the Revenue. Similarly, the decision in the case of Garg Brothers Pvt. Ltd. Vs DCIT, rendered vide order dated 18.04.2018 in ITA 2519/KOL/2017. 15. Further, no new facts have been shown to have emerged after the passing of the assessment order and no fact has been stated to have been skipped by the AO. Therefore, again, the assessment order cannot be said to be erroneous and prejudicial to the interests of the Revenue. In this regard, the following decisions are to the same effect: i) CIT Vs Max India Ltd. 295 ITR 282 (S.C.) ii) Malabar Industrial Co.Ltd. V CIT 243 ITR 83 iii) 171 ITR 698 (All) CIT v. Goyal Private Family Specific Trust iv) 170 ITR 28 (All) CIT v. Kashnl Nath & Company v) 171 ITR 141 (MP) CIT v. Ratlam Coal Asn. & Co. vi) 430 ITR 55 (Kar) CIT vs. Cyber Park Development & Construction Ltd. vii) ITA No.25l9/Kol/2017 dated 18.4.2018 Garg Brothers (P) Ltd. vs. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) ITA No. 7785/2015 (Del) dated 13.10.2015 Pr. CIT vs. Rakam Money Matters (P) Ltd. 15.3 It is also settled, as in the case of CIT Vs Leisure Ware Exports Ltd. 341 ITR 166 (Del) that the provisions of Section 263 of the Act cannot be invoked to make deeper enquiry in presumption and assumption that something new may come out. 15.4 In "DCIT Vs Jyoti Foundation" 357 ITR 388 (Del), it has been held that orders passed without enquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue, but orders which are passed after enquiry/investigation on the question/issue are not per-se or normally treated as erroneous and prejudicial to the interests of the Revenue because the revisionary authority feels and opines that further enquiry/investigation was required or deeper or further scrutiny should be undertaken. These decisions are also to this effect: i) 332 ITR 167 (Del) CIT vs. Sunbeam Auto Ltd ii) 341 ITR 537 (Del) CIT vs. Vikas Polymers Income Tax Appellate Tribunal iii) ITA No. 7265/D/2017 dated 27.1.2020 M/s Klaxon Trading (P) Ltd. vs. PCIT (Delhi Tribunal) iv) ITA No. 1781/D/2016 dated 24.4.2019 Sanjeev Singh vs. PCIT (Delhi Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening the assessment were the same as for which jurisdiction u/s 263 had been invoked, such invocation of the provisions of Section 263 was not tenable. In the present case, evidently, the reasons recorded (APB 53) for re-opening the assessment u/s 147 of the Act and those (APB 93-94) for which the ld. PCIT sought to invoke his revisionary jurisdiction, are the same. In similar facts and circumstances, revision has been held to be not sustainable ; (i) CIT Vs Suresh Paul Bansal 2 taxmann.com 260 (Mad), following CIT Vs Vikram Aditya & Associates (P) Ltd. 287 ITR 268 (Mad) and CIT Vs Prudent Advisory Services (P) Ltd., order dated 28.02.2007, passed in IT Appeal No. 170 of 2007, against which last order, the SLP filed by the Department has been dismissed vide order dated 15.01.2000 in SLP (Civil) [CC No. 13518/2007]. (ii) Sri Bala Forgings (P) Ltd. Vs PCIT 175 DTR 57 (Del) (Trib) is also to the same effect. (iii) Too, once the order passed u/s 147/143(3) of the Act is invalid, the consequential proceedings u/s 263 are also invalid, as held in ; i) 341 ITR 240 (Del) CIT v. Software Consultants ii) 49 ITR (T) 0406 (Mum) dated 24.6.2016 M/s Westlife Development Ltd v. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (MP) CIT vs. Ratlam Coal Ash Co. 16.5 It has also been held that where all particulars are furnished before the AO by the assessee and he has applied his mind thereto, revision of the assessment order is not valid. The following decisions are on the issue : i) 130 TTJ 669 (Del) Regency Park Property Management Services Pvt. Ltd. vs. CIT ii) 125 TT.I 428 (Del) Rajiv Agnihotri vs. CIT iii) 131 ITD 58 (Jai) Rajiv Arora vs. CIT v) 137 TTJ 67 (Pat) Ramakant Singh vs. CIT 16.6 Courts have also on to hold that proceedings u/s 263 of the Act have to be confined to the findings recorded by the AO, as follows : i) 140 ITR 490 (P&H) Jagadhri Electric and Supply Co. vs. CIT ii) 192 ITR 547 (Kar) CIT vs. L.F.D. Silva iii) 192 ITR 50 (Mad) CIT vs. Late T.S. Srinivasa Iyer iv) 60 ITD 295 (Del) Jagjit Industries Ltd vs. ACIT v) 61 ITD 307 (Ahd) Satishbhai Jayantilal Shah vs. ACIT vi) 125 Taxation 188 (AP) CIT vs. G.K. Kabra Cooperative Ind. Estate vii) 61 ITD 317 (Mad) Sanco Trans Ltd. vs. ACIT 17. No decision contrary to the above has been cited before us. 18. In the entirety of the facts and circumstances discussed herein above, it is found that the revisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether all the payments made to partners is accordance with partnership deed and Income Tax Act, 1961 and also the observation that AO has not even called for the copy of partnership deed and brought the same on record" is patently erroneous, unsupported by any evidences, cryptic and, untenable. 2.4 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "'lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. 2.5 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard the parties and have perused the material on record with regard to these issues. 25.1 Apropos the issue of genuineness and credit worthiness of the unsecured loans, the ld. PCIT has observed that perusal of the assessment record showed that the replies filed during the assessment proceedings were just placed on record and that the AO had failed to verify the genuineness and credit worthiness of the unsecured loans; that the AO had not called for any ledger document and confirmation of accounts of the parties from whom the assessee had taken unsecured loans; that the AO had also failed to make any independent enquiry to verify the genuineness of the loans; that the assessee had submitted supporting documents related to unsecured loans only in response to the notice u/s 263 of the Act; that therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue; that the AO should have brought the same on record and make independent enquiry and also carry out examination of the parties to verify the genuineness and credit worthiness of the parties; and that there is a clear cut lack of enquiry on this issue. 25.2 The stand of the assessee is that the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,817/-, as appearing in the balance sheet, with full narration against the entry where the outstanding balance was of Rs. 2 lacs and above. The assessee was also asked to furnish details of loans squared up during the year. 27.1 Vide reply (APB 46-47) dated 04.12.2018, the assessee stated that details of interest paid and interest charged during the year would be produced during the manual hearing and that the rate of interest charged and paid are given in the said details. It was stated that there were no loans/deposits accepted or repaid during the year otherwise than by account payee cheques or bank drafts. It was stated that copies of accounts alongwith complete address with PAN, contact number, e-mail Id in respect of unsecured loans of Rs. 19,33,54,914/-, trade creditors of Rs. 19,42,87,255/- and sundry debtors of Rs. 66,39,17,817/-, as appearing in the balance sheet, with full narration against the entry where the outstanding balance was of Rs. 2 lacs and above, would be produced during the year, with documentary evidence would also be produced during the manual hearing. 27.2 Vide notice (APB 48-49) dated 11.12.2018, issued u/s 142(1) of the Act, the assessee was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil & Vanaspati Ltd. are the opening balances which are being carried forward for several years. The issue as to the genuineness of a credit entry, thus does not arise in the current year and this issue could only be examined in the year when the liability was recorded as having arisen, that is. in the year 1984-1985. The department having accepted the balances outstanding over several years, it was not open for the CIT (Appeals) to confirm the addition of the amount of" 1,53,48,850/- on the ground that the assessee could not produce sufficient evidence to prove the genuineness of the transactions which were undertaken in the year 1984-85." iv) 301 ITR 404 (Raj) CIT vs. Prameshwar Bohra v) 349 ITR 260 (All) CIT vs. Raghuraji Agro Industries (P) Ltd. vi) 45 taxmann.com 441 (Guj) CIT vs. Jagatkumar