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Facts
The assessee filed its return of income declaring a total loss. The case was reopened under section 147 based on a report about bogus bills from a supplier. The assessee provided various documents to prove the genuineness of purchases, which were accepted by the Assessing Officer.
Held
The Principal CIT invoked revisionary powers under section 263, holding the AO's order erroneous due to lack of detailed inquiry. However, the Tribunal found that the AO had conducted sufficient inquiry and accepted the purchases based on the provided documents. The PCIT's order was deemed to have been passed without sufficient material.
Key Issues
Whether the PCIT was justified in invoking Section 263 by alleging lack of inquiry by the AO when the assessee had provided substantial evidence of genuine purchases.
Sections Cited
263, 147, 133A, 148, 133(6), 144, 143(3), 2(23)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘G‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 30/03/2024 passed by ld. PCIT, Mumbai-8 in his revisionary jurisdiction u/s.263.
The brief facts are that the assessee filed its return of income on 29/12/2017, declaring total loss of Rs.18,60,257/-.
From the perusal of the assessment order it transpires that through ITBA (inside portal) there was a report that during the course of action u/s.133A in the case of Kusum Multitrade Pvt. Ltd., it was found to be providing bogus bills without actual delivery of any goods. Such bogus bills from Kusum Multitrade Pvt. Ltd by the assessee aggregate to Rs.2,22,94,944/- in the F.Y. 2016-17 relevant to A.Y.2017-18. A notice u/s. 133(6) was issued to the assessee, (before issuing notice u/s 148) and in response, assessee filed all the details for the purchases and submitted tax invoices, VAT Audit report, ledger confirmations, bank statements, etc. to show that purchases made were genuine and duly accounted for in the books. Despite such information having made available, notice u/s.148 was issued to the assessee and the case was reopened u/s.147 that there was a reason to believe that income of Rs.2,22,94,944/- chargeable to tax has escaped assessment. During the course of assessment proceedings u/s 147/143(3), ld. AO asked for all the requisite details from time to time and assessee submitted replies and the details before ld. AO vide reply dated 12/03/2022 which was as under:- “1. These are the genuine purchases and we have sold the goods to different parties.
In this connection, we would like to submit the followings: a. We attach herewith ledger confirmation from the aforesaid party (pg 1-2) b. We attach herewith our ledger accounts in our books of accounts. (pg 3-4)
c. We also submit herewith VAT Audit report of the party in Form no 704 with the extract of J-1 Schedule of sales showing sales amount including VAT amounting Rs 2,22,94,944/- (pg 5- 6) d. We also attach herewith copies of the tax invoices of purchase bills (pg 7-31) e. We also attach herewith copy of bank statements highlighting the payments made to the aforesaid parties. (pg 32-65) f. We also attach herewith MVAT and CST order assessing and accepting all the purchases and VAT setoff and order passed in our favour considering all the purchases genuine and correct. (pg 66-74). Accordingly, you can verify that all the purchases are genuine and we have duly paid VAT tax thereon. So, there is no question of disallowance of purchases amounting to Rs 2,22,94,944/- and for further details, if any kindly call on us or ask for the same.
The ld. AO thereafter issued a final show-cause notice u/s.144 which was a draft assessment order proposing the addition of Rs. 2,22,94,944/-. The details of show-cause notice u/s.144 and the draft assessment order have been placed from pages 12 to16 of the paper book. In response assessee, again filed the detailed reply alongwith all the relevant details and delivery challans, tax invoices to prove the genuineness of the purchase and actual delivery of goods. It has been stated before us that all these details were submitted by the assessee company earlier also before the AO in response to notice u/s. 133(6) including the VAT assessment orders wherein the purchases made from the said party have been accepted. The details of tax invoices alongwith the delivery challans which were annexed to said reply have been placed in the paper book from pages 17 to 100 of the paper book alongwith copy of bank statements from pages 101 to 134 and also the assessment order u/s. 2(23) of Maharashtra Value Added Tax Act which has been placed in the paper book from pages 135 to 148. The ld. AO after examining all these documents accepted the returned income and no addition was made on account of bogus purchases once it was found to be genuine in light of these documents.
The ld. PCIT on perusal of the assessment records noted that submissions made by the assessee with regard to tax purchase was not satisfactory and assessee had not fully answered the questions that have been raised by the ld. AO during the time of assessment proceedings. Thus, on these grounds he issued a show-cause notice u/s.263. In response, the assessee filed its reply before ld. PCIT submitting all the documents once again. However, ld. PCIT cancelled the assessment order after observing as under:-
“8.1 Further, the submission of the assessee talks about the details furnished by it with regard to purchases made from Kusum Multitrade Pvt. Ltd and that these purchases are genuine as they have sold goods to different parties. In this regard, it is pertinent to mention here that perusal of records shows that details were filed by the assessee only at fag and on 26.03.2022 only after the showcause dated 24.03 202 was issued.
