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Facts
The assessee's case was reopened under section 147 of the Income Tax Act, 1961, based on information that the assessee's proprietary concern, M/s Ashutosh Industries (India), was involved in bogus purchases from M/s Unique Polypack. The Assessing Officer, after considering the assessee's detailed replies and furnished documents, found no additions necessary and passed the assessment order. Subsequently, the Ld. Principal Commissioner of Income-tax (PCIT) initiated revision proceedings under section 263, considering the assessment order erroneous and prejudicial to the revenue.
Held
The Tribunal held that the Assessing Officer had made sufficient inquiries and accepted the assessee's explanation, forming a reasonable and legally sustainable view. The PCIT's action under section 263 was not justified, as it was based on a differing opinion rather than a lack of proper inquiry by the Assessing Officer. The Tribunal relied on various High Court and Tribunal decisions supporting the view that if the Assessing Officer has taken a plausible view after due inquiry, the PCIT cannot substitute it with his own opinion under section 263.
Key Issues
Whether the Ld. PCIT was justified in invoking section 263 to revise the assessment order when the Assessing Officer had conducted a proper inquiry and accepted the assessee's explanation, thereby forming a reasonable and legally sustainable view.
Sections Cited
263, 147, 144B, 143(3)
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िनधा"रती की ओर से /Assessee by Shri Suresh K. Kabra, CA राज" की ओर से /Revenue by Shri Ravi Kant Gupta– CIT-DR अपील पंजीकरण/Appeal instituted on 10.05.2024 सुनवाई की तारीख/Date of hearing 17.12.2024 उद्घोषणा की तारीख/Date of 03.01.2025 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Ld. Principal Commissioner of Income-tax, Valsad [for short to as “Ld. PCIT”] passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 15.03.2024 for assessment year (AY) 2017-18, in revising the assessment order passed by Assessing Officer under section 147 r.w.s. 144B of the Act dated 26.03.2022. The assessee has raised the following grounds of appeal: “1. The Ld. PCITE, Valsad has erred and was not just and proper on the facts of the case and I law in considering the assessment order dated 28.03.2022 passed u/s 147 r.w.s 144B as erroneous and prejudicial to the interest of revenue and passing order u/s 263, directing to pass fresh assessment order in the case. 2.Prayer Ajay K Bohra 2.1 The order u/s 263 passed by the PCIT may be kindly set aside. 2.2 Personal hearing may be granted. 2.3 Any other relief that your honours may deem fit may be granted.
3. The assessee craves leave to add, amend, modify alter or delete any of the grounds at the time of hearing.”
2. Rival submission of both the parties heard and record perused. The Ld. Authorized Representative (Ld.AR) for the assessee submits that case of assessee was reopened on the basis of information received from ITO, Valsad that survey action was conducted in case of M/s Unique Polypack. During survey statement of Nilesh R Patel, accountant, of M/s Unique Polypack was recorded who had allegedly made a statement that they have made bogus purchase and one such purchases was made from assessees proprietary concern M/s Ashutosh Industries (India). The assessee contested the re- assessment proceedings and filed complete details. The Assessing Officer, in the re-assessment proceedings, issued various show cause notices to substantiate the sales by assessee. In response such show cause notices, the assessee filed reply dated 08.03.2022 and 15.03.2022. Along with reply his the assessee also furnished financial statement, bank account statement of HDFC Bank account No.xxxxx7644 highlighting the transactions made with Unique Polypack, copies of VAT returns, stock register, details of sales made to M/s Unique Polypack, ledger extract, sales invoices, purchase invoices, delivery challans, copies of sales made against Form-C, excise audit order etc. Further assessee requested for personal hearing through video conferencing facility, which was allowed to the assessee. The assessee substantiated the purchases and sale made to Unique Polypack and the Assessing Officer accepted the explanation furnished by assessee and passed assessment order 2 Ajay K Bohra on 26.03.2022 without making any addition. Subsequently, assessment order was revised by Ld. PCIT by invoking the provisions of 263 of the Act vide order dated 15.03.2024. The Ld. PCIT in his show-cause notice dated 07.02.2024 raising exactly on similar issue in the show cause notice, which was the subject-matter reopening. In the show-cause notice, Ld. PCIT mentioned that Assessing Officer not considered the report of ITO (Investigation) and no addition was made by stating that no amount was withdrawn from cash book. The assessment order passed by Assessing Office on 28.03.2022 is erroneous as well as prejudicial to the interest of Revenue. The Ld. AR of the assessee submits that case of assessee was reopened for assessment year 2016-17 as well as for assessment year 2017-18 and reassessment order was passed in both the assessment years. However, show cause notice issued under section 263 was issued only in respect of assessment year 2017-18 only and that similar re-assessment proceedings for assessment year 2016-17 was not revised. The assessee in response to show cause notice field detailed reply. The reply of assessee is duly scanned on page No. 5 to 14 of the order of Ld. PCIT. The Ld. AR of the assessee submits that Assessing Officer has passed reasonable, plausible and legally sustainable assessment order in accepting the contention of assessee. Once the Assessing Officer has taken a reasonable and legally sustainable view, the same cannot be substituted by ld PCIT by excessing his power under section 263, if he has having some other views or opinion. The Ld. PCIT instead of appreciating the fact that repeated that Assessing Officer ignored the impounded material as well as post survey enquiry while passing the assessment order. The order passed by Ld.PCIT on 3 Ajay K Bohra similar issue is not legally sustainable when the Assessing Office has a reasonable and legally sustainable view. To support his submission, LD. AR of the assessee relied upon the decision of Hon’ble jurisdictional High Court in the case of PCIT vs. Mukesh Chand Mal Pitti [2023] 156 taxmann.com 145 (Guj) wherein it was held that where cash deposit made by assessee during demonetization period were specifically verified during original assessment proceedings wherein assessee produced all necessary documents as asked for by Assessing Officer, it was not a case where no enquiry was made by Assessing Officer during course of assessment proceedings regarding cash deposits, and therefore, impugned revision proceedings under section 263 is to be quashed. To support his submission, Ld. AR of the assessee also relied upon following decisions: Daffodills Pharmaceuticals Ltd. vs. PCIT [2023] 157 taxmann.com 195 (Del- Trib.) Ashok Manilal Thakkar vs. ACIT [2005] 97 ITD 361 (Ahmedabad-ITAT)/[2006] 99 TTJ 1262 (Ahmedabad-ITAT) Rajmal Kanwar vs. CIT [2017] 82 taxmann.com 119 (Jaipur-Trib.) CIT vs. Jagdish Kalani [2007] 163 Taxman 267 (MP)[2007] 295 ITR 539 (MP) CIT vs. State Bank of India, Financial Reporting, Compliance & Taxation Department [2015] 59 taxmann.com 86 (Bom) Gyan Infrabuild (P.) Ltd. vs. PCIT [2024] 162 taxman.com 664 (Patna-Trib.) Jitendrasinh Bharatsinh Chauhan vs. PCIT dated 27.08.2024 3. On the other hand, Ld. Commissioner of Income-tax-Departmental Representative (Ld.CIT-DR) for the Revenue supported the order of Ld.PCIT.
