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2024 (1) TMI 908 - AT - Income TaxRevision u/s 263 - CIT observed lack of proper inquiry by the AO on two issues as of not making disallowance on account of outstanding Central Sales Tax (CST) and claim of cash purchase of cotton which was allowed by the AO despite absence of bills, vouchers, transportation receipts, weighment slips etc - HELD THAT:- AO made an inquiry about the genuineness of the purchase and due to deficiency in supporting evidence of purchase the AO made an adhoc disallowance. Thus to the extent of conducting an inquiry on purchase made by the assessee the case in hand does not fall in the category of complete lack of inquiry though it may be a case of inadequate inquiry. However the Pr. CIT has invoked the provisions of section 263 on two issues as stated in the show cause notice being non-allowability of the outstanding Central Sales Tax as per the provisions of section 43B and non-conducting of the inquiry on the part of the AO in respect of the cash purchase of cotton in the light of the provisions of section 40A(3) of the Act. So far as the first issue regarding non-payment of the CST is concerned the assessee has accepted that the same is not allowable as per the provisions of section 43B. Therefore, to that extent the invocation of the provisions u/s 263 are not in dispute. As regards the second issue though the Pr. CIT has taken up the issue of disallowance u/s 40A(3) as well as the genuineness of the purchase however, it is manifest from the record and particularly from the assessment record and order sheet entries that the AO has not even taken up the issue of disallowance u/s 40A(3) of the Act. It is manifest from the record and particularly from the assessment order and order sheet entries that the AO has not taken up this issue of disallowance u/s 40A(3) of the Act and hence, there is a complete lack of inquiry on the part of the AO so far as this issue is concerned. Whether the assessee would take the benefit of exception under Rule 6DD is again a matter of verification and examination of the relevant facts and record which the AO has not at all taken into account despite knowing the factum of cash purchase of more than Rs. 14.90 crore as the AO did not raise any query on this issue. Hence, there is complete lack of inquiry on the part of the AO on this issue and consequently the Pr. CIT has rightly exercised his jurisdiction u/s 263 to revise the assessment order to the extent of allowