SATYA PRAKASH SHARMA ,KOLKATA vs. PR.CIT, KOLKATA - 12, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA (सम� �ी ए.ट�. वक�, �या�यक सद�य एवं डॉ ए.एल. सैनी, लेखा सद�य) [Before Shri A. T. Varkey, JM & Dr. A.L. Saini, AM] I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma Pr. CIT-12 C/o Subash Agarwal & Associates, Kolkata. Advocates, Siddha Gibson, 1, Gibson Lane, Vs. Suite 213, 2nd Floor, Kolkata-700 069. (PAN: ALSPS 5479 C) Appellant Respondent For the Appellant Shri Subash Agarwal, Adv. For the Respondent Dr. P.K. Srihari, CIT(DR) Date of Hearing 24.10.2019 Date of Pronouncement 22.11.2019 ORDER Per Shri A.T.Varkey, JM

These are appeals preferred by the assessee against the action of the Ld. Pr. CIT-12, Kolkata dated 31.03.2018 u/s 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) for Assessment Year 2009-10 to 2011-12.

2 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma within 10 days. Due to the said reason delay of 194 days happened when assessee filed this appeal, which according to him is not intentional and pleads that delay be condoned. Since there is no quarrel in-respect of the facts which led to the delay we are of the opinion that the assessee should not be penalized for the ignorance of the AR as discussed. Therefore, we are inclined to condone the delay and for that we refer to the decision of Hon’ble Supreme Court reported in 167 ITR 471 (SC). Assessment Year 2009-10

3 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma by sending a show cause notice (SCN) dated 12.02.2018 to assessee which is reproduced as under:

“From the assessment order as well as records & information received for the A.Y. 2009-10, it has been noticed that the following aspects of the return of income/computation of income were not properly looked into by the A.O. concerned which are as follows:- 1. The case was re-opened U/s.147 on the basis of information received from DGIT(Inv),Mumbai through DIT(Inv), Kolkata that the assessee during the F.Y. 2008-09 relevant to A.Y. 2009-10 had purchased entries of "bogus purchase" amounting to Rs. 4,43,18,698/- from hawala dealers. 2. The assessment for the A.Y. 2010-11 was completed U/s. 147/143(3) on 07/01/2016 assessing the income at Rs.2,13,13,570/- as against assessed income assessed U/s.143(3) on" 21/12/2011 at Rs.2,03,16,400/-. 3. From the details available on the record it is observed that the case was re-opened U/s. 147 of I.T. Act, 1961 on the basis of information received from DGIT(Inv), Mumbai through DIT(Inv), Kolkata that the assessee during the Financial Year 2008-09 had purchased entries of bogus purchase amounting to Rs. 4,43,18,698/- from Hawala Dealers. However, the assessment was completed by making partial disallowance of Rs. 9,97,170/- [i.e. 2.25% of bogus purchase of Rs. 4,43,18,698/-] on estimated basis under Section 69C of the Income Tax Act, 1961. 4. Considering the nature of information received from the Department of Sales Tax, Maharashtra, enquiries were required to be made by the A.O. to verify how goods shown to have been purchased from the alleged dealers were transported and delivered to the assessee, which was not done by the A.O. Absence of the proper examination/verification regarding the above has rendered the assessment erroneous and prejudicial to the interest of the revenue which deserves to be revised U/s 263 of the I.T. Act 1961.” 6. Pursuant to the aforesaid SCN, the assessee filed written submissions on 08.03.2018 and 22.03.2018 which is placed at paper book at page 68-85 and 86-93 respectively. After reproducing the submissions of the assessee in his order, the Ld. Pr. CIT, being not satisfied with the replies of the assessee, was pleased to set aside the order of the AO and directed him to make necessary investigation in the light of the bills, invoices, delivery challans concerning transportation and delivery alone and pass a fresh assessment order re-computing the assessee’s income taking into consideration the reasons leading to the action u/s 263 of the Act.

4 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma 7. Aggrieved by the aforesaid action of the Ld. Pr. CIT the assessee is before us. Assailing the action of the Ld. Pr. CIT, the Ld. Counsel for the assessee Shri Subash Agarwal, submitted that the AO in the original assessment as well as during the reassessment had made enquiries from the persons/entities from whom the assessee had purchased goods. According to the Ld. Counsel during the original scrutiny of assessment the assessee had duly furnished the list of purchases before the AO who properly issued Section 133(6) of the Act notices to all the vendors/purchasers and pursuant to the notices, the Vendors had confirmed the sale of goods to the assessee and taking note of the confirmation from the Vendors and taking note of the fact that all the Vendors were paid by the assessee through account payee cheques and since due taxes were levied on the transactions, the AO had accepted the purchases as claimed by the assessee during the original assessment completed u/s 143(3) of the Act on 21.12.2014. However, according to Ld. AR, after receipt of the information from the sales tax wing of Maharashtra, the AO after re-opening the assessment during the re-assessment proceedings also had conducted enquiries and thereafter had taken a plausible view in consonance with the judicial precedence upheld by the Hon’ble Supreme Court in the case of CIT-7 Vs. M/s. Odeon Builders Pvt. Ltd., Civil Appeal No. 9604-9605 of 2018 dated 21.08.2019 in cases of this nature i.e. when the payments to Vendors have been made by account payee cheques, and due taxes have been levied on the transaction and when the Sales of goods (alleged to be bogus) has been accepted by the department to have been sold and sales figure of goods (alleged to have been bogus) has been found included in the turnover of assessee, then only the profit element of the sales should be added. Accordingly, the AO has added over and above the GP shown by the assessee (i.e. assessee had shown in his return of income G.P. of 11.96%) and the AO in the re-assessment added 2.25% more and thus added ₹9.97 lakhs on the items alleged to be bogus purchases by the Sale Tax Wing on whose report, the AO re-opened the original assessment. According to the Ld. Counsel the view taken by the AO after enquiry, as acknowledged by the Ld. Pr. CIT

5 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma itself at page 29 of his impugned order that he (Pr. CIT) has examined the records of the assessment and he found that the AO had in fact verified the purchases. Further, the Ld. Pr. CIT also noted that the office note of the AO suggested that the AO had infact verified the purchases however, the only fault which the Ld. Pr. CIT found from the reassessment order/action of the AO was that, “Nonetheless the root of the action u/s 263 lay in lack of enquiry in respect of the delivery and transportation charges incurred by the assessee on purchases.” (emphasis given by us). 8. So, we note that the only fault which the Ld. Pr. CIT notes in the reassessment order is that the AO has not verified the transportation charges incurred by the assessee on the purchases (bogus purchases to the tune of ₹4.43 crores). According to the Ld. Counsel the case of the assessee before the AO was that there were no transportation charges incurred by the assessee. For that the Ld. Counsel drew our attention to page 49 read with page 56 of the paper book which is the reply of assessee dated 30.11.2015 written to the AO during the reassessment proceedings wherein the assessee had given the list of suppliers from whom the Maharashtra Sales Tax wing has alleged that the assessee had purchased bogus purchases to the tune of Rs.4.43 cr., which is placed at page 56-61 of the paper book. From a perusal of the same, it is shown that the mode of delivery and transportation goods is shown as “Free delivery by truck”. It was also brought to our notice that the assessee had brought to the notice of the Ld. Pr. CIT during revisional proceedings that the transportation charges was free (FOR) free on road or free of transportation charges which fact is evident from a perusal of page 24 of the impugned order wherein the assessee had submitted before the Ld. Pr. CIT that there were no expenses on transportation of these goods. However the Pr. CIT found fault with the AO on this issue that there was lack of enquiry in respect of delivery and transportation charges incurred by the assessee on bogus purchases. And on this fault only he had set aside the reassessment order and directed him to make necessary investigation in the light

6 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma of the bills, invoices, delivery challans concerning transportation and delivery alone and pass a fresh assessment order re-computing the assessee’s income.

Name of the Date of Amount of Mode of payment Mode of delivery & supplier Transaction transaction transportation Arihant Traders 05.10.2008 774,384.00 Bank cheque-IDBI Free Delivery-By Truck 06.10.2008 779,750.00 Bank Cheque-IDBI Free Delivery-By Truck 20.10.2008 788,783.00 Bank cheque-IDBI Free Delivery-By Truck Total: 2,342,917.00

7 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma wherein on similar facts & circumstances, their Lordships explained the difference between the two as follows:-

"14. The case of the CIT in his notice dated 26th November, 2009 under Section 263 of the Act reads as follows :-- "1. During the said A.Y., you have received a sum of Rs.18.00 Crore from M/s. Beierdorf AG., Germany (BDF) as one-time settlement for termination of contracts of producing and selling of the products of the latter company in India as well as issuing a NOC for setting up a 100% subsidiary by them in India. The said receipt should have been considered as income in the ambit of either Sec.28 or Sec.56, if the same is considered as voluntary payment on a goodwill gesture as pointed out by you. But, the said receipt has been allowed to be transferred directly to Capital Reserve Account while passing the assessment order for the A.Y. 2006-07." .... 76. He drew our attention to the notice under Section 142(1) of the Act and in particular to the annexure thereto from which it would appear that the assessing officer wanted the assessee to "furnish in writing and verified in the prescribed manner information called for as per annexures and on the points or matters specified therein before me at my office at 18, RabindraSarani, Poddar Court, 5th Floor, on 04.02.2008 at 11.30 AM.". The annexure to the notice under Section 142(1) of the Act reads as follows:-- 'Requisition u/s 142(1) of the IT Act '61. M/s. J. L. Morison (India) Ltd. - AY 06-07. (1) A write-up on receipt of Rs.18 crore from foreign co. (2) …… 77. Mr. Poddar also drew our attention to the reply dated 19th March 2008 given by the assessee to the notice, dated 21st January 2008, under Section 142(1) of the Act. He contended that all the requisite particulars were furnished together with documents. Thereafter, the matter was heard from time to time by the assessing officer as would appear from the List of Dates submitted by Mr. Nizamuddin, learned advocate for the appellant. From the list of dates it appears that on 21st January, 2008 notice under Section 142(1) was issued. On 4th February, 2008 the Assessee appeared and filed details and particulars. On 18th February, 2008, 4th March, 2008, 19th March, 2008 and 26th March, 2008 the matter was heard. The Assessing Officer has recorded in the order sheet that the case was discussed and the official documents and particulars were filed by the Assessee. 78. Mr. Poddar contended that the fact that the Assessing Officer had issued the notice under Section 142(1) of the Act requiring the assessee to give particulars and to furnish documents in respect of seventeen items indicates that the Assessing Officer had in fact applied his mind. Without application of mind, according to him, the aforesaid notice

8 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma itself could not have been issued. The fact that all the requisite papers required by the Assessing Officer were duly furnished and the matter was discussed from time to time on the various days indicated above, appearing from the assessment records produced by Mr. Nizamuddin, leave no scope for any doubt as regards the fact that the Assessing Officer after satisfying himself passed the order dated 28th March, 2008. 79. Mr. Poddar also drew our attention to the impugned judgment of the learned Tribunal which reads as follows:-- "Therefore, on combined reading of the assessment order for the assessment year under consideration along with the order sheet entries, it can be said that the A.O. had carried out such enquiry as the circumstances warranted and permitted before accepting the claim of the assessee and passing assessment order accordingly. It was an entirely different matter that the Commissioner did not agree with the conclusion derived by the A.O. from the enquiries made. Failure to carry out an enquiry is one thing and in such cases the commissioner would be justified in saying that the mere failure to make any enquiry was erroneous and prejudicial to the interests of the Revenue. But it would not be open to him to hold that the assessment order was erroneous and prejudicial to the interests of the revenue merely because he is of the opinion that some more enquiries are required to be made and he could not agree with the conclusion arrived at by the A.O. from the enquiries made. It was after verifying the books of account and various materials gathered from the assessee during assessment proceeding and after considering the explanation offered by the assessee that the A.O. had exercised a judicial discretion in the matter while completing the assessment u/s 143(3) of the Act. In such circumstances, the view taken by the A.O. cannot be said to be prejudicial to the Revenue nor can it be said to be erroneous simply because in his order the A.O. did not make any elaborate discussions in that regard." 80. Mr. Poddar contended that neither before the Tribunal nor in the present appeal has any question has been suggested that the assessment order was bad because the same did not disclose any reasons. The contention raised and the judgments cited by Mr. Nizamuddin, as regards exercise of power u/s. 263 of the Act, are misconceived, and also out of the context. 81. Mr. Poddar contended that the finding of the learned Tribunal that the order dated 28th March, 2008 was not passed without application of mind has not been challenged before this Court. No attempt far less any serious attempt was made on behalf of the revenue to demonstrate that the order passed on 28th March, 2008 by the Assessing Officer was wrong either on facts or law. The appellant has also not been able, nor in fact has made any attempt to establish that the finding of the learned Tribunal that the order dated 28th March, 2008 was not passed without the application of mind is based otherwise than on evidence. On the contrary, the records of assessment, the list of dates produced by Mr. Nizamuddin go to establish that the assessment order was passed after due application of mind. 82. Mr. Poddar contended that there is no provision in the Income Tax Act which requires the Assessing Officer while accepting the claim of the assessee to pass a reasoned order. The reasons, according to him, are required only when an issue is decided against the assessee. He also drew our attention to the judgment in the case

9 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma of S.S Gadgil v. Lal & Co. [1964] 53 ITR 231, wherein the Apex Court held as follows :- - "A proceeding for assessment is not a suit for adjudication of a civil dispute. That an income tax proceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The Income Tax authorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State: they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income, and to assess tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the State." 83. He also drew our attention to the judgment in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108 /71 Taxman 585 (Bom.) 'The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order, he did not make an elaborate discussion in that regard.' 84. The aforesaid views expressed by the Bombay High Court was quoted in the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi). 85. He also drew our attention to a judgment of the Punjab & Haryana High Court in the case of Hari Iron Trading Co. v. CIT [2003] 263 ITR 437/131 Taxman 535, wherein the following views were expressed:-- "The expression "record" has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee has no control over the way an assessment order is drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal has merely been swayed by the fact that the Assessing Officer has not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examines numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. As already observed, we have examined the records of the case and find that the Assessing Officer had made full inquiries before accepting the claim of the assessee qua the amount of Rs.10 lakhs on account of discrepancy in stock. Not only this, he has even gone a step further and appended an office note with the assessment order to explain why the addition for alleged discrepancy in stock was not being made. In the absence of any suggestion by