Satishbhai Patel INCOME TAX APPELLATE TRIBUNAL i) ITA No.1925/Del/2013 Kamal Industry, HUF vs. DCIT ii) ITA No. 1946/D/2010 AY 2000-01 dated 26.3.2018 Ravina Khurana v. DCIT iii) ITA No. 3736/D/2017 dated 27.11.2020 ACIT vs. SPG Finvest (P) Ltd. (in respect of investments pertains to earlier years) iv) 21 SOT 22 (Delhi) (URO) Suraj Bhan Bajaj vs. ITO v) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 335 (SC) iii) 105 taxman.com 158 (Del) PCIT vs. E-Smart Systems (P) Ltd. affirmed by Hon'ble Apex Court in 263 Taxman 373 (SC) dated 3.12.2018. iv) 361 ITR 155 (Del) CIT Vs Nipun Auto (P) Ltd. v) 62 ITR (T) 512 (Del) ACIT Vs Shyam Indus Power Solutions (P) Ltd. 28.6 It is seen that with regard to these ten lenders, the assessee has produced the following evidences: 28.7 The above evidence with regard to each of these lenders remains patent on record and uncontroverted. Further, to reiterate, with regard to these loans carried out from earlier years, the assessee has also paid interest thereon after deduction of TDS. Now, evidently, the department cannot be allowed to approbate and reprobate, as has wrongly been done in the present case. The following are some of the decisions on this issue : 1. Union of India Vs British India Corporation 268 ITR 481 (S.C) 2. 217 Taxmann 247 (Guj) CIT vs. Jayantkumar Motichand Doshi 3. 217 Taxman 29 (All) CIT vs. Mohan Lai Agarwal 4. ITA No. 564/2012 (Guj) CIT vs. Ulaben Jayant Kumar Doshi 5. CIT Vs H.P. Stock Holdings Ltd. 325 ITR 316 (Del) 28. In view of the above discussion, we find that the assessee is justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by the parties. 29.3 Vide reply (APB 46-47) dated 04.12.2018, the assessee stated that the names, complete address and copies of persons from whom purchases and sales exceeding Rs. 2 lacs had been made during the year, would be produced during the manual hearing. 29.4 Vide notice (APB 48-49) dated 11.12.2018, issued u/s 142(1) of the Act, the assessee was asked to attend the Assessing Officer's office on 17.12.2018 alongwith the required information/documents, and also to produce the books of account. 29.5 In ordersheet entry (APB 59) dated 21.12.2018, the AO noted that the counsel of the assessee was present and had submitted the required documents/information and had also produced books of account, which had been test checked, and that the case had been discussed with the counsel of the assessee. 29.6 In the assessment order (APB 50-59) dated 21.12.2018, passed u/s 143(3) of the Act, the AO noted that the response of the assessee had been received; that the assessee had requested for personal hearing for submission of complete information/documents; that accordingly, notice u/s 142(1) had been issued on 11.12.2018, fixing the case for 17.12.2018 for personal hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted purchases made by the respondent-assessee on credit and the purchases and sales having been accepted by the Department, the question of addition of the aforesaid two amounts under s. 68 of the Act did not arise inasmuch as the provisions of s. 68 of the Act would not be attracted on the purchases made on credit. iii) 220 Taxman 17 (Guj) CIT v Nangalia Fabrics (P) Ltd. iv) 200 Taxman 170 (Del) CIT v Oswal Chemical & Fertilisers Ltd. v) 372 ITR 619 (Bom) CIT vs. Nikunj Eximp Enterprises (P) Ltd. vi) 256 ITR 134 (Bom) Ramanand Sagar vs. DCIT vii) 282 ITR 251 (Bom) Babulal C Borana vs. ITO viii) 163 ITR 249 (Guj) CIT vs. M. K. Brothers ix) 276 CTR 89 (Cal) CIT v Manish Enterprises x) 205 Taxman 22 (Raj)(MAG.) CIT vs. Precious Jewels Corporation xi) 124 TTJ 554 (Del) Elnad International (P) Ltd. v DCIT "'5.4 We have considered the facts of the case and rival submissions. From the submissions made before us, it is clear that the transactions of purchase and sale were recorded in the books of account and these transactions led to profit to the assessee, which was brought to tax. If sales have been effected out of purchases made from these partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefore has been allowed." xiii) 95 TTJ 71 (Del) Annamaria Travels & Tours (P) Ltd. vs. DCIT