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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per A. L. Saini, AM:
The captioned three appeals filed by the different assessee, pertaining to assessment year 2010-11, are directed against the separate orders passed by the Principal Commissioner of Income Tax Kolkata,u/s 263 of the Income Tax Act, 1961 (in short the ‘Act’).
2.All these appeals filed by the different assessees are barred by limitation by 2 days. All these three assessees have moved petitions requesting the Bench to condone the delay. We heard these parties on this preliminary issue. Having regard to the reasons given in the respective petitions, we condone the delay and admit these appeals for hearing.
Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in for A.Y. 2010-11, have been taken into consideration for deciding the above appeals en masse.
4. The grounds of appeal
raised by the assessee in lead case in for A.Y. 2010-11, are as follows:
1. For that the order passed by the Ld. Pr. CIT-10, Kolkata is bad in law as well as on facts.
2. For that the reassessment proceedings itself being bad in law, the consequential proceedings are also bad in law.
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 3. For that the Ld. Pr. CIT -10, Kolkata erred in setting aside the reassessment order passed by the Ld. AO whereas the said order is neither erroneous nor prejudicial to the interest of revenue.
For that the reassessment order having been passed by the Ld. AO after due application of mind whereby the Ld. AO accepted the sale and held that there cannot be any sales without corresponding purchase and ultimately made addition of 3% of the purchase amount as inflated purchases. Therefore, the order passed by the Ld. AO is neither erroneous nor prejudicial to the interests of the revenue.
For that in course of assessment proceedings, the books of account including stock register which were duly audited and no defect has been found in such books of account.
6. For that apparently the revision proceedings having been initiated at the behest of the Ld. AO, therefore the entire reassessment proceedings are bad in law.
7. For that under the facts and circumstances, the action of disallowance of 3% of the purchases by the Ld. AO implies that the Ld. AO took a considered view which is not an impossible view and therefore the order passed by the Ld. AO is neither erroneous nor prejudicial to the interest of the revenue.
8. For that under the facts and circumstances of the case, the revision order passed by the Ld. PCIT is liable to be quashed and the appellant be given relief as prayed for.
For that the appellant craves to leave, add, alter or withdraw any ground(s) of appeal on or before hearing of the appeal.
5.By way of these appeals, these three assessees have challenged correctness of the order passed by the ld Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act.
The facts of the case may be stated quite shortly as follows: The assessee, is an individual, and filed his return of income for the AY 2010-11 on 09.10.2010, declaring total income at Rs 3,82,968 /-. The said return of income was processed u/s 143(1) of the Income Tax Act, at the returned income. Subsequently, information was received from the office of the DGIT(Inv), Mumbai, through DIT(Inv), WB & Sikkim, that the assessee had claimed bogus purchases to the tune of Rs 48,84,550 /- during the relevant AY 2010-11, as allowable expenses, having debited the same to the Profit & Loss account for the year ending 31.03.2009. The above stated information was deduced out of an enquiry conducted by the Sales Tax Authorities that many assessees have availed of entries Page | 3
Binod Kumar Tekriwal HUF &Ors. Binod Kumar Tekriwal HUF &Ors. 1134-1136/Kol/2018 Assessment Assessment Year:2010-11 of bogus purchase from entry operators of Mumbai and from the statements of of bogus purchase from entry operators of Mumbai and from the statements of of bogus purchase from entry operators of Mumbai and from the statements of such Hawala Operators who had provided entries of bogus purchases to various such Hawala Operators who had provided entries of bogus purchases to various such Hawala Operators who had provided entries of bogus purchases to various assessees. Therefore, asse assessee`s case was reopened u/s 148 of the Act, 8 of the Act, on 19.03.2015 and reassessment u/s 147/143(3) of the Act was completed on 19.03.2015 and reassessment u/s 147/143(3) of the Act was completed on 19.03.2015 and reassessment u/s 147/143(3) of the Act was completed on 29.03.2016 raising a demand of 29.03.2016 raising a demand of Rs. 56,060/-. As per the impugned assessment . As per the impugned assessment order, the AO concluded that the assessee had made bogus purc order, the AO concluded that the assessee had made bogus purchases to the tune of hases to the tune of Rs 48,84,550 /-, as reported in the Investigation wing’s report. However, instead of , as reported in the Investigation wing’s report. However, instead of , as reported in the Investigation wing’s report. However, instead of disallowing the whole amount, the AO disallowed only 3% of such purchases and disallowing the whole amount, the AO disallowed only 3% of such purchases and disallowing the whole amount, the AO disallowed only 3% of such purchases and accordingly added back a sum of Rs 1,46,537 / accordingly added back a sum of Rs 1,46,537 /- to the total income of th to the total income of the assessee.
Subsequently, the Assessing Officer detected error in the assessment order and Subsequently, the Assessing Officer detected error in the assessment order and Subsequently, the Assessing Officer detected error in the assessment order and submitted a proposal to the ld PCIT the ld PCIT for review u/s 263 of the Act of the impugned for review u/s 263 of the Act of the impugned order. The Ld. PCIT noticed that AO has failed to take a logical action on the The Ld. PCIT noticed that AO has failed to take a logical action on the The Ld. PCIT noticed that AO has failed to take a logical action on the information available with him therefore, ld PCIT was of the view that assessment information available with him therefore, ld PCIT was of the view that assessment information available with him therefore, ld PCIT was of the view that assessment order passed by the AO is erroneous and prejudicial to the interest of Revenue. order passed by the AO is erroneous and prejudicial to the interest of Revenue. order passed by the AO is erroneous and prejudicial to the interest of Revenue. The Ld. PCIT therefore issued show cause initiating proceedings u/s 263 of the Ld. PCIT therefore issued show cause initiating proceedings u/s 263 of the Ld. PCIT therefore issued show cause initiating proceedings u/s 263 of the Act which is reproduced below: produced below:
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11
In response to the show cause notice, none appeared on behalf of the assessee therefore the ld. PCIT again issued a show cause notice which was served on the assessee on 22.02.2018.
9. The ld. PCIT noted that only issue under consideration in this case is as to whether the impugned purchases were bogus in nature and as to whether the entire amount of such purchases should have been disallowed. Therefore ld PCIT relied on the judicial pronouncement of the Apex Court in the case of N. K. Proteins Ltd. vs. Deputy Commissioner of Income Tax Special Leave to Appeal (C ) No. 769 of 2017 January 16,2017, as reported in [2017] 84 taxmann.com 195 (SC), wherein the High Court’s decision to add back the entire bogus purchase as per the fictitious invoices debited to trading account holding that percentage disallowance of bogus purchases goes against principle of Sec 68 and 69C of the Act, was upheld by the Apex Court. Since the AO failed to make addition of entire bogus purchases therefore ld PCIT held that assessment order passed by the AO is erroneous and prejudicial to the interest of Revenue.Accordingly the ld. PCIT directed the Assessing Officer to re-assess the income of the assessee for the relevant A.Y. 2010-11 on the issue as discussed above.
10. Aggrieved by order of ld. PCIT, the assessee is in appeal before us.
11. Learned Counsel for the assessee submitted before the Bench that these assessee`s were engaged in trading activities as well as manufacturing activities The ld PCIT relied on the judgment of Apex Court in the case of N. K. Proteins Ltd. vs. Deputy Commissioner of Income Tax, Special Leave to Appeal (C ) No. 769 of 2017 January 16,2017, as reported in [2017] 84 taxmann.com 195 (SC), which is distinguishable on facts. In the case of N. K. Proteins Ltd, there was only trading activity whereas the assessees under consideration are engaged in trading activities as well as manufacturing activities. The assessees under consideration were maintaining quantity details, such as opening stock, quantity manufactured, purchased and sold. The assessee also filed other necessary details as required by Page | 5
Binod Kumar Tekriwal HUF &Ors. Binod Kumar Tekriwal HUF &Ors. 1134-1136/Kol/2018 Assessment Assessment Year:2010-11 assessing officer. The assessee also filed the list of purchase/sundry creditors The assessee also filed the list of purchase/sundry creditors The assessee also filed the list of purchase/sundry creditors before the AO and if these before the AO and if these creditors do not cooperate in the assessment creditors do not cooperate in the assessment proceedings then AO ought to write a letter to the AO of these creditors to dig the proceedings then AO ought to write a letter to the AO of these creditors to dig the proceedings then AO ought to write a letter to the AO of these creditors to dig the information, which he failed to do so. The assessee declared information, which he failed to do so. The assessee declared suo moto suo moto, gross profit at the rate of 4.63% and AO also made addit at the rate of 4.63% and AO also made addition @ 3%, which comes to 7.63%. In ion @ 3%, which comes to 7.63%. In case of assessee the profit rate @ 7.63% case of assessee the profit rate @ 7.63% should be considered normal acceptable should be considered normal acceptable rate taking into account trading activities as well as manufacturing activities. rate taking into account trading activities as well as manufacturing activities. rate taking into account trading activities as well as manufacturing activities. Therefore, assessment order passed by the AO is neither err Therefore, assessment order passed by the AO is neither erroneous nor prejudicial oneous nor prejudicial to the interest of Revenue. to the interest of Revenue.
