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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: Shri D.T. Garasia & Shri G Manjunatha
O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of Principal Commissioner of Income-tax-24, Mumbai dated 20-01-2016 u/s 263 of the Income-tax Ac6, 1961 pertaining to assessment year 2009-10. 2. The brief facts of the case are that the assessee is an individual, filed his return of income for the assessment year 2009-10 on 25-09-2009 declaring total income of Rs.9,73,141/-. Subsequently, the case was reopened u/s 147
Sd/- sd/- for the reason that the assessee is a beneficiary of bogus bills issued by hawala dealers as per the list prepared by Maharashtra Sales-tax department. The assessment was completed u/s 143(3) r.w.s. 147 on 23-03-2015 by making additions of Rs.1,52,061 being 12.5% of profit on total bogus purchases made from hawala operators.
3. The Principal Commissioner of Income-tax-24, Mumbai proposed to revise the assessment order passed by the AO, as in his opinion, the same was erroneous, insofar as it was prejudicial to the interest of the revenue because the AO has failed to conduct necessary enquiries and also applied his mind on the issue of bogus purchases. The Principal Commissioner of Income-tax further observed that the AO has brought out clear facts in the assessment order to the effect that purchases from M/s Vijay Sagar Trading Pvt Ltd is bogus in nature, however, made additions only to the profit element embedded in the purchases without conducting enquiry with regard to credits outstanding in the parties’ account. The Principal Commissioner of Income-tax further observed that there is a difference of Rs.13,500 in the return of income filed by the assessee insofar as commission income shown from M/s Bombay Dyeing Mfg Co Ltd when compared to the TDS certificate issued by the party and income shown by the assessee in its books of account. The AO not only failed to examine the issue but also failed to apply his mind on the issue in the Sd/- sd/- right perspective, therefore, Principal Commissioner of Income-tax opined that the assessment order passed by the AO was erroneous, on these grounds, insofar as it is prejudicial to the interest of revenue.
The assessee, in response to show cause notice submitted that the issue of purchase from hawala dealers and taxation of such purchases has been considered by the AO in the assessment proceedings which is evident from the fact that the AO has estimated 12.5% net profit on purchases from M/s Vijay Sagar Trading Pvt Ltd. Insofar as, difference in commission income received from M/s Bombay Dyeing & Mfg Co Ltd, the assessee admitted that there is a difference of Rs.13,500, however, such difference is on account of debit note issued by the party but the same cannot be reconciled immediately. The assessee further submitted that the AO has considered above two issues at the time of assessment itself, therefore, the assessment order passed by the AO cannot be considered as erroneous insofar as it is prejudicial to the interest of the revenue. The Principal Commissioner of Income-tax, after considering the submissions of the assessee also and by relying upon certain judicial precedents including the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co Ltd vs CIT 243 ITR 83 (SC) and Hon’ble Gauhati High Court in the case of CIT vs Jawahar Bhattacharjee reported in 341ITR 434 (Gauhati)(HC)(FB) observed that the assessment order passed by the AO is Sd/- sd/- erroneous insofar as it is prejudicial to the interest of the revenue, as the AO has failed to conduct necessary enquiry with regard to the credit outstanding in the name of the party, who was declared as hawala dealer engaged in providing bogus purchase bills. The Principal Commissioner of Income-tax further observed that the assessee is unable to reconcile difference of Rs.13,000 in commission received from M/s Bombay Dyeing & Mfg Co Ltd, which fact has not been examined by the AO. With these observations, he directed the AO to re-assess the income of the assessee de novo after affording reasonable opportunity of hearing to the assessee. Aggrieved by the order of the Principal Commissioner of Income-tax, the assessee is in appeal before us.
We have heard both the parties, perused the material available on record and gone through the order of the Principal Commissioner of Income-tax. The limited issue came up for our consideration is whether the assessment order passed by the AO u/s 143(3) r.w.s. 147 is erroneous insofar as it is prejudicial to the interest of the revenue as narrated by the Principal Commissioner of Income-tax in his order dated 20-01-2016. The Principal Commissioner of Income-tax has taken up two issues in revision proceedings. The first issue being credits appearing in the name of Vijay Sagar Trading Pvt Ltd, a firm declared as hawala dealer by the Maharashtra Sales-tax department and the Sd/- sd/- assessee is beneficiary of bogus purchase bills from the said party. We find that in the assessment proceedings, the AO has considered purchases made from the said party and has estimated profit at 12.5% on total purchases made from Vijay Sagar Trading Pvt Ltd. The Principal Commissioner of Income-tax has not disputed the fact that the AO has considered the issue of purchases from the said party. However, was of the opinion that the AO ought to have added sundry creditors appearing in the name of the assessee. We do not find any reasons in concurring with the findings of the Principal Commissioner of Income-tax for the reason that once the AO has considered the issue in the assessment proceedings, the Principal Commissioner of Income-tax does not have any jurisdiction to revise the assessment order on the ground that the AO has not conducted necessary enquiry and also not applied his mind. In this case, the AO has examined the issue of purchase from the party and after considering the facts decided to estimate net profit of 12.5% on total purchases. Therefore, we are of the view that the Principal Commissioner of Income-tax is incorrect in holding that the AO has not conducted proper enquiry on the issue. As regards the difference in commission income received from M/s Bombay Dyeing & Mfg Co Ltd, though the assessee claims that difference is on account of debit note issued by the party, failed to reconcile the difference between TDS certificate issued by the party and commission