8.2 Even if for arguments sake the assessee's contention is accepted, there is nothing on record to suggest that the AO had carried out detailed enquiry with regard to these issues. As per Explanation 2(a) below section 263, if an order is passed without making inquiries or verification which should have been made, it shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. As such an order passed by the Assessing Officer becomes erroneous and prejudicial to the interest of the revenue if it is passed without making requisite enquiry and verification of the details. The lack of enquiry or inadequate enquiry by the Assessing Officer is a valid reason for invoking revisionary power uls 263 of the Act as has been held by the Tribunal in the case of Mahatakshmi Liquor Promoters Pvt Ltd Vs Commissioner of Income tax (2013) 29 taxmann com 70 Further in the case of Gee Vee Enterprises Vs. Addl. CIT (1975) 99 ITR 375 (Delhi) it was held that PCIT can regard the AO's order as erroneous on the ground that considering the circumstances of the case the AO should have made further enquiries and which he has failed to make before accepting the statements made by the assessee 83 For invoking provisions of sec.263 of the Act, there are twin conditions to be satisfied (1) order passed by the AO must be erroneous and (ii) the error must be such that it is prejudicial to the interest of revenue. In the instant case, the AO had not carried out verification of issues relating to purchases from M/s. Kusum Multitrade Pvt Ltd thereby making the Assessment Order erroneous and prejudicial to the interest of revenue. As such, twin conditions embedded in Section 263 have been met in this case
Considering the facts and circumstance of the case the Assessment order passed u/s 147 rws 144 on 30.03.2022 is hereby set aside on the issue relating to the genuineness of purchases made from Kusum Multitrade Pvt. Ltd with a direction to pass fresh order in accordance with the law and after considering a detailed enquiry and providing sufficient opportunity to the assessee.’ Thus, the only reason assigned by the Ld. PCIT was, firstly, that perusal of records shows that details were filed by the assessee only at fag and on 26.03.2022 only after the show cause dated 24.03.2022 was issued; and secondly, there is nothing on record to suggest that the AO had carried out detailed enquiry with regard to these issues.
We have heard both the parties at length and perused the relevant material placed on record. As discussed above, the assessee’s case was reopened u/.147 specifically to enquire upon the alleged bogus purchases made from Kusum Multitrade Pvt. Ltd. The assessee in response to the notices issued by the ld. AO has filed all the replies alongwith the details which has been mentioned above. Further, ld. AO had issued a draft assessment order proposing the addition in his final show-cause notice u/s.144 dated 25/03/2022 and again assessee on 26/03/2022 has filed voluminous documents before the ld. AO including the tax invoices, delivery challans, ledger confirmation from the said party, VAT audit report, bank statements, MVAT and CST assessment order wherein all the purchases have been verified and accepted by the VAT authorities and even VAT set off have been passed considering all the purchases are genuine. Once all these documents have been filed and ld. AO after examining the same has accepted the purchases, then ld. PCIT without any further information or material coming on record cannot hold that ld. AO has not carried out any enquiry. At least he should have pointed out what further inquiry was required to be done or he himself should have asked the ld. AO to carry out the inquiry specifying the nature of inquiry which can prove that all these documents proving the genuineness of the purchases cannot be accepted. Nowhere the ld. PCIT has demonstrated as to how the order of the ld. AO is erroneous and prejudicial to the interest of the Revenue. Order cannot be held to be erroneous and prejudicial to the interest of the Revenue only on the ground that final show-cause notice was issued on 24/03/2022 and assessee had filed the reply on 26/03/2022. He should have at least specified what further documents were required to be filed to prove the genuineness of the purchase; or what has been ignored by the AO. In fact all possible documents were filed not only prior to the issuance of notice u/s 148 but also twice during assessment to substantiate the genuineness of the purchases. Once the source of purchases are from the books and quantitative details of purchase and corresponding quantity of sales are not doubted and trading account alongwith gross profit has been accepted, then what further enquiry should have been carried out to prove that these purchases are outside the books or are bogus. If the tax invoices, delivery challans, ledger confirmation from the said party, VAT audit report, bank statements reflecting the transactions, MVAT and CST assessment order wherein all the purchases have been verified and accepted by the VAT authorities and also corresponding sales, then what further inquiry was to carried out to treat the entire purchases as bogus. The manner in which ld. PCIT has cancelled the assessment order de hors any material coming on record and without pointing out any defect in evidences filed before him cannot be upheld. We thus set aside the order of the Ld. PCIT and accordingly, order under section 263 is quashed and assessment order is restored. 6. In the result, appeal of the assessee is allowed. Order pronounced on 12th December, 2024.
Sd/- Sd/- (PADMAVATHY S) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 12/ 12/2024 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//
BY ORDER,
(Asstt. Registrar) ITAT, Mumbai