We have considered the submission of both the parties and have gone through order of authorities below carefully. We have also deliberated of various case law relied by Ld. AR of the assessee. We find that there is no dispute that case of assessee was reopened under section 147 of the Act. In para-3 of 4 Ajay K Bohra assessment order, the Assessing Officer recorded the basis of reopening wherein, it is mentioned that “As per the information received from the ITO(Inv.) Vapi, it is seen that a survey actin u/s 133A was conducted in the case of M/s Unique Polypack. During the course of survey on the basis of impounded material, Shri Nilesh R Patel, Accountant of firm, M/s Unique Polypack, has accepted that the purchases of the firm was bogus and payment given against the purchase was return to the firm in cash. One such entity from which M/s Unique Polypack was taking bogus purchases entry was Shri Ajay Kailashchandra Bohra, Prop. of M/s Ashutosh Industries (India)”.
We find that during re-assessment proceedings, Assessing Officer issued various show cause notices. The assessee filed his reply dated 08.03.2022 and 15.03.2022. Filing of reply is duly acknowledged by Assessing Officer in para- 3.4 of assessment order. Along with reply, assessee furnished bank statement, copy of VAT return, sales invoice, delivery channel, stock register and further stated that he has ready to furnish any further information or details as and when asked for on providing reasonable time. The assessee also furnished VAT return. We find that Assessing Office in para-4 of assessment order, recorded that from the details furnished by assessee, it is seen that sales transaction made by assessee with M/s Unique Polypack has been duly recorded in the books of account and no cash withdrawal are shown. The returned of income of assessee was accepted and no adverse inference has been drawn by Assessing Officer.
We find that Ld. PCIT while invoking his jurisdictional also relied upon the same information, which was a basis of reopening of assessment. We find that 5 Ajay K Bohra Assessing Officer during assessment has made requisite enquiries and explanation with regard to sales to Unique Polypack. From the contents of assessment order it is seen that Assessing Officer was satisfied with the assessee’s explanation, which has been duly accepted. The observation of Ld. PCIT that Assessing Officer has not considered the report of ITO(Inv.) wing is not correct, when the basis of reopening itself was the report of ITO(Inv.). On considering the facts of the case, we find that it is not a case “lack of enquiry or inadequate enquiry” even if there is inadequate enquiries that could not by itself, the occasion of Ld. PCIT to pass order under section 263 of the Act merely because he has different of opinion on the matter as recorded above, Assessing Officer duly examined the fact and formed opinion that no addition is necessary.
Hon’ble jurisdictional High Court in case of Mukesh Chand Mal Pitti (supra), wherein Hon’ble jurisdictional High Court in a recent decision held that where cash deposits made by assessee during demonetization period were specifically verified during original assessment proceedings wherein assessee produced all necessary documents as asked for by Assessing Officer, it was not a case where no enquiry was made by Assessing Officer during course of assessment proceedings regarding cash deposits, and therefore, impugned revision proceedings under section 263 was to be quashed. We further find that Jaipur Benches of Tribunal in Rajmal Kanwar vs. CIT 82 taxmann.com 119 (Jaipur- Trib.) also held that where Assessing Officer has made sufficient enquiry, considered survey record and surrender made by assessee and after considering submissions of assessee completed assessment proceedings under 6 Ajay K Bohra section 143(3), assessment order could not be held to be an erroneous order which was prejudicial to interest of revenue.
We also find merit in the contention of Ld.AR of the assessee that similar assessment order for assessment year 2016-17 wherein similar transaction has been accepted by Assessing Officer and same is not revised on the ground of same issue. We find that once the explanation/reply of assessee was found acceptable by Assessing Officer and no addition was made he has taken a plausible view which is otherwise legally sustainable view supported with various evidence furnished by assessee, which cannot be considered as erroneous. Thus, the twin condition for exercising jurisdiction under section 263 is not fulfilled in the present case. In our view, when the transaction of assessee with Unique Polypack was examined by the Assessing Officer in accepting the impugned transaction, the Ld. PCIT was not justified in invoking the provisions of section 263. Therefore, the order passed by Ld.PCIT is not legally sustainable and the same is set aside. In the result, the grounds of appeal
raised by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 03/01/2025. (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद"/Accountant Member "ाियक सद"/Judicial Member सूरत / Surat Dated: 03/01/2025 Dkp Outsourcing Sr.P.S*