10 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma the Commissioner as to how the inquiry was not proper, we are unable to uphold the action taken by him under section 263 of the Act." 86. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time. In deciding the question Court has to bear in mind the presumption in law laid down in Section 114 Clause - e of the Evidence Act:-- "that judicial and official acts have been regularly performed;" 87. Therefore, the Court has to start with the presumption that the assessment order dated 28th March 2008 was regularly passed. There is evidence to show that the assessing officer had required the assessee to answer 17 questions and to file documents in regard thereto. It is difficult to proceed on the basis that the 17 questions raised by him did not require application of mind. Without application of mind the questions raised by him in the annexure to notice under Section 142 (1) of the Act could not have been formulated. 88. The Assessing Officer was required to examine the return filed by the assessee in order to ascertain his income and to levy appropriate tax on that basis. When the Assessing Officer was satisfied that the return, filed by the assessee, was in accordance with law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. 89. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact the order was passed by the assessing officer after due application of mind. 90. The judgments cited by Mr. Nizamuddin do not really support his contention. The judgment in the case of Meerut Roller Flour Mills (P.) Ltd. (supra) does not apply because the High court in that case was satisfied that the assessment order was passed without enquiry. 91. The judgment of Cochin Bench of Income Tax Appellate Tribunal in ITA No. 116 /Coch/ 2012 relied upon by Mr. Nizamuddin is evidently based on an erroneous impression that "the proceedings before the Assessing Officer are judicial proceedings". This impression, which is patently contrary to the views expressed by Apex Court in the case of S.S. Gadgill (supra), was responsible for the views taken by the Tribunal. When the premise is wrong, the conclusion is bound to be wrong. 92. The judgment in the case of Infosys Technologies Ltd. (supra) is distinguishable on facts. The step taken by the CIT under Section 263 in that case was justified because the

11 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma Income Tax records produced before him did not show that the assessing officer had considered the double taxation avoidance agreement on the basis whereof the claims were made by the assessee. Therefore, that was a clear case to show that the assessment order was passed without considering the relevant pieces of evidence. 93. The judgment in the case of Anusayaban. A. Doshi (supra) does not apply because the High Court in that case was dealing with the need on the part of the learned Tribunal to give reasons in support of its order. 94. The judgment in the case of Hindusthan Tin Works Ltd. (supra) also does not apply because there the Delhi High Court was dealing with the duty of the learned Tribunal to disclose reasons in support of its appellate order. 95. The judgment in the case of S.N. Mukherjee (supra) is clearly distinguishable. The point for consideration in that case was whether it was incumbent for the Chief of Army Staff while confirming the findings and the sentence of the General Court Martial, and for the Central Govt. while rejecting the post confirmation petition of the appellant, to record reasons for the orders passed by them. 96. The function of an Assessing Officer is to estimate the income of the assessee and to recover tax on the basis of such estimate as laid down by the Apex Court in the case of S.S Gadgil (supra). Their Lordships opined that the income tax proceedings do not partake the character of a judicial proceeding between the State and the citizen. Therefore, the principles applicable to a proceeding before a judicial or a quasi-judicial authority where there are two contesting parties cannot be made applicable to the proceedings before an Assessing Officer. 97. Mr. Nizamuddin contended the judgments cited by Mr. Poddar indicate that the Assessing Officer is not required to write an elaborate judgment. He contended that the assessing officer may not have any such obligation but it cannot be said, according to him, that the Assessing Officer is under no obligation to record anything in his assessment order. It is not in the first place a fact that he has not recorded anything. From the assessment order, the following facts and circumstances appear:-- "Return was filed on 29/11/06 showing total income of Rs.3,80,66,940/-. In response to notices u/s. 143(2) and 142(1) of the I. T. Act, 1961, Sri P. R. Kothari, A/r appeared from time to time and explained the return. Necessary details and particulars were filed. The business of the assessee is manufacturing and trading of cosmetics and dental care products as in earlier years. In view of above total income is computed is under:" 98. Unless the aforesaid recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind. On the top of that when the Assessing Officer accepted the contention of the assessee there was no occasion for him to make any discussion in his order.

12 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma 11. We note that the sheet anchor on which the ld. Pr CIT has found fault with the AO's order in the present case is the lack of enquiry on the part of the AO in not enquiring about the transportation and delivery of the goods alleged to have been purchased from the bogus accommodation entry providers. In this context we find that there is a clear distinction between "lack of enquiry" and "inadequate enquiry". If there is an enquiry, even if inadequate, that would not by itself give occasion to the ld. PrCIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the ld. Pr CIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then the ld. Pr CIT should himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his order was unsustainable in law and therefore the order of the AO was erroneous. In addition, the ld. Pr CIT should also prima facie show that the erroneous order caused prejudice to the Revenue and thereby twin conditions prescribed by Section 263 are satisfied. If even one condition is not satisfied, then it is open for the ld. CIT to usurp the revisionary jurisdiction u/s 263 of the Act.

