2023 (3) TMI 517 - AT - Income Tax

Revision u/s 263 by CIT - Bogus purchases - CIT held AO had not investigated the bogus claim of purchases pertaining to these parties - Whether records of subsequent years could not have been considered by the ld.CIT for arriving at a finding that there was an error in the impugned order? - HELD THAT:- A bare and literal reading of clause (b) reveals that “records” include “all records” relating any proceedings under this Act which is available with the ld.CIT at the time of examination. There is no restriction in the Explanation 1(b) to section 263 ,where the term “records” is specifically defined, restricting “records” in any manner more so to a particular year only. Therefore, applying principle of literal interpretation, we see no reason to restrict the definition of “records” to that relating to the year for which revisionary jurisdiction is exercised, when the definition of the term clearly states that it includes all or any records relating to the assessee available with the ld.CIT at the time he examines it.

In view of the same, the contention of the ld.counsel for the assessee that the ld.CIT could not have been referred to the records of the subsequent year i.e. Asst.Year 2015-16 for exercising his revisionary jurisdiction for the impugned year i.e. Asst.Year 2014-15 is rejected.

Whether issue of purchases from these very same parties was examined during the assessment proceedings? - It is a fact on record that in subsequent year i.e. Asst.Year 2015-16 when these very same parties, from whom purchases were made in the impugned year, were examined and inquired into by the AO during assessment proceedings, it revealed that all these parties were bogus and non-existent even in the impugned year. The inquiry revealed that these parties did not have TIN for the impugned year, having surrendered it in earlier year. In the impugned year, the inquiry by the AO was clearly inadequate. The Ld.CIT has pointed out from the records that in response to inquiry conducted u/s 133(6) of the Act, these parties had responded in identical format. This ideally should have raised suspicion and prompted further inquiry. But the AO accepted their responses and treated the parties as genuine. Therefore, the inquiries conducted by the AO being inadequate, and the records of the Asst.Year 2015-16 revealing these parties to be non-existent and bogus, it cannot be said that the AO had taken a plausible view accepting the purchases from these parties as genuine. This plea of the assessee is also, therefore, rejected.

Whether CIT without conducting any further inquiry had simply restored the issue to the AO to make further inquiry? - It is a fact on record that during the revisionary proceedings, the ld.CIT had confronted the finding of the AO in the subsequent year of the same parties having been found bogus and non-existent. The ld.CIT has noted that the assessee was given sufficient opportunity during revisionary proceedings to respond to the same and prove genuineness. But despite adverse material available relating to these parties, the assessee simply reiterated contentions which were made before the AO without dislodging the adverse findings for the assessment year 2015-16. Therefore, we find that, it cannot be said that the ld.CIT had arrived at his finding of error without conducting any inquiry and without making any further investigation into the issue.

CIT had clear cut information that the creditors relating to these purchases were bogus. He had given sufficient opportunities to the assessee during the revisionary proceedings to counter this fact, but the same was not done by the assessee. Therefore in the absence of any explanation furnished by the assessee to controvert the findings of the Ld.CIT that the purchases were bogus, the ld.CIT, we hold, rightly found the assessment order erroneous causing prejudice to the Revenue in accepting assesses claim to such purchases as being genuine.

CIT(A) held that the purchases though not made from these parties must have been made from some other parties, and accordingly restricted the addition to the element of GP embedded therein only, on the premise that the assessee must have gained on this count. Therefore, the fact that these parties were bogus and non-existent was not disturbed by the ld.CIT(A) in Asst.Yr. 2015-16. Therefore, this contention of the assessee merits no consideration. - Decided against assessee.