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Facts
The assessee filed a return declaring a loss. The AO finalized the assessment order after making an addition for bogus purchases. The PCIT initiated revision proceedings u/s 263, setting aside the AO's order and directing addition of the entire amount of bogus purchases, holding it to be erroneous and prejudicial to revenue.
Held
The Tribunal held that since the matter was pending before the CIT(A) and the CIT(A) has all powers to decide the issue, there was no requirement for the PCIT to initiate proceedings under Section 263. Consequently, the order u/s 263 was set aside.
Key Issues
Whether the PCIT's initiation of revision proceedings u/s 263 was valid when the issue was already pending before the CIT(A) and the CIT(A) possessed the power to decide the same.
Sections Cited
263, 143(3), 69C, 115BBE, 250
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Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI
आदेश / O R D E R PER RENU JAUHRI [A.M.] :- The present appeal filed by the assessee emanates from the Revision order u/s 263 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 31.03.2025 passed by the Pr. Commissioner of Income-tax, Thane - 1 [hereinafter referred to ‘PCIT’] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2020-21.
A.Y. 2020-21 M/s Innovators Facade Systems Limited, Mumbai 2. The assessee has raised following grounds of appeal:
1. The order dated 31.3.2025 passed by the Ld. PCIT under section 263 of the Income-tax Act, 1961 is bad in law and without jurisdiction.
2. The exercise of revisional jurisdiction by the Ld. PCIT under Section 263 on issues pending adjudication before the CIT(A) is bad in law, as it violates the statutory bar against parallel proceedings on the same subject matter, leading to jurisdictional overreach and potential double jeopardy.
3. The order passed by Ld. PCIT is in violation of principles of natural justice.
4. The Ld. PCIT has grossly erred in setting aside order passed by the A.O. under section 143(3) of the Income Tax Act 1961 on 12.12.2022 and issuing direction to add entire of amount of alleged bogus purchases of Rs. 9,33,49.090/- u/s. 69C r.w.s. 115BBE of the Act.
2. The brief facts of the case are that the assessee filed return declaring loss of Rs. 6,54,10,276/- on 13.02.2021 for A.Y. 2020-2021. The case was selected for scrutiny and Ld. AO noticed that the assessee has shown bogus purchases to the tune of Rs. 9,33,49,090/- from three entities. The assessment was finalized under Section 143(3) r.w.s. 144B of the Act determining assessed loss at Rs. 4,67,40,458/- after making an addition of Rs. 1,86,69,818/- computed at the rate of 20% of the bogus purchases of Rs. 9,33,49,090/-. Aggrieved with the order, assessee preferred an appeal before the Ld. CIT(A).
3. On the other hand, Ld. PCIT vide order u/s 263 dated 31.03.2025, held that the order of the Ld. AO was erroneous and prejudicial to the interest of revenue since in view of the facts and circumstances of the case and the decision A.Y. 2020-21 M/s Innovators Facade Systems Limited, Mumbai of the Hon’ble jurisdictional High Court, disallowance of 100% of bogus purchases was required to be made, since, it has been found that the assessee has obtained bogus rates. Accordingly, vide order dated 31.03.2025, the Ld. PCIT set aside the AO's Order dated 12.12.2022 and directed to add the entire amount of Rs. 9,33,49,090/- under section 69C r.w.s 115BBE of the Act. Aggrieved with the order of PCIT, the assessee has preferred an appeal before the Tribunal.
We have heard the rival submissions and perused the material available before us. At the outset, Ld.AR has pointed out that appeal against the original assessment order filed before Ld. CIT(A) was dismissed vide order dated 30.11.2023 and therefore, further appeal was filed before the ITAT. Vide order dated 30.09.2024, the order of Ld. CIT(A) has been set aside by the coordinate bench with the following observations:- In our opinion under the provisions of the Act, the Ld. CIT(A) is required to pass a reasoned order on the grounds of the appeal raised before him after considering the submission of the assessee. Even in case of no submissions filed on behalf of the assessee, the Ld. CIT(A) is required to pass order on merit of the grounds raised. Since, the Ld. CIT(A) has not considered the submission of the assessee and not pass a reasoned order, therefore, we set aside the finding of the Ld. CIT(A) and restore the matter back to him for deciding afresh after considering the submission of the assessee and pass a reasoned order on the grounds raised by the assessee before him. Ld. DR, on the other hand, strongly relied on the order of Ld. PCIT.
A.Y. 2020-21 M/s Innovators Facade Systems Limited, Mumbai 5. After careful consideration of the peculiar facts and circumstances of this case, we are of the view that the issue regarding addition in respect of bogus purchases of Rs. 9,33,49,090/- is restored back to the Ld. CIT(A) by the coordinate bench.
In the pending appeal proceedings before Ld. CIT(A), he has all the powers to decide of the issue of addition to be made in respect of bogus purchases afresh on merits. Under these circumstances, we are of the view that since the matter is pending before Ld. CIT(A), there was no requirement for the PCIT to initiate proceedings under section 263 in respect of the same issue. We, therefore, set aside the order under section 263 of the Act as CIT(A) has all the powers to decide the issue as he deems fit u/s 250 of the Act and the Revenue may make its submissions before him, as the appeal is still pending. Hence, order u/s 263 is set aside and appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29.08.2025.