13 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma transaction, amount of transaction, mode of payment and mode of delivery and transportation wherein the assessee has clearly stated that it was free on road (FOR) or free of transport charges. We note that the main fault the Ld. Pr. CIT has pointed out in his SCN was with regard to the failure of “AO to verify how goods shown to have been purchased from the alleged dealers were transported and delivered to the assessee”(refer para 4 of SCN of Ld. Pr. CIT (supra) and accordingly, the Ld. Pr. CIT has set aside the assessment order and directed the AO to enquire and investigate in the light of the bills, invoices, delivery challans concerning transportation and delivery alone and pass fresh assessment order re-computing the assessee’s income. So, while setting aside the reassessment order framed by the AO, the Ld. Pr. CIT directs him to investigate only about the transportation and delivery of the goods alleged to have been purchased from the bogus accommodation entry providers. However, we fail to comprehend this direction to AO for investigation which is an off shoot from his SCN para 4 discussed (supra) wherein he expressed his view that AO failed to verify how goods shown to have been purchased from the alleged dealers were transported and delivered to the assessee. As we have noted above that AO had made enquiries about the names of all the dealers, the details of transaction and the mode of transportation from the assessee and entire details has been given in a tabular format from page 56 to 61 a sample has been reproduced in para 9 (supra). Thus, the conclusion drawn by the Ld. Pr. CIT that “the assessee failed to produce relevant material and offered explanations in pursuance of the notice issued u/s. 142(1) as well as section 143(2) which led to non-consideration of the relevant material ” is contrary to evidence on record. So we find that the ld. Pr. CIT’s SCN para 4 where he alleges the AO’s failure to enquire about the mode of transportation is per se erroneous and therefore, his final direction to AO to enquire to re-compute the expenditure incurred for transportation of goods from the alleged hawala dealers is fraught with infirmities, viz., when the assessee has not claimed any expenditure on account of transport of these goods, we wonder as to how it can be computed by the

14 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma AO or there was any material in the hands of ld Pr CIT to state that assessee had booked any expenditure on account of transport of these goods. We note that the AO during reassessment proceedings after reopening on the basis of precise information of sales tax department of Maharastra has enquired into these facts and after taking note of the assessee’s stand that mode of transport was free on road (FOR) or free of transportation charges and when the books of account of the assessee did not show any amount as outgoing/expenses for transport of these goods and there was no material to draw any contrary view with the department, the AO has accepted the stand of the assessee; and taking note that assessee has procured the goods by making payment through the banking channel and the sales of the goods having been accepted by the department, the AO has made the GP addition of the profit embedded in the alleged bogus transaction which is a plausible action which cannot be at any rate be termed as unsustainable action/view of the AO on the facts discussed above. Further, we note that the Hon’ble Supreme Court in similar case of M/s. Odeon Builders Pvt. Ltd.[supra] has upheld the Tribunal order which is in consonance with the action of AO in the present case held as under:

“ Delay condoned. We have perused the review petition and find that the tax effect in this case is above Rs.1 crore, that is, Rs.6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs.1 crore. However, .on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view Of the above discussion in totality, the purchases made by the appellant from

