VIMLA DEVI BHATTAR,JODHPUR vs. PCIT-1, JODHPUR

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ITA 479/JODH/2024Status: DisposedITAT Jodhpur30 June 2026AY 2017-1817 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO had conducted sufficient inquiries and verified the purchases based on documentary evidence provided by the assessee. Therefore, the PCIT's invocation of Section 263 was not justified as the AO's order was neither erroneous nor prejudicial to the revenue.

What were the facts?

The assessee's case was reopened under Section 147, and the Assessing Officer (AO) dropped the reassessment proceedings after the assessee provided details regarding purchases. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding the AO's order erroneous and prejudicial to revenue due to alleged lack of inquiry into purchases.

What were the issues?

Whether the PCIT was justified in invoking Section 263 when the AO had conducted sufficient inquiries and verified the assessee's purchases, making the order not erroneous or prejudicial to revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 147,Section 143(3),Section 69A,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR BENCH, JODHPUR

For Appellant: Shri Kapil Hirani, Advocate
For Respondent: Smt. Seema Meena CIT-DR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 479/Jodh/2024 (Assessment Year 2017-18) Vimla Devi Bhattar PCIT-1, Jodhpur E-51, Industrial Area Khichan (Phalodi) Jodhpur-342301 PAN:AMJPB6652J Assessee by Shri Kapil Hirani, Advocate (Virtually) Revenue by Smt. Seema Meena CIT-DR (Virtually) Date of Hearing 19 / 05 / 2026. Date of Pronouncement 30 / 06 / 2026.

ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by assessee against the order of the Principal Commissioner of Income Tax (PCIT), Jodhpur-1 [hereinafter referred to as the PCIT] dated 19.03.2024 with respect to the assessment years 2017- 18, challenging therein that order passed under Section 263 by the PCIT is illegal and bad in law as the same was not in conformity to the basic requirement of Section 263 of the Income Tax Act, 1961.

2 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) 2. The appellant assessee has raised the following grounds of appeal as under:-

1.

The notice issued U/s 263 and the order passed U/s 263 are illegal as the same are not in conformity to the basic requirements of section 263 and which deserves to be quashed as per law and interest of justice. 2. Without prejudice to above, the notice and proceedings under section 263 are invalid as the order passed by AO u/s 147 was neither erroneous nor prejudicial to the interest of revenue. 3. With prejudice to the above, the AO having duly verified all the grounds for initiating revisionary proceedings under section 263 of the Act, the order of the AO cannot be held to be erroneous nor prejudicial to the interest of the revenue so as to be amenable to the provisions of section 263 of the Act and consequently the order passed under section 263 deserves to be quashed as per law and in the interest of justice. 4. The Appellant craves leave to raise additional grounds before the Hon'ble Tribunal if and so warranted and further to add, amend, alter, vary and / or withdraw any or all the above grounds of Appeal with the kind permission of the Hon'ble Tribunal. 3. There was a short delay of 13 days in filing this appeal before the Tribunal for which the Ld. AR has filed an application for the condonation of delay before the Tribunal alleging therein, that this

3 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) marginal delay in filing of this appeal is on account of the appellant seeking appropriate legal advice apart from the fact that the appellant was suffering from ill health as well and the Ld. AR has requested to condone the delay. The Ld. DR has no objection to the request of the assessee for condonation of delay.

4.

Accordingly, short delay of 13 days in filing the appeal before the Tribunal is condoned and this appeal is admitted.

5.

At the outset the Ld. AR has submitted that the appellant assessee is an individual which is engaged in the business of trading and manufacturing of agricultural products and food items under the name and style of M/s Vimla Agency. The Books of accounts of appellant assessee were duly maintained and audited under Section 44AB of the Income Tax Act, 1961. The assessee has filed her return of the assessment year 2017-18, under consideration on 31.10.2017 declaring gross total income of Rs. 4,03,299/- comprising primarily of business income. The case of the appellant assessee was selected for scrutiny and was assessed under Section 143(3) of the Income Tax Act, 1961 (in short “the Act”) by the AO vide order dated 30.12.2019 with an addition of Rs. 56,48,000/- under Section 69A of the Act, pertaining to cash deposited by the

4 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) appellant assessee in her bank account during demonetization period by rejecting the claim of the appellant that the aforesaid disputed cash deposit was out of the cash sales made by the appellant and forming part of audited books of accounts of the appellant.

6.

