SMT.RAJLAKSHMI B.,MUMBAI vs. PR.CIT-29, MUMBAI

Smt. Rajlakshmi B. Assessment Year :2010-11 2. Agitating the same, Ld. Authorized Representative for Assessee [AR] submitted that the jurisdiction u/s 263 as invoked by Ld. Pr. CIT on identical facts has been set aside by the Tribunal in the case of Rajal Enterprises Vs. Pr.CIT [ITA No. 2273/Mum/2018 dated 31/10/2018]. The copy of the order has been placed on record. Although Ld. Departmental Representative [DR] supported the impugned order, however, could not point out any distinguishing facts or features.

The facts on record reveal that the assessee was subjected to reassessment proceedings u/s 143(3) read with Section 147 for the impugned AY vide order dated 30/01/2016 wherein the assessee was saddled with estimated addition of 12.5% on account of certain alleged bogus purchases. While estimating the same, Ld. AO relied upon the decision of Hon’ble Gujarat High Court rendered in Simit P.Sheth 356 ITR 451.

However, subsequently, upon perusal of case records, Ld. Pr.CIT noted that the assessee was not maintaining any quantitative register and could not substantiate the delivery of the material and therefore, the full disallowance was to be made as against 12.5% estimated by Ld. AO keeping in view the decision Hon’ble Apex Court rendered in N.K.Proteins Ltd. Vs. DCIT [84 Taxmann.com]. Therefore, applying clause (a) and (d) of explanation 2 to Section 263(1), the order was treated as erroneous as well as prejudicial to the interest of the revenue. Accordingly, the order on the stated issue was set aside for re- adjudication. Aggrieved, the assessee is in further appeal before us.

We find that the co-ordinate bench of this Tribunal in the cited case of Rajal Enterprises Vs. Pr.CIT [ITA No. 2273/Mum/2018 dated Smt. Rajlakshmi B. Assessment Year :2010-11 31/10/2018], on identical set of facts, quashed the revisional proceedings u/s 263, by observing as under: - 5.We have considered rival submissions and perused material on record. Factual matrix of the case reveals that on the basis of specific information received indicating that the purchases made by the assessee are bogus, the Assessing Officer reopened the assessment under section 147 of the Act. It is also evident, in course of assessment proceeding the Assessing Officer has conducted necessary inquiry by calling for various information from the assessee as well as independently to ascertain the genuineness of the purchases made by the assessee. After examining the material available on record the Assessing Officer, though, was of the view that the assessee has failed to prove the genuineness of purchases made, however, he found that not only the assessee has shown the purchases made in the books of account but has also recorded the corresponding sales effected. Thus, he proceeded to make addition of the profit element embedded in the bogus purchases by estimating the same at 10%. Thus, a reading of the assessment order makes it clear, the Assessing Officer not only has conducted due inquiry to ascertain the genuineness of the purchases made by the assessee but has made addition on account of bogus purchases in terms with the principle laid down in various judicial precedents. It is observed, learned PCIT has held the assessment order to be erroneous and prejudicial to the interest of revenue primarily for two reasons. Firstly, due to non-consideration of the decision of hon’ble Supreme Court in case of N. K. Protein (supra) and secondly, due to lack of proper inquiry. As regards the second allegation of the PCIT, we are unable to agree with the same. The assessment order clearly reveals that the Assessing Officer made necessary inquiry to find out genuineness of purchases. As regards the allegation of non- consideration of the decision in case of N.K. Protein (supra), it is relevant to note, the said decision was rendered by the hon’ble apex court on 16.01.2017 which is much after the completion of assessment on 02.03.2016. Therefore, there is no occasion on the part of the Assessing Officer to consider the said decision. That being the case, the exercise of power under section 263 of the Act for non- consideration of the aforesaid decision of the hon’ble apex court is wholly misconceived. In any case of the matter, the addition to be made on the basis of bogus purchase is a purely factual issue and varies from case to case depending upon the facts of each case. In case of N.K. Protein (supra) the facts involved clearly reveal that there was a search and seizure action carried out in case of N.K. Protein during which various incriminating material including blank cheque books in the name of different entities were found which conclusively proved that the assessee had not made any purchases. Thus, in the context of those facts 100% addition on account of bogus purchases was upheld. Whereas, in the case of the present assessee no such facts are involved. In any case of the matter, when the assessee was able to link the purchases with corresponding sales, the logical conclusion which one can arrived at is, the assessee might not have purchased goods from the declared source but from some other parties. In that event, only the profit element embedded in the bogus purchases can be considered for addition. Therefore, the decision of the Assessing Officer to restrict the addition to 10% of the bogus purchases is in tune with the consistent view of the tribunal and different high Smt. Rajlakshmi B. Assessment Year :2010-11 courts in similar nature of cases. That being the case, in our view, the exercise of power under section.263 of the Act in the facts of the present case is invalid. Accordingly, the impugned order passed by the leaned PCIT under section 263 of the Act deserves to be quashed. Accordingly, we do so. Consequently, the order passed by the Assessing Officer is restored.