15 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted." The ITAT by its judgment dated 16th May, 2014 relied on the self- same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. In these circumstances, the Review Petitions are dismissed .” 13. As discussed the AO has taken a plausible view after enquiry in the first round as well as in the second round and had appreciated the facts that assessee had shown the purchases in his stock register and had given the details of the opening stock of goods, purchases, sales and closing stock of the goods (both quantity as well as the value) and when the department has already accepted the sales of the goods (which includes the sale of the alleged bogus goods) and has shown a GP of 11.96% in its return of income declaring total income of Rs.2,01,14,730/- and during the second round the AO after reopening the assessment had paid the vendor through account payee cheque and since the sales have been accepted by the department (turnover) accepted, then AO’s action of adding 2.25% over and above the result shown by the assessee i.e. 11.96% and making an addition of Rs.9,97,170/- in the facts and circumstances of the case is a plausible view. In order to take the aforesaid action the AO has relied on the decisions of the Hon’ble Gujarat High Court in CIT Vs. President Industries (2002) 258 ITR 654 (Guj)(HC) and the decision of Hon”ble Madhya Pradesh High Court in the case of CIT Vs. Balchand Ajit Kumar (2003) 263 ITR 610 (MP). Moreover, the AO, before coming to the conclusion of adding the 2.25% GP in respect of the alleged bogus purchase, had considered whether to make the addition which is to be restricted to the gross profit or the entire purchase need to be disallowed in a case when the assessee has filed the copies of the bank statement showing entries of payment through account payee cheques through the suppliers, copies of the invoices for purchases and stock statement i.e. stock reconciliation

16 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma statement giving complete details with regard to opening stock, purchases, sales and closing stock, the books of account not being rejected and sales not being doubted then only profit element in respect of bogus purchase need to be taxed and accordingly, he is relied on the decision of the Hon’ble Gujarat High court in CIT Vs. Bholanath Poly Fab (P) Ltd. (2013) 355 ITR 290 (Guj) wherein it was held (Head- note)

“Purchases were made from bogus parties but the purchases themselves were not bogus as entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. therefore, the Tribunal held that addition should not be the entire amount but the profit margin embedded on such purchases would be subjected to tax. On appeal by revenue to Hon’ble High Court, the Tribunal order was upheld AY 0506”. 14. Therefore, since in the instant case the AO has made enquiries and the assessee has given details and furnished answers/replies which has been discussed supra from para 8 to 10 the Ld. Pr. CIT ought not to have taken a view that the AO’s order is erroneous for lack of enquiry. It has to be kept in mind that since enquiry was conducted by AO even if inadequate that would not by itself gives an occasion to the Ld. Pr. CIT to interdict and interfere by exercising his revisional jurisdiction merely because he is of the opinion that some more enquiries should have been conducted in the matter. In a case where the ld. PrCIT finds that the enquiry conducted by the AO is not in accordance with his subjective standards, then it is incumbent upon the ld. Pr CIT to himself conduct the investigation and thereafter record a clear finding in his order u/s. 263 that the view followed or acted upon by the AO in his assessment order was unsustainable in law and therefore the order of the AO was erroneous. We note that the Ld. Pr. CIT has not taken any such exercise as discussed. Thus, in the light of the enquiry conducted by the AO on the issue on which the Ld. Pr. CIT has found fault with, the Ld. Pr. CIT’s finding of fault cannot be sustained and, therefore, there was no basis to find fault with. So, we find that the Ld. Pr. CIT erred in usurping the jurisdiction without satisfying the jurisdictional condition precedent as stipulated in

17 I.T.A. Nos. 2574 to 2576/Kol/2018 Assessment Years: 2009-10 to 2011-12 Satya Prakash Sharma sec. 263 of the Act and, therefore, we are inclined to quash the impugned order of the Ld. Pr. CIT.

Order is pronounced in the open court on 22 November, 2019.

Sd/- Sd/- (A.L. Saini) (A. T. Varkey) Accountant Member Judicial Member Dated: 22 November, 2019 Bidhan (P.S.) Copy of the order forwarded to: 1 Appellant – Satya Prakash Sharma, C/o Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2nd Floor, Kolkata-700 069. 2 Respondent – Pr. CIT-12, Kolkata. 3 CIT(A)- 4 CIT 5 DR, Kolkata Benches, Kolkata. (sent through e-mail) /True Copy, By order, Assistant Registrar