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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: HON’BLE SHRI SAKTIJIT DEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee challenges the invocation of revisional jurisdiction u/s 263 by Ld. Principal Commissioner of Income Tax-32, Mumbai (Pr. CIT) for Assessment Year (AY) 2014-15 vide order dated 18/03/2019. The grounds raised
by the assessee read as under:-
1. The Ld. Pr.CIT erred in passing revision u/s.263 of the Income Tax Act, 1961 (the “Act”) revising assessment order passed u/s.143(3) on the issue of addition of alleged bogus purchases without appreciating that assessment order u/s. 143(3) is neither erroneous nor prejudicial to the interest of revenue as during assessment proceedings Ld. AO had specifically raised queries pertaining to alleged bogus purchases and after considering the evidences produced by the appellant, made 2 M/s Vaghasiya Exports Assessment Year: 2014-15 addition of 1.6% of alleged bogus purchases in accordance with law and thus revision under section. 263 is nothing but a change of opinion and hence order u/s. 263 is bad in law.
2. The directions given to AO in para 8 and 9 of order under section. 263 by the ld. Pr.CIT are already carried out by the Hon’ble AO at the time of assessment proceedings and thus directing the AO to make fresh assessment by verifying the same details again is not justifiable.
3. The Ld. Pr.CIT erred in invoking the powers conferred to him u/s. 263 to the extent that the discretion of the Ld.AO in arriving at a conclusion after verification of facts could not be taken away by invoking the provisions of Section 263 of the Act. The powers conferred upon Pr.CIT cannot be invoked merely for substituting the view of Pr.CIT in place of AO as it is contrary t the purpose mentioned in Section 263 of the Act.
4. The ld. Pr. CIT erred by not granting the appellant proper opportunity of being heard and thus violated principles of natural justice.
2. The Ld. Sr. Counsel for assessee, Dr. K. Shivram, advanced arguments to submit that the issue which was subject-matter of jurisdiction under Sec. 263 was already appraised by Ld. AO during original assessment proceedings and one of the plausible view was already taken in the matter after due application of mind. Therefore, the revisional jurisdiction was bad in law. The written submissions have also been filed along with supporting case laws. Reliance has been placed on the decision of this Tribunal in assessee’s own case for AY 2009-10 in dated 28/09/2020 wherein revisional order passed under similar factual matrix was quashed by the bench. The Ld. CIT-DR, on the other hand, submitted that in terms of Explanation-2 to Sec.263, Ld. AO failed to conduct proper enquiries during original assessment proceedings and therefore, jurisdiction was validly exercised.
3. We have carefully heard the rival submissions and perused relevant material on record including the cited case laws. Our adjudication to the subject-matter of appeal would be as given in succeeding paragraphs.
3 M/s Vaghasiya Exports Assessment Year: 2014-15 4. The material facts are that the assessee being resident firm stated to be engaged in manufacturing & trading of diamonds was assessed for the year under consideration u/s. 143(3) on 30/12/2016 wherein it was saddled with estimated addition of 1.6% against certain bogus purchases stated to be made by the assessee from 6 entities allegedly run by entry provider Shri Bhanwarlal Jain Group. During the course of original assessment proceedings, it was alleged that these entities merely provided accommodation entries against commission without delivering actual goods or services. The said allegations were based on search action carried out by the department in case of Bhanwarlal Jain Group on 03/10/2013. Accordingly, the assessee was show caused to substantiate these purchase transactions vide notice dated 15/11/2016 along with requisite details and documentary evidences. In defense, the assessee, vide reply dated 17/11/2016 submitted that the purchases were genuine. In support, copy of ledger extracts, copies of invoices, stock records etc. were also filed. The assessee also submitted corresponding sale details along with stock details etc. However, in the light of investigation findings and in view of the fact that the assessee could not produce the concerned suppliers, Ld. AO formed an opinion that the assessee could not discharge the onus of proving the genuineness of the purchases. However, since the assesse filed adequate stock details, the receipt of material was not in doubt. Therefore, the goods were purchased from the grey market and the bills were obtained from these suppliers. In such a case, the estimation of suppressed profit was to be made. Considering the fact that applicable VAT rate on diamond was 1% and going by the ratio of various judicial pronouncements as enumerated in para 6.4 of the assessment order, 4 M/s Vaghasiya Exports Assessment Year: 2014-15 Ld.AO estimated an addition of 1.6% against these purchases. The decisions being relied upon include the decision of Hon’ble Gujarat High Court in Simit P. Sheth Vs. CIT (356 ITR 451); CIT Vs. Bholanath Poly Fab Ltd. (355 ITR 290); M/s. Vijay Proteins Ltd. Vs. CIT (58 Taxmann.com 44). It has been submitted before us that the assessment order has attained finality since no further appeal has been preferred by the assessee against the same. 5.1 Subsequently, upon perusal of case records, Ld. Pr. CIT opined that the order was erroneous and prejudicial to the interest of revenue and consequently, invoked revisional jurisdiction u/s 263. Accordingly, the assessee was show caused on 26/11/2018 that Ld. AO wrongly added only 1.6% of the total bogus purchases without any justification and there was an escapement of income. 5.2 The assessee defended assessment order by drawing attention to various details and documentary evidences furnished during assessment proceedings and submitted that there was no error in the order. 5.3 However, not convinced, Ld. Pr. CIT opined that the issue was to be decided keeping in view the principle laid down in the case of N.K. Proteins Ltd. (2017-TIOL-23-SC-IT) in SLP (C) CC No.769 of 2017 dated 16/01/2017 and therefore, addition should have been made to the extent of 100%. Finally, the assessment order was set aside and Ld. AO was directed to pass fresh order in terms of this decision. Aggrieved, the assessee is in further appeal before us and challenges the validity of revisional jurisdiction. Our Adjudication 6. Upon careful consideration of queries raised by Ld. AO during original assessment proceedings and the assessee’s replies thereto, we 5 M/s Vaghasiya Exports Assessment Year: 2014-15 find that Ld. AO was clinched with the issue of suspicious purchases made by the assessee from various entities of tainted group. In fact, it is the only addition made in the assessment order. Specific queries were raised requiring the assessee to substantiate the purchases under suspicion. The assessee produced requisite details and documentary evidences including stock record and quantitative details of opening stock, closing stock, purchase, sale etc. The corresponding sales made against the purchases were also demonstrated. The copies of purchase invoices as well as ledger extracts were furnished in support of purchase transactions. After considering all these evidences, Ld. AO came to a conclusion that since sales were offered and adequate quantitative details were produced by the assessee, the conclusion which was to be drawn was that the goods were procured from grey market whereas the bills were obtained from accommodating suppliers. In such a case, the only option left was to estimate the suppressed profits on these transactions. Keeping in view the applicable VAT rate, Ld. AO estimated a further addition of 1.6% against these purchases. There facts would show that Ld. AO took one of the possible view with due application of mind which could not be termed as perverse, in any manner. There could be no sale without actual purchase of goods keeping in view the nature of assessee’s business. The action of Ld. AO was in conformity with the ratio of various judicial pronouncements as enumerated in para 6.4 of the assessment order. In view of the foregoing, it could very well be said that the view of Ld. AO was one of the possible view which was not contrary to law or unsustainable in law.
Merely because Ld. Pr. CIT held a view that the estimation should have been at higher rates or entire purchase should have been 6 M/s Vaghasiya Exports Assessment Year: 2014-15 disallowed, the same would not make the order erroneous unless it was found that the action of Ld. AO was not in accordance with law or perverse, in any manner. This being the case, the revision could not be held to be justified as per the ratio laid down by jurisdictional High court in Grasim Industries Ltd. V/s CIT (2010; 321 ITR 92).
Proceeding further, we find that revisional jurisdiction was exercised by revisional authority on similar facts in assessee’s own case for AY 2009-10 which came up for challenge before this Tribunal. The coordinate bench quashed the revision by observing as under: - 7. After hearing both the parties and perusing the material on record, we note that in this case the assessment was framed under section 143(3) of the Act vide order dated 27.10.2011 thereafter the case of the assessment was reopened under section 147 of the Act after a communication was received by the AO from DIT (Inv.)-2, Mumbai to the effect that assessee is beneficiary of bogus hawala purchases from 9 parties aggregating to Rs.26,73,39,615/- and thus the income has escaped assessment. Thereafter, the assessment was framed under section 143(3) read with section 147 of the Act assessing the total income at Rs.48,88,440/- wherein an addition of Rs.40,10,094/- was made towards assessing the profit element in the bogus purchases of Rs.26,73,39,615/- calculated at 1.5% of the total alleged bogus purchases. The Ld. PCIT has exercised the revisionary jurisdiction on the ground that AO has not correctly assessed the income from bogus purchases by relying on the decision of Hon’ble Supreme Court in the case of N.K. Proteins vs. DCIT (supra) and Vijay Proteins Ltd. vs. CIT (supra). The undisputed facts are that the issue has been examined by the AO during the reassessment proceedings as the assessment was reopened only to examine the issue of escapement of income resulting from bogus purchases and the assessment was framed by the AO after making addition of Rs.40,10,094/-. Thus the Ld. PCIT proposes to exercise the revisionary jurisdiction only qua the same issue which appears to be incorrect and fallacious. In the present case, we note that the issue has been examined by the AO and a possible view has been taken while framing the assessment therefore, the issue is squarely covered by the decision of the jurisdictional High Court in the case of Grasim Industries Ltd. vs. CIT (supra). In the case of Grasim Industries Ltd. vs. CIT (supra) it has been held by the Hon’ble Bombay High Court that a possible view taken by the AO cannot be regarded as unsustainable in law and the revisionary jurisdiction under section 263 cannot be exercised. It was also held that a debatable issue on which more than one plausible views are reasonably possible and if the AO has taken one possible views it cannot be said that assessment is erroneous and prejudicial to the interest of the Revenue. In the case of CIT vs. Nirav Modi (supra) which has been passed after considering the decision of the Hon'ble Apex Court in the case of Malabar Industries Company Ltd. vs. CIT (supra) wherein it has been held that in order to invoke the revisionary jurisdiction the twin conditions have to be satisfied namely (i) the assessment order should be erroneous and (ii) also prejudicial to the Revenue. The 7 M/s Vaghasiya Exports Assessment Year: 2014-15 Hon’ble Court has held that where two views are possible and AO has taken one of the possible views there is no occasion to invoke the provision of section 263 even the Hon’ble Supreme Court has dismissed the SLP filed by the Revenue against this decision in CIT vs. Nirav Modi (2017) 77 taxmann.com 78 SC. Therefore, we are not in concurrence with the conclusion of the Ld. PCIT on this issue. We have also perused the decision relied upon by the ld DR but same are either distinguishable on facts or cannot be followed in view of the legal position discussed above. In our considered view, the revisionary jurisdiction has been invalidly exercised and accordingly we set aside the proceedings under section 263 and the consequent order.
We find that similar factual matrix exist in this year and the ratio of above decision is applicable to this year also. 9. Therefore, on the given facts are circumstances, we hold that revisional jurisdiction was invalidly exercised and therefore, liable to be set-aside. We order so. 10. The appeal stands allowed in terms of our above order.