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Income Tax Appellate Tribunal, DEHRADUN BENCH : DEHRADUN
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
ORDER
PER M. BALAGANESH, AM:
This appeal in for AY 2009-10 arises out of the order of the Pr. Commissioner of Income Tax (Appeals), Dehradun, [hereinafter referred to as „ld. PCIT‟, in short] in DIN & Order No. ITBA/REV/F/REV5/2020- 21/1031815348(1) dated 27.03.2021 against the order of assessment passed u/s 148/147 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 26th/28th December, 2018 by the ld. Assessing Officer, Ward 1(3)(3), Haridwar (hereinafter referred to as „ld. AO‟).
2. The only issue to be decided in this appeal is as to whether the ld. PCIT was justified in invoking revisionary jurisdiction u/s 263 of the Act in respect of disallowance of purchases of Rs 33,35,500/- in the facts and circumstances of the instant case.
3. The assessee has raised the following grounds of appeal before us :-
“1. That on the facts and circumstances of the case and in law, the impugned order dated 27.03.2021 passed by the Principal Commissioner of Income-tax (PCIT), under section 263 of the Income-tax Act, 1961 („the Act‟) is without jurisdiction, illegal, bad in law and void- ab-initio. 1.1. That on the facts and circumstances of the case and in law, the impugned order passed by the PCIT is illegal and bad in law, being: (a) barred by limitation prescribed under section 263(2) of the Act; (b) initiated to cancel/set-aside reassessment order which had attained finality under the Direct Tax Vivad se Vishwas Act, 2020 (“the VsV”); and (c) initiated to revise reassessment order in respect of issues which were not even subject matter of reopening proceedings. 1.2. That on the facts and circumstances of the case and in law, impugned revisionary proceedings were without jurisdiction, illegal and bad in law since the reassessment order dated 28.12.2018 sought to be revised was itself without jurisdiction, illegal and bad in law. 1.3. That on the facts and circumstances of the case and in law, the impugned order passed under section 263 of the Act, without appreciating that the twin conditions of that section viz., assessment order being erroneous as well as prejudicial to the interests of the Revenue, were not satisfied, is illegal and bad in law. 1.4. That on the facts and circumstances of the case, the impugned order having been passed by the PCIT without: (a) affording reasonable opportunity of being heard to the appellant in violation of principles of natural justice; and (b) first disposing off the legal objections by passing a separate speaking order, is illegal and bad in law.
2. That on the facts and circumstances of the case and in law, the PCIT erred in holding that the re-assessment order dated 28.12.2018, passed under section 147 r.w.s 143(3) of the Act is erroneous and prejudicial to the interests of Revenue on the issue of alleged bogus „purchases‟ made from one M/s Meet Enterprises.
2.1. That the PCIT exceeded his jurisdiction in setting aside the reassessment order on the issue of alleged bogus „purchases‟ from M/s Meet Enterprises, despite the fact that the issue in reassessment proceedings was restricted only to alleged bogus „payments‟ made to the said party. 2.2. That the PCIT failed to appreciate that the issue of disallowance of alleged bogus purchases from M/s Meet Enterprises was, in any case, extensively examined during the course of original as well as reassessment proceedings and the same was, therefore, outside the scope of revisionary jurisdiction under section 263 of the Act. 2.3. That the PCIT failed to appreciate that the issue of „alleged bogus purchases made from M/s Meet Enterprises‟ having being settled under the YsV was amenable to immunity and consequently, fell outside the scope of revisionary jurisdiction under section 263 of the Act. 2.4. That the PCIT erred in setting aside the reassessment order on aforesaid issue on vague/ general ground, without pointing out the error, much less prejudice, in the reassessment order. The appellant craves leave to add, to amend or vary the above grounds of appeal on or before the date of hearing.”
