TMI Blog2022 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... nly in a very gross case of inadequacy in enquiring or where the mandatory enquiries are not conducted has reached finality. AO in the given case has conducted enquiry and perused the details submitted and has taken decision to make addition of bogus purchases recorded in the books accounts with proper application of mind. Therefore in our considered view, that the PCIT is not justified in revising the order of the AO. Accordingly, the impugned order of the PCIT is quashed. Appeal of assessee allowed. - ITA No.383/Bang/2022 - - - Dated:- 29-7-2022 - Shri N.V. Vasudevan, Vice Preseident And Shri Padmavathy S, Accountant Member For the Appellant : Shri V. Srinivasan, Advocate For the Respondent : Smt. Susan Dolores George, CIT(OSD) ORDER PER PADMAVATHY S., ACCOUNTANT MEMBER This appeal by the assessee is against the order of the Principal Commissioner of Income Tax (Central), Bangalore [PCIT] passed u/s.263 of the Income Tax Act 1961 (the Act) dated 11.03.2022 for the assessment year 2017-18 on the following grounds:- 1. The order of revision passed by the learned Principal Commissioner of Income tax [Central], Bengaluru, under Section 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their mind and considering the facts the order of assessment has been passed. Hence on the very same issue no action can be taken under Section 263 of the Act as the actions of the Assessing Officer is pursuant to applying his mind to the matter and in accordance with law, on the facts and circumstances of the case. 7. Without further prejudice the learned Principal Commissioner of Income tax failed to appreciate that the impugned order of assessment passed by the learned assessing officer under section 143[3] r.w.s. 153C of the Act dated 19/12/2019 is subject matter of appeal before the learned Commissioner of Income-tax [Appeal}, thus as per the Explanation [c] to sub-section [1] of section 263 of the Act the power are restricted to exercise the jurisdiction to the matter which was a subject matter of appeal, on the facts and circumstances of the case. 8. The learned Principal Commissioner of Income tax failed to appreciate that it is settled position of law that mere consent alone cannot confer jurisdiction and consequently, the authorities have to independently examine the claim of the Appellant before making any assessment based on any declaration by the appellant at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show cause why the difference of Rs.77,82,870 should not be added to the income of the assessee. Sl.No Name of the Bogus Supplier Purchases as per books Admitted u/s.132(4) Admitted in return u/s.153C 4 Raghav Poojari 8,64,276 44,04,412 8,64,276 5 Abdul Rasheed 15,63,500 66,88,221 - 6 Sayeed Ebrahim 8,27,700 60,72,877 - 7 Katakeriv Ebrahim Sayeed 53,91,670 53,91,670 - Total 86,47,146 2,25,57,180 8,64,276 14. The assessee filed a reply before the AO stating that the confirmation from the parties could not be obtained during the course of search proceedings and hence the additional income was offered to tax to buy peace and to cooperate with the department. The assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Syed Ibrahim for A.Y. 2018-19 has been accepted as bogus and offered to tax in that assessment year. It is to be noted that all these alleged supplies are the employees of sister concern Mukka Sea Foods Industries Private Limited and not a regular traders in fish. The assessee has filed the confirmations only from these alleged suppliers who are the employees even now. The case law relied upon by the assessee is not applicable to the facts of the case of the assessee, as here the accountant and the director had confirmed on the date of search itself that no materials were received in respect of the bills issued by these parties. Relying on the case law, the contention of the assessee is that there cannot be sales without purchases and since sales is not disproved there cannot be inflated purchases. This argument is not acceptable because in the case of the assessee the purchase is raw fish and the sale is fish meal, fish oil and fish paste which is variable due to many factors like protein content, quality, moisture and wastage depending on the breed and other manufacturing variables. 7.2 In view of the position of these alleged suppliers being unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not prove the genuineness of purchases. The assessee has conceded that there are bogus purchases and even admitted bogus purchases in the return filed in response to notice u/s 153C. 7.6 The admission made in statement under section 132(4) has great evidentiary value and is binding on a person who makes it. Therefore, the assessment can be made based on such admission by using the same in evidence. If in the course of such search, the assessee makes some admission, he debars the authorised officer from making further investigation. The sanctity of such provision would be lost if the assessee is allowed to contend that no addition can be made based on such admission. 7.7 In the case of B. Kishore Kumar vs. Deputy Commissioner of Income-tax, Central Circle-IV (1) , Chennai the Hon'ble High Court of Madras in [2014] 52 taxmann.com 449 (Madras) held that where assessee himself stated in sworn statement during search and seizure about his undisclosed income, same was to be levied tax on basis of admission even without scrutinizing documents. 7.8 The Hon'ble Supreme Court of India has upheld the decision of the Hon'ble Madras High Court and the SLP was dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of survey and details verified during the assessment proceedings Rs. 77,82,870 is added to the income under the head Income from Business . 