iv) 67 SOT 52 (Mum) DCIT v Rajeev G. Kalathil xiv) 167 ITD 621 (Mum) M/s. Fancy Wear vs ITO., 6.But, we will like to decide the issue on merits also. The AO or the FAA have not rejected the books of accounts of the assessee nor have doubted the purchases made by it. The recognised principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961; that the AO had not even called for the copy of the Partnership Deed and had not brought the same on record during the assessment proceedings; that in the absence of the Partnership Deed, all the payments made to the partners remained unverified; that the copy of the Partnership Deed had been submitted by the assessee only in response to the notice issued u/s 263; that therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue and that the AO should bring the same on record and verify and check whether all the payments made to the partners are in accordance with the deed and the Income Tax Act, 1961. 29.12 The payments made to the partners have been tabulated as follows : Sr. No. Name of Partner Interest (in Rs.) Remuneration (in Rs.) i) Lalit Mohan Sharda 8.98.170 3,00,000 ii) Mahesh Sharda 19,69,555 6,00,000 iii) Pankaj Sharda 17,66,511 3,00,000 Total 46,34,236 12,00,000 29.13 Further, the status of the partners' remuneration and interest paid to partners has been shown as follows : Sr. No. Assessment Partners Remuneration Interest Partners Disallowance Assessed Assessment i) 2011-12 16.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al enquiry has to be there; that the revisionary action is based on receipt of proposal from the AO; that Commissioner of Income Tax cannot simply ask the Assessing Officer to re- examine the matter, he can do so only after finding order of assessment is erroneous and prejudicial to interest of Revenue; that error should be one which depended on fact or law and not mere poss1blity or guess work; that proceedings u/s 263 have to be confined to findings recorded by learned Assessing Officer and not beyond. 31. All these above contentions stand dealt with by us while dealing with t he assessee's appeal in ITA 146/CHD/2021 for assessment year 2011-12 (supra). For the above discussion, finding merit in the grievance sought to be raised by the assessee, the same is accepted. The impugned order qua all the three issues raised, i.e., genuineness and credit worthiness of unsecured loans, verification of sundry creditors and payments to partners, is reversed and the assessment order concerning all these issues is ordered to be revived. 32. Consequently, the assessee's appeal in ITA 147/CHD/2021, for assessment year 2015-16 is partly allowed. ITA 148/CHD/2021 33. In this appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. 2.5 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.6 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the lenders and the genuineness of the transactions was not enquired into by the AO regarding loans of Rs. 8.3 Crores taken by the assessee during the year; that the AO did not ask for the Income Tax Return and the bank account and confirmations; that in the assessment order, there is even no mention of any such enquiry having been carried out by the AO. It has been contended that no minimal enquiry is mandatorily to be carried by the CIT in the revisionary proceedings. Reliance in this regard has been placed on "Basera Realtors" 163 TTJ 736 (CHD), "Raj Laxmi" 31 SOT 353 (Chennai) (SB), "Daniel Merchants" (2017) TIOL 455 (SC)(IT) & "Daniel Merchants" (2017) TIOL 2526 (HC) (KOL) (IT). 39.1 In this regard, we find that no such objection was raised by the CIT in the impugned order. It is well settled that the case of the Commissioner cannot be improved upon by the DR. Reference, in this regard, can be made to "CIT v. Jagadhiri Electric Supply & Industrial Co." 140 ITR 490 (P&H), "M/s Sabh Infrastructure Ltd. vs. ACIT",398 ITR 198 (Del) and "Sarogi Credit Corporation v. Commissioner Of Income-Tax, Bihar" 03 ITR 344 (Patna). 39.2 In view of the above, finding that in this matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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