4. We have heard the rival submissions and perused the materials available on record. The assessee is an individual and proprietrix of M/s Hindustan Asbestos & Ferro Alloys , Haridwar, engaged in the business of supplying industrial ferro alloys. The return of income for the A.Y. 2009-10 was electronically filed by the assessee on 30.09.2009 declaring total income of Rs 5,19,760/-. The assessment was completed u/s 143(3) of the Act on 27.12.2011 determining the total income of the assessee at Rs 8,49,215/-. Amongst various additions made by the ld. AO in the said assessment , one such addition was on account of mismatch / difference in purchases amounting to Rs 42,650/-. The assessee preferred an appeal before the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as the ld. CIT(A)] who vide order dated 26.10.2012 deleted the addition made in the sum of Rs 42,650/- on account of difference in purchases. However, other additions made by the ld. AO were confirmed by the ld. CIT(A). The assessee preferred further appeal against the said order of ld. CIT(A) which was dismissed by the Tribunal vide order in dated 28.06.2013. 3
Subsequently on the basis of information received from Deputy Director of Income Tax (Inv.) Unit-I , Dehradun and examination of the said information, it was gathered that the assessee had made purchases of Rs 1,06,80,540/- from M/s Meet Enterprises and had made payments to the tune of Rs 73,45,040/- thereon. In the opinion of the ld. AO, this purchase from M/s Meet Enterprises was bogus and was in the nature of accommodation entry as the said entity was non-existent and not having any real business operations. Accordingly, the case of the assessee was sought to be reopened by issuance of notice u/s 148 of the Act on 25.03.2014 after taking prior approval from the competent authority in terms of section 151 of the Act. In response to the said notice u/s 148 of the Act, the assessee filed a reply dated 23.04.2014 sought for reasons recorded for reopening the assessment. The reasons recorded were duly furnished by the ld. AO to the assessee. The validity of reopening was challenged by the assessee by way of writ petition before the Hon‟ble Uttarakhand High Court and the same was dismissed by the Court vide its order dated 18.12.2017. Thereafter the notices u/s 143(2) and 142(1) of the Act were issued to the assessee calling for details in respect of purchases made from M/s Meet Enterprises. The reasons recorded specifically stated that the entire purchases made from M/s Meet Enterprises were bogus in the sum of Rs 1,06,80,540/- by the assessee and out of this, a sum of Rs 73,45,040/- has been paid by the assessee during the year. Since the said party was found to be non-existent, the ld. AO concluded that the purchases made from the said party to be a mere accommodation entry. During the course of re-assessment proceedings, the ld. AO made following enquiries with the assessee by seeking the following details :-
“1. Kindly refer to your reply dated 23.08.2018 in response to notice under section 142(1) of the I.Tax Act, 1961, you are hereby required to submit your sale tax return for the F.Y. 2008-09, copies of road permit and „Bahati Form ‟ for the item claimed to be purchased from Meet enterprises.
Kindly furnish the detail of final order of VAT/Sale Tax, detail of penalty imposed by the Department, and detail of payment of the same. Kindly also furnish the current status of the same, along with documentary evidence.
From the sale tax return of Meet enterprises, is reveals that no such sale has been made by them, as claimed by you that you have purchase from Meet enterprises. Therefore, you are requested to kindly submit your reply in this regard, you are also requested to produce Shri. Vikash Kumar, Prop. Meet Kumar for further investigation.
Kindly furnish the detail of payments made to Contractors on account of Transportation and Sea Port Clearance for Rs. 30,52,440/- and the Detail of TDS done on the same. 5. Kindly furnish the TDS return filed by you, for the year under consideration.”
Further yet another show cause notice was issued by the ld. AO as to why the assessment should not be completed u/s 144 of the Act vide notice dated 16.12.2018. In the said notice, the ld. AO had proposed to make disallowance of Rs 73,45,040/- alone towards bogus purchases. The assessee furnished her reply vide letter dated 26.12.2018 before the ld. AO by way of letter sent by post. The ld. AO observed that assessee was required to submit the evidence in support of claim of purchases made from so called M/s Meet Enterprises, in the form of copies of „Road Permit‟ and „Bahati Form‟. The assessee failed to produce the same. Further the assessee was also requested to produce Shri Vikash Kumar, Proprietor of Meet Enterprises for further investigation as all the letters sent at the address of M/s Meet Enterprises were returned unserved. Further the purchases claimed by the assessee also has not been reflected in the sales tax return of M/s Meet Enterprises as procured u/s 133(6) of the Act. The ld. AO also relied on the findings recorded by the Hon‟ble Uttarakhand High Court while disposing of the writ petition of the assessee wherein they had recorded that M/s Meet Enterprises had falsely fabricated invoices and claimed input VAT to the tune of Rs 6,45,198/- on certain purchase transactions and the commercial tax authorities detected that assessee had fabricated purchase invoices of three vendors thereby increasing its purchase bill by over Rs 2,44,69,640/-. The fabricated invoices pertained to M/s Meet Enterprises for Rs 1,06,80,540/- , M/s R.K. Traders for Rs 92,27,400/- and M/s Bharat Trading Co. for Rs 45,61,700/-. The ld. AO finally concluded that the purchases made by the assessee from M/s Meet Enterprises and the payment made to the said firm amounting to Rs 73,45,040/- was not genuine and only an accommodation entry. Accordingly, this sum of Rs 73,45,040/- was disallowed in the reassessment proceedings completed u/s 143(3) read with section 147 of the Act dated 26.12.2018.
This reassessment dated 26.12.2018 was sought to be revised by the ld. PCIT by invoking revisionary jurisdiction u/s 263 of the Act on the ground that the ld. AO ought to have disallowed the entire purchases from M/s Meet Enterprises amounting to Rs 1,06,80,540/- and since only Rs 73,45,040/- was disallowed by the ld. AO in the reassessment proceedings, the order of reassessment became erroneous and prejudicial to the interest of the revenue. The assessee submitted that the demand raised in the re-assessment proceedings dated 26.12.2018 was settled by her by availing the Direct Tax Vivad Se Vishwas Act, 2020 and the dispute was settled thereon. In support thereon, the assessee submitted Form 3 dated 23.02.2021 issued by the ld. PCIT, Dehradun (being the designated authority) and thereafter the taxes due thereon were paid by the assessee. Accordingly, Form No.5 was also issued by the ld. PCIT , Dehradun on 09.04.2021.
The ld. PCIT observed that the assessee had settled the dispute under Vivad Se Vishwas (VSV) Scheme only against the disallowance of purchases from M/s Meet Enterprises only for Rs 73,45,040/-. Anyway, the difference of purchases from M/s Meet Enterprises of Rs 33,35,500/- was never subject matter of disallowance in assessment by the ld. AO or settlement of dispute by the assessee under VSV scheme. Accordingly the ld. PCIT invoked his revisionary jurisdiction u/s 263 of the Act for disallowing the remaining sum of Rs 33,35,500/-.
Before us, the ld. AR vehemently argued that the ld. AO had already made enquiries in the reassessment proceedings and had arrived at a possible view that only a sum of Rs 73,45,040/- need to be disallowed on account of purchases from M/s Meet Enterprises. He argued that once the ld. AO had taken a possible view, the same cannot be subject matter of revision by the ld. PCIT u/s 263 of the Act , merely because the ld. PCIT was of a different view. There is no quarrel on this proposition laid out by the ld. AR. But what is relevant to be seen in the instant case is as to what was the basis of ld. AO concluding to disallow the sum of Rs 73,45,040/-. It is not in dispute that the assessee had indeed made purchases from M/s Meet Enterprises to the tune of Rs 1,06,80,540/-. It is not in dispute that M/s Meet Enterprises was a non-existent firm. The ld. AO had relied on the findings recorded by the Hon‟ble Uttarakhand High Court in the writ petition preferred by the assessee challenging the validity of notice u/s 148 of the Act, wherein the Hon‟ble High Court had indeed given adverse findings on the existence of M/s Meet Enterprises. Hence the fact that M/s Meet Enterprises is a non-existent firm and that they were engaged only in providing accommodation entries is proved beyond reasonable doubt. The findings of Hon‟ble Uttarakhand High Court is reproduced in the reassessment order of the ld. AO. Once the conclusion is reached that M/s Meet Enterprises was engaged in providing accommodation entries in the form of providing bogus sale bills, the ld. AO ought to have disallowed the entire purchases made by the assessee from the said party amounting to Rs 1,06,80,540/-. Strangely the ld. AO had disallowed only a partial sum of Rs 73,45,040/- representing payments made to M/s Meet Enterprises during the year. The ld. AO had ignored the fact that though the payment was made only for Rs 73,45,040/-, the assessee herein had claimed deduction for purchases to the tune of Rs 1,06,80,540/-. This is a grave error committed by the ld. AO in his assessment. This error had also caused prejudice to the interest of the revenue. We find that even the reasons recorded by the ld. AO clearly states that the assessee had made bogus purchases to the tune of Rs 1,06,80,540/- from M/s Meet Enterprises. Hence there is nothing wrong in ld. PCIT invoking his revisionary jurisdiction u/s 263 of the Act and directing the ld. AO to reconsider the remaining sum of Rs 33,35,500/- in accordance with law. We are also in agreement with the ld. PCIT and the argument advanced by the ld.DR before us that the dispute settled under VSV scheme is only for Rs 73,45,040/- which is partial and not the entire issue of purchases of Rs 1,06,80,540/-. In our considered opinion, though the assessee had sought to settle the dispute arising out of reassessment order under VSV scheme, it would be limited only to the extent of disallowance / addition made in the said reassessment . The assessee is not given any blanket immunity so as to prevent the revenue from looking into other matters relating to such assessment year.
In view of the aforesaid observations, we hold that the ld. PCIT was duly justified in invoking his revisionary jurisdiction u/s 263 of the Act by cancelling the reassessment framed by the ld. AO as erroneous and prejudicial to the interest of the revenue. Accordingly, the grounds raised by the assessee are dismissed.
In the result, the appeal of the assessee is dismissed.