17. The PCIT on examination of case records noticed that as against the admitted bogus expenses of Rs.2,25,57,180, bogus purchase to the extent of Rs.86,47,146 only is brought to tax and to the extent of the balance amount of Rs.1,39,10,034, there is an under assessment. The PCIT stated that the AO had passed the assessment order without making enquiries which should have been made on this and therefore the order passed u/s.143(3) r.w.s 153C is erroneous and prejudicial to the interest of the revenue. The PCIT issued a show cause notice to the assessee in this regard. The assessee filed a reply stating that an amount in excess of income offered u/s.132(4) towards purchases was assessed u/s.143(3) r.w.s.153C in the earlier assessment year i.e. 2016-17. Further the assessee submitted that the AO has conducted the verification of books of accounts of the assessee before concluding the assessment and therefore the order passed is not erroneous. Further the assessee stated that an appeal is filed before the Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject matter of appeal pending before the CIT(Appeals). Without prejudice to this fact, it is submitted that there was a thorough enquiry by the AO in the assessment proceedings and there is no lack of inquiry or inadequate enquiry which warrants the invocation of revision provisions under section 263 of the Act. The AO after duly applying his mind, has concluded the assessment under section 143 [3] r.w.s. 153C of the Act, dated 19/12/2019. 20. It is further submitted that the order of assessment passed by the AO under section 143[3] r.w.s. 153C of the Act is pursuant to the notice issued under section 153C of the Act. The said order of assessment has been concluded by the AO after duly verifying the facts of the case and further as per the provisions of section 153D of the Act, the said order of assessment has been passed after obtaining the approval of the Additional Commissioner of Income tax, Central Range, Mangaluru and consequently it is not only that the AO has applied his mind, but the Addl. CIT, after considering the observations and conclusions arrived at by the AO, has accorded the approval as well. Consequently, two officers having applied their mind, there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgments of the various High Courts on the issue. 25. On the other hand, the ld DR submitted that the statement recorded u/s.132(4) is a conclusive evidence and that the AO failed to bring to tax amount declared which is erroneous. The AO has made addition without verification and to that extent, the ld DR submitted that the PCIT is justified in setting aside the order u/s.263. 26. We have heard the rival submissions and perused the material on record. We notice that the main reason as stated by the PCIT in the order u/s.263 for revision is that the AO has not made any verification and failed to make enquiries before passing the order (para 11 and 12 of PCIT order extracted above). The PCIT has invoked Clause (a) of Explanation (2) to the section 263 and concluded that the order of the AO is erroneous and prejudicial to the interests of the revenue. However we also notice from the AO s order as extracted above that the AO has done a thorough examination of the facts and has given an elaborate finding on bogus purchases declared. The AO has confronted each of the submissions of the assessee and has listed out his conclusions as can be seen from the order. With regard to the PC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils consisting of copy of ledger account, copy of acknowledgment of income filed for A.Y. 2012-13 and 2013-14 and copy of bank statement reflecting the payment received was paid during the financial year 2012- 13 relevant to assessment year 2013-14 which are placed at paper book, page 9 to 49 in respect of GTPL as well as PAFPL. This indicate that the assessee has furnished account confirmation of the depositor, acknowledgment of income of the parties, audited balanced sheet and profit and loss account of the parties and bank pass book and bank statement of the parties. During the course of assessee proceedings, form these facts it is clear that the assessee has not only proved the from these facts it is clear that the assessee has not only proved the identity of the lenders but also the genuineness of the transactions and credit worthiness of the lenders. Accordingly, the Ld. AO after verifying the details of unsecured loans being satisfied, accepted the submissions of the assessee which leads to infer that the Assessing Officer had made full enquiries of unsecured loans by raising the queries and calling for the all information in respect of the loan taken along with details evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel has placed reliance on the following decision: CIT v. Amir Corporation 81 CCH 0069 (Guj.), CIT Mehrotra Brothem -270 ITR 0157 (MP,CIT v. Ganpet Ram Bishnoi - 296 ITR 0292 (Raj.), Cadila healthcare Ltd. v. Cl 7, Ahmedabadh-1 [ITA no. 1096/Ahd/2013 910/Ahd/2014], Sri Sa Contractors v. ITO [ITO no. 109Nizag/2002] and Pyare lal Jaiswal v. CIT, Vamnesi [(2014) 41 taxmann.com 27 (AII Trib.)]. It was contended by the Learned Counsel that clause -(a) (b) of Explanation 2 of Section 263 are not applicable as the Assessing Officer has made enquiry and verification which should have been made. Further, in the show cause notice, the Explanation-2 of section 263 was not invoked by the PCIT and it was referred in the order u/s.263 of the Act. Therefore, in the light of decision of the Co-ordinate Bench of Mumbai ga in the case of Narayan Tatu Rane - 70 taxmann.com 227 (Mum. Trt.) [PB 153-1561 wherein held that explanation cannot laid to have over ridden the law as interpreted/the various High Courts where the High Courts have held that before reaching the conclusion that the order of the Assessing Officer is erroneous prejudicial to the interest of Revenue. The CIT himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expression erroneous in so far as it/3 prejudicial to the interests of the revenue has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner. (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 17 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal of the Assessee. 5. The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. 6. Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. 28. The SLP against the above order of the Hon ble High Court was dismissed by the Hon ble Supreme Court, thereby the issue that Explanation (2) to Section 263 of the Act could be invoked only in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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