The AR submitted that appellant had preferred an appeal before Hon’ble CIT(A) against the addition so made in assessment completed under Section 143(3) and the same is pending for adjudication before the Hon’ble CIT(A). In the meantime the appellant case has been reopened under Section 147 of the Act vide notice issued under Section 148 dated 31.03.2021 primarily on the ground that the appellant has made bogus purchases of Rs. 2,21,60,870/- from M/S Telvas Trading Private Limited. During the course of reassessment proceedings, the appellant has furnished all the detailed as desired by the AO, justifying the genuineness of the purchases made from Telvas trading Private Limited and clarified that the amount of purchases so made from Telvas Trading Private Limited was only of Rs. 53,70,465/- during the year under consideration and not of Rs. 2,21,60,870/- as wrongly alleged by the AO. The appellant has further submitted all the details in support of the purchases so made by her from Telvas Trading Private Limited.

5 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) Accordingly, the AO on a conspectus of the submissions so made by the appellant during the reassessment proceedings vide order dated. 31.03.2022 dropped the reassessment proceedings and completed the assessment without making any modification in the assessed income of the appellant.

7.

Thereafter, the reassessment order dated 31.03.2022 passed in pursuance to proceedings under Section 147 of the Act was sought to be revised by the Hon’ble PCIT-1, Jodhpur under Section 263 of the Act and consequently notice dated 01.03.2024 was issued primarily on the ground that the AO passed the assessment order dated 31.03.2022 under Section 147 r.w.s. 143(3) of the Act without conducting proper inquiries/investigations particularly in connection with the alleged purchases of Rs. 2,21,60,870/- as made by the appellant from M/s Telvas Trading Pvt. Ltd. In response, the appellant submitted reply dated 14.03.2024 objecting to the proposed revisionary proceedings under Section 263 of the Act on various grounds that the proceedings under Section 147 of the Act were initiated by the AO and during the course of reassessment proceedings notice under Section 142(1) was issued on 15.03.2022 asking the appellant to furnish various details as mentioned

6 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) therein including the details of purchases having been made by the appellant from M/s Telvas Trading Pvt. Ltd. and in response to which the appellant submitted her detailed response on 22.03.2022 wherein the appellant has submitted all the details of transactions as called for by the AO including the copies of invoices, delivery challans, and the ledger of M/s Telvas Trading Pvt. Ltd. in the books of the appellant and it was only after considering the entire facets of the case including the evidence as filed by the appellant, the AO concluded the assessment accepting the assessed income of the appellant and not making any addition whatsoever.

8.

The appellant submitted that in view of the above, the AO having made sufficient enquiries of the criteria on which the case of the appellant was reopened which was primarily purchases made by the appellant from M/s Telvas Trading Pvt. Ltd., it cannot by any stretch of imagination be held that the issue of verification of purchases from M/s Telvas Trading Pv.t Ltd. has not been verified by the AO so as to invoke the provisions of Section 263 of the Act. The AR argued that considering the facts and circumstances of the case and in law the order so passed by the AO cannot by any stretch of imagination be held to be erroneous in

7 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) so far as prejudicial to the interest of revenue so as to be amenable to the provisions of Section 263 of the Act. The Ld. AR contended that it is trite law that revision proceedings cannot be initiated/exercised under Section 263 for mere change of opinion. The AO having verified all the facts including the fact of purchases made by the appellant from M/s Telvas Trading Pvt. Ltd., the order passed by the AO is not amenable to the provisions of Section 263 of the Act and consequently requested the Ld. PCIT to drop the impugned proceedings under Section 263 as per law. The Ld. AR argued that the Ld. PCIT did not appreciate the facts of the case and the submissions as made by the appellant, on legal basis and proceeded to hold that the assessment order passed under Section 147 dated 31.03.2022 for the assessment year under consideration is erroneous in so far as it is prejudicial to the interest of the revenue as the said order has allegedly been passed by the AO as the assessment order was passed without conducting necessary enquiry and verification of the purchase made from M/s Telvas Trading Pvt. Ltd. Accordingly, he set aside the assessment passed under Section 147 of the Act dated 31.03.2022 with a direction to the AO to reframe the assessment De Novo. The AR argued that the impugned order passed under Section 263 of the Act is illegal and bad in law as the AO has made detailed enquiries and

8 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) verification as discussed in the assessment order. The Ld. counsel has placed reliance on the following judgments:-

 Principal Commsioner of Income Tax Vs. Mera Baba Reality Associates Pvt. Ltd. ITA No. 637 of 2017-Delhi HC.  Commissioner of Income Tax Vs. Vikas Polymers (2012) 341 ITR 537-Delhi HC  Commissioner of Income Tax Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167-Delhi HC  Small Wonder Industries Vs. Commissioner of Income Tax-24, Mumbai ITA No. 2464/Mum/2013 ITAT Mumbai. 9. On the other hand the Ld. CIT-DR relied on the impugned order.

10.

We have heard both the sides, perused the material on record, impugned order and case laws cited before us. It is an undisputed fact that the appellant assessee’s case was selected for scrutiny and assessment order was completed under Section 143(3) vide order dated 30.12.2019 with an addition of Rs. 56,48,000/- under Section 69A of the Act pertaining to cash deposited by the appellant assessee in her bank account during demonetization period against which the assessee has preferred an appeal before the CIT(A) against the addition so made in assessment completed under Section 143(3) and the same is pending for adjudication before the CIT(A). Thereafter, the appellant’s case has been

9 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) reopened under Section 147 of the Act, vide notice issued under Section 148 dated 31.03.2021 primarily on the ground that the appellant has made bogus purchases of Rs. 2,21,60,870/- from M/S Telvas Trading Private Limited. During the course of reassessment proceedings, the appellant has furnished all the detailed as desired by the AO justifying the genuineness of the purchases made from Telvas trading Private Limited and clarified that the amount of purchases so made from M/s Telvas Trading Private Limited was only of Rs. 53,70,465/- during the year under consideration and not of Rs. 2,21,60,870/- as wrongly taken by the AO. During the course of reassessment proceedings after considering the detailed submissions the AO has completed the assessment vide order dated 31.03.2022 without making any modification in the assessed income of the appellant under Section 143(3) of the Act. However, the reassessment order dated 31.03.2022 passed in pursuance to proceedings under Section 147 of the Act was sought to be revised by the Hon’ble PCIT-1, Jodhpur under Section 263 of the Act, primarily on the ground that in the impugned reassessment order passed under Section 147/143(3) dated 31.03.2022, the perusal of the records showed that the AO passed the assessment order without conducting proper inquiries/investigations particularly in connection

10 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) with the alleged purchases of Rs. 2,21,60,870/- as made by the appellant from M/s Telvas Trading Pvt. Ltd. We find that all the details of transactions as called for by the AO including the copies of invoices, delivery challans, and the ledger of M/s Telvas Trading Pvt. Ltd. (APB Page No. 7 to 24) as in the books of the appellant had been furnished by the appellant and it was only after considering the entire facets of the case including the evidence as filed by the appellant, the AO concluded the assessment accepting the assessed income of the appellant without making any addition whatsoever.

11.

We find that the appellant assessee vide reply dated 15 March 2022 to the Assessing Officer/National Faceless Assessment Centre (AO/NFAC), Delhi, wherein vide point no. 5 and 7 it has been categorically explained that assessee has purchased FMCG goods from M/s Telvas Trading Pvt. Ltd. amounting to Rs. 53,70,465/- only as against the alleged purchases amounting to Rs. 2,21,60,870/- and it was further clarified that the said goods were exempted from the purview of the provisions of VAT and Service Tax. The appellant assessee has also filed details of the payments made to M/s Telvas Trading Pvt. Ltd. with copy of the ledger statement, invoices, delivery challans etc. of M/s

11 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) Telvas Trading Pvt. Ltd. and Bank Statement of Vimla Devi Bhatter (APB Page No. 25 to 26 ), and that the copy of confirmation of accounts from Telvas trading Pvt. Ltd. (APB Page No. 6).

12.

The Ld. PCIT has observed from the case history notings available on note sheet of the AO dated 31.03.2022, as under:-

"Due to paucity of time, investigation could not be made to examine the reasons for which the case has been reopened u/s 147 of the income tax act. Necessary remedial measures may be taken in due course, if required, as per provision of the income tax act. DAO a being submitted for your kind perusal." 13. Thus, based on the AO’s above notings in the order sheet, the Ld. PCIT has presumed that the AO/NFAC has not examined the issue of purchase of Rs. 2,21,60,870/- made from M/s Telvas Trading Pvt. Ltd. during the financial year under consideration and the purchases so made from M/s Telvas Trading Pvt. Ltd. is not disclosed by the appellant and remained undisclosed, brushing aside the detailed submission made by the appellant assessee before the AO during the course of reassessment proceeding as well as before the Ld. PCIT, as explained by the Ld. AR with the support of the copies of invoices, delivery challan, and ledger account, bank statement etc.

12 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) 14. On similar facts in the case of Principal Commissioner of Income Tax Vs. Mera Baba Reality Associates Pvt. Ltd., ITA No. 637 of 2017, the Hon’ble Delhi High Court held that the AO had a full-fledged opportunity to undertake a detailed enquiry, and having not done so on account of paucity of time, there cannot be any inference that the inadequate inquiry led the AO to arrive at incorrect facts. The Hon’ble High Court has further observed vide para no. 16 of the judgment as under:-

The facts in the present case, however, are different. As noticed by the ITAT, following the notices issued in the course of the assessment proceedings by the AO, on more than one occasion the Assessee furnished the complete details sought. Where the Assessee has in fact furnished the details that are available with him along with explanation to the queries raised by the AO, to permit the exercise of the revisionary jurisdiction only on the ground that the AO did not have sufficient time to verify the details furnished would be unfair to the Assessee. The PCIT must be satisfied, after application of his mind, that the order of the AO was erroneous with respect to the material made available to him. No such application of mind by the PCIT is evident from the impugned order which was under challenge before the ITAT.

13 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) 15. In the present case, the assessee has furnished all the details which are available with the Ld. PCIT along with all the details and explanation furnished by the appellant to the queries raised by the AO. In our view, the exercise of the revisionary jurisdiction merely on the ground that the AO did not have sufficient time to verify the details furnished by the appellant would be unfair to the Assessee appellant. The PCIT must be satisfied, after application of his mind, that whether the order of the AO was erroneous with respect to the material made available to him. In fact, the Ld. PCIT has not made any efforts to examine and verify the detailed documentary evidences furnished by the assessee before the AO and the Ld. PCIT and he has not applies his mind as evident from the impugned order while jumping on the conclusion based on the comments made by the AO in the notesheet regarding the paucity of time. Further, the Ld. PCIT has made no reference to the detailed proceedings carried out by the AO and the submissions made by the assessee on the issue of purchase under dispute which has been duly accepted by the AO as explained after verification with the books of account and thereby AO accepted assessed income without making any addition whatsoever reason to the return of income while passing the reassessment order.

14 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) 16. In another case, the Hon’ble Delhi High Court in the case of Commissioner of Income Tax Vs. Vikas Polymers (2012) 341 ITR 537 (Del) has observed that the Commissioner of Income Tax has to satisfy twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is absent- If the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but prejudicial to the revenue- recourse cannot be available for review under Section 263 of the Act, following the Supreme court in the case of Malabar Industrial Co. Ltd. Vs. CIT(2000) 159 CTR (SC) 1/ (2000) 243 ITR 83 (SC).

17.

It is trite law that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In our view, the PCIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be

15 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity as observed by the Apex Court in the case of Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32: (1977) 106 ITR 1 (SC).

18.

From the record it is evident that the AO had made sufficient enquiries of the criteria on which the case of the appellant was reopened that was primarily purchases made by the appellant from M/s Telvas Trading Pvt. Ltd. In our view, by no stretch of imagination, it cannot be held that the issue of verification of purchases from M/s Telvas Trading Pvt. Ltd., has not been verified by the AO so as to invoke the powers under Section 263 of the Act. Considering the peculiar facts and circumstances of the present case, the reassessment order passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of revenue so as to be amenable to the provisions of Section 263 of the Act.

19.

Considering the factual matrix of the case and judicial precedents, we hold that the reassessment order has been framed by the AO after making proper and sufficient enquiries and on examination of

16 ITA No. 479/Jodh/2024 (Assessment Year 2017-18) documentary evidences furnished by the assessee with respect to the purchases made by the appellant from M/s Telvas Trading Pvt. Ltd. In such a situation, the invoking revisionary jurisdiction under Section 263 of the Act, cannot be justified.

20.

Accordingly, we hold that by no stretch of imagination, the assessment order can be found to be erroneous or prejudicial to the interest of revenue for invoking the revisionary jurisdiction by the Ld. PCIT.

21.

Thus, the impugned order of the PCIT is held as bad in law and as such, it is quashed.

22.

In the result, the appeal of the assessee is allowed.

Order pronounced on 30 / 06 / 2026 under Rule 34(4) of the ITAT Rules,1963.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 30 / 06 / 2026. Pritesh Vaishnav PS

17 ITA No. 479/Jodh/2024 (Assessment Year 2017-18)

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