12.On the other hand, the Ld. DR for the Revenue has primarily reiterated the On the other hand, the Ld. DR for the Revenue has primarily reiterated the On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the ld PCIT ld PCIT, which we have already noted in our earlier para and , which we have already noted in our earlier para and the same is not being repeated for the sake of is not being repeated for the sake of brevity.
We heard both the parties and carefully gone through the submission put forth We heard both the parties and carefully gone through the submission put forth We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws on behalf of the assessee along with the documents furnished and the case laws on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld relied upon, and perused the fact of the case including the findings of the ld relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. and other materials brought on record.Learned Counsel for the assessee submitted Counsel for the assessee submitted before us the quantity details of before us the quantity details of Trading Goods (MS Plate) and manufactured and manufactured goods along with quantity reconciliation for each assessee goods along with quantity reconciliation for each assessee which are are given below:
Binod Kumar Tekriwal HUF &Ors. Binod Kumar Tekriwal HUF &Ors. 1134-1136/Kol/2018 Assessment Assessment Year:2010-11 Binod Kumar Tekriwal Binod Kumar Tekriwal ITA No.1134/Kol/2018 ITA No.1134/Kol/2018
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 For example in case of Pramod Kumar Tekriwal HUF, the assessee submitted before Assessing Officer purchase value, purchase quantity, cost of purchase, consumption of quantity because assessee is partly doing manufacturing activity. Total quantity sold and cost of goods sold were also mentioned. Taking into account total sales reflected in audited Profit and loss account, the assessee computed gross profit rate @ 5.84%. In this reconciliation, the assessee worked out alleged purchase quantity as per PCIT at 25,07,205 kg.; which is not possible against sale / quantity consumed at 38,29,322 kg; therefore, stand taken by the Ld. PCIT is not correct.
Likewise in case of Binod Kumar Tekriwal HUF the alleged purchase quantity as per CIT is 2,77,000 kg., which is not possible against sale quantity consumed at 4,64,032 kg; therefore, stand taken by ld. PCIT is not correct.
Coming to Sandeep Kumar Tekriwal HUF, we note that assessee submitted quantity details of Trading goods of MS Plate. Assessee submitted opening stock in quantity, then he added purchase quantity, then after he deducted sales quantity and shortage quantity and then resulted closing stock at 36,8955 kg was disclosed. The assessee computed gross profit ratio @ 6.37%. The assessee explained that purchase quantity as per CIT is 13,50,420 kg which is not possible against sales quantity of 19,05,276 kg. Therefore, in the light of the factual position narrated by ld. Counsel and taking into account reconciliation of quantity filed by the assessee before Assessing Officer, the stand taken by the ld. PCIT, is not tenable.
