ORRA FINE JEWELLERY PVT. LTD. (FORMERLY KNOWN AS M/S. INTER GOLD GEMS PVT. LTD.),MUMBAI vs. PRINCIPAL CIT CENT. CIR. 46, MUMBAI

ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2008-09. The appeal is directed against the order u/s 263 of the Income Tax Act 1961, (the ‘Act’) dated 28.03.2016 passed by the Principal Commissioner of Income Tax (Central) – 4, Mumbai (hereinafter referred as ‘PCIT’).

filed by the assessee read as under:

1. Learned Commissioner of Income-tax erred in invoking the jurisdiction under section 263 of the Act and setting aside the assessment made under Section 153A r.w.s. 143(3) of the Act. The Learned Commissioner of Income-tax further erred in holding that the Assessing Officer while framing the assessment under Section 153A r.w.s. 143(3) of the Act did not carry out any further enquiries/necessary verification to ascertain the genuineness of the purchases. It is submitted that the assessment order passed under Section 153A r.w.s.143(3) of the Act is in accordance with the law, is not erroneous or prejudicial to the interest of the revenue. The conclusions arrived at by the learned Commissioner of the Income-tax is erroneous and contrary to the facts. The order under Section 263 of the Act is without jurisdiction, bad in law and to be cancelled.

3. Briefly stated, the facts of the case are that the assessee filed its return of income for the AY 2008-09 on 30.09.2008 declaring total income of Rs. Nil. The said return was selected in scrutiny and the assessment was completed by the Assessing Officer (AO) u/s 143(3) on 24.12.2010. The total income was assessed at Rs. Nil. The additions made in the said return were deleted by the CIT(A). The appeal filed by the Revenue against the order of the CIT(A) was dismissed by the ITAT. A search and seizure action was carried out by the Revenue u/s 132 at the residence and business premises of Rosy Blue (India) Group on 25.08.2011. The assessee was also covered in the said search action. Consequent to the search, the AO issued notice u/s 153A on 11.12.2012. In response to it, the assessee filed its return of income on 30.01.2013 declaring total income of Rs. Nil. The AO after verification made the assessment u/s 153A r.w.s. 143(3) on 31.03.2014 as under: Particulars Amount (Rs.) Business Income 62,32,333/- Less: Unabsorbed Depreciation (62,32,333/-) of Earlier Years Total Income Nil 4. The PCIT initiated proceedings u/s 263 by issuing a show cause notice dated 02.03.2016. The points raised by the PCIT were (i) on perusal of records, it is seen that the assessee company had made bogus purchases to the extent of Rs.60,56,006/- by way of accommodation entries from the concerns controlled and operated by Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharmichand Jain Group. The information to this effect, consequent to the search & seizure action conducted by the Investigation Directorate, Mumbai on 03.10.2013 in the case of Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Dharmichand Jain Group is placed on record and (ii) the AO had not made any inquiry/verification with regard to the purchases. The assessee filed a reply before him which has been extracted at para 3 of the above order. The initial objection raised by the assessee was that during the course of search in its case, no incriminating material was found. The assessee also submitted before the PCIT that it has not made purchases from the above parties. However, the PCIT was not convinced with the reply of the assessee as the AO did call for the list of party wise purchases but did not carry out any further inquiry/verification to ascertain the genuineness of those purchases. Therefore, he set aside the order of the AO on the above issue with a direction to make de novo assessment.