We note that Assessing Officer after taking into account, the quantity reconciliation and other detailed filed by the assessee made addition @ 3% on account of bogus purchases which is quite reasonable, hence order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. We note that just to gather more material to prove the claim of the assessee wrong, is not the object of section 263 of the Act, the ld PCIT has to prove the patent error in the assessment order passed by AO and has to prove twin conditions that order passed by the AO is erroneous and prejudicial to the interest of revenue. Page | 8
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11
We note that considering the return u/s 148, the Ld AO issued notice u/s 143(2) and 142(1) of the Act. In response to these notices, the assessee provided list of purchases / creditors and the AO randomly selected few parties and issued verification letter. Ld AO sought explanation from assessee that why not GP rate for current year of 4.63% will not be applied on the said amount of bogus purchases and added to the total income of the assessee. The assessee produced all necessary details of purchases, sales, audited books of account, quantity details as mentioned above. The assessee books of accounts were audited by Chartered Accountant. Quantity details were given in respect of opening stock, purchases, sales, closing stock (vide page 29 of Paper Book). The Ld AO did estimate and further added 3% as possible profit on the alleged purchases of Rs. 48,84,550/- over and above the GP rate 4.63% shown by the assessee in the audited books of account. The quantity details shown by assessee in the audit report reflects sales quantity 4,64,632 Kg and corresponding purchases 4,30,650 Kg (Page 29 of Paper Book). No discrepancy was found between purchase shown by assessee and the sales declared. Purchase cannot be rejected without disturbing the sales. Recognized principle of accountancy and tax jurisprudence hold that no sales can take place without purchase. The AO has passed order consciously after applying his mind after conducting the enquiry and added further 3% on bogus purchase over and above GP rate 4.63% declared by the assessee inclusive of the said purchase. We note that ld PCIT exercised his jurisdiction u/s 263 of the Act solely by relying on the judgment of Apex Court in the case of N. K. Proteins Ltd. vs. Deputy Commissioner of Income Tax, reported in [2017] 84 taxmann.com 195 (SC), which is distinguishable on facts, as narrated above. In the assessee`s case, the assessee submitted before the AO audited books of accounts, details of purchases, details of sales, detail of quantity purchased, used in manufacturing activity ( in case of one assessee), opening stock, closing stock detail and reconciliation of quantity, as mentioned above, these facts were not there in case of N. K. Proteins Ltd (supra), thus distinguishable on facts. Therefore, considering these peculiar facts the AO applied his mind and made 3% more addition, based on his best estimate, over and above the GP rate declared by the assessee. Page | 9
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 Therefore, in these circumstances, order passed by the AO can not be termed erroneous. 15. We note that Hon`ble High Court of Calcutta in the case of Subarna Rice Mill,[2018] 96 taxmann.com 286 (Calcutta) held that in case of unexplained expenditure on Purchases, only profit embedded in transaction which can be added to total income. Findings of the Hon`ble court is given below:
“9. According to the Appellate Tribunal the value of the entire quantity of additional stocks that were discovered in course of the survey operation could not be regarded as the additional income of the assessee and amenable to tax. There was a specific ground taken before the Appellate Tribunal, which was a legal question, as to whether the undisclosed purchase could be taken as the additional income without reference to the possible sale of the paddy when converted.
The assessee refers to a judgment of the Gujarat High Court Vijay Trading v. ITO [2016] 388 ITR 377/76 taxmann.com 366. The principle enunciated in such judgment is that when undisclosed purchases of such nature are discovered, it is only the profit embedded in the transaction which can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that "not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee."
In the circumstances and particularly since the factual findings rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. The Appellate Tribunal merely directed the gross profit that the additional purchase was capable of generating to be regarded as the additional income for tax to be assessed on such basis. Such view of the Appellate Tribunal does not call for any interference.”
We note that Hon`ble High Court of Gujarat in the case of Tejua Rohit kumar Kapadia,[2018] 94 taxmann.com 324 (Gujarat) held that where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating said purchases as bogus under section 69C. In the assessee`s case under consideration the AO has failed to prove that amount was recycled back to assessee, therefore order passed by Assessing Officer is not erroneous.
We also note that Hon`ble Bombay High Court in the case of M/s Mohommad Haji Adman & Co. Income Tax Appeal No.1004 of 2016, held that if sales are accepted then purchases cannot be disallowed. The findings of the Hon`ble Court is given below: Page | 10
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 “8 In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- " So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66 %. Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,621.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross 9 In these circumstances, no question of law, therefore, arises.
We note that during the assessment stage the assessee submitted before assessing officer, the Balance Sheet , Profit and loss account, Tax Audit Report, quantity details such as opening stock, purchases, closing stock. Some of the assessees were in both segment, that is, trading and manufacturing activities therefore there gross profit rate will differ from those who engaged in trading activity. The assessee submitted quantity reconciliation wherein we noticed in case of Pramod Kumar Tekriwal-HUF, that purchase quantity as per ld PCIT is at 25,87,205 kg which is not possible against quantity sold/ consumed at 38,29,322/-. We note that these facts were not there in the case of N.K. Proteins Ltd (2017) 292 CTR 354 (SC), therefore assessee`s case is distinguishable on these facts narrated above. Thus, in assessee`s case the facts are different therefore, the judgment of the Hon`ble Supreme Court in the case of N.K.Proteins Ltd (supra) does not squarely applicable to the assessee.
It is a settled position in law that the proceedings u/s. 263 cannot be initiated by the Ld. Pr. C.I.T. merely in his supervisory capacity. Before invoking the Page | 11
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 powers u/s 263 of the Act, it is necessary for him to demonstrate that the A.O. had committed a patent error which resulted in prejudice to the revenue. On the contrary, where the Ld. A.O. has conducted enquiries and after due consideration of the facts and circumstances of the case backed by relevant details/documents he comes to a conclusion, then it is not open to the Ld. Pr. C.I.T. to invoke revisionary jurisdiction. The power envisaged u/s. 263 of the Act in setting aside an assessment is large and wide, but that cannot be exercised to allow the A.O. to make up the deficiency of his case. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedings. We note that AO after taking into account all the quantity details, as mentioned above took a decision that over and above the gross profit rate shown by the assessee, a gross profit @3% may be added, which is logical and reasonable considering the facts of the case that some of the assessee`s were doing manufacturing activities also.
We note that Ld. Pr. C.I.T. on analysis of assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression ‘record ’ as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order is based. At the same time, if any information asked for by the assessing authority from the assessee or from others to whom he referred the matter during the course of assessment proceeding was not received but received subsequent to the completion of the assessment, in that situation the assessment order passed without receiving such report may appear to be erroneous within the meaning of sec.263 of the Act. In the case of the assessee, there is no denying the fact, as detailed above in this submission and acknowledged in the assessment order u/s. 143(3) dated 28.03.2016, that in response to notices u/s. 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time and produced/ submitted necessary details/documents Page | 12
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined. Therefore, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s. 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessment order passed by him could not be held to be erroneous and prejudicial to the interests of revenue. For that we rely on the decision of Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Del)] .Further, it was settled by Hon`ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC)] wherein it was held that if the A.O. adopts one of the possible courses available in the scheme of the I.T. Act which results in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s. 263 of the Act. In other words, the Ld. Pr. C.I.T. on the same set of facts and evidences on record was of the opinion that the A.O. should have rejected the regrouping of debit and credit entries as explained above and he should have taken the stand which the Ld. Pr. C.I.T. hinted in the impugned order u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below : “The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law”.
It is a settled position in law that provisions of sec. 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of ‘erroneous’ nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. revenue authorities that the evidences produced were Page | 13
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 fictitious or invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to interests of revenue only because the A.O. made the assessment without discussing such details therein, as held by the Coordinate Bench of ITAT Kolkata in the case of Chroma Business Ltd. vs. DCIT (2004) 82 TTJ 540 (Cal).Further support in this connection is taken from the decision of Hon’ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under : " This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision." [Emphasis supplied] Further, according to the decision of Coordinate Bench of I.T.A.T., Hyderabad in the case of Manisha Agri Biotech P. Ltd. vs. CIT (2014) 36 ITR (Trib.) 42 -, wherein it was held as follows: “The respondent had no different or new material to take a different view from the one taken by the Assessing Officer and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable. The respondent is not vested with any power under section 263 to initiate proceedings for revision in every case and start re- examination and fresh enquiries in matters which have already been concluded under the law. ”
The assessee produced all necessary details of purchases, sales, audited books of account, quantity details as mentioned above. The assessee books of accounts were audited by Chartered Accountant. Quantity details were given in respect of opening stock, purchases, sales, closing stock (vide page 29 of Paper Book). The Ld AO did estimate and further added 3% as possible profit on the alleged purchases of Rs. 48,84,550/- over and above the GP rate 4.63% shown by the assessee in the audited books of account. The quantity details shown by assessee in the audit report reflects sales quantity 4,64,632 Kg and corresponding purchases 4,30,650 Kg (Page 29 of Paper Book). No discrepancy was found between purchase shown by assessee and the sales declared. Purchase cannot be rejected without disturbing the sales. Recognized principle of accountancy and tax jurisprudence hold that no sales can take place without purchase.The AO has passed order consciously after applying his mind after conducting the enquiry and Page | 14
Binod Kumar Tekriwal HUF &Ors. Assessment Year:2010-11 added further 3% on bogus purchase over and above GP rate 4.63% declared by the assessee inclusive of the said purchase. Based on the above discussion on assessee`s facts as well as on various precedents applicable to facts, we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the Ld. A.O. and verified by him and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed as per law, settled by various judicial pronouncements (supra). Therefore, we quash the order of the ld. PCIT u/s 263 of the Act.
In the result, these three appeals of three assessees are allowed.
Order pronounced in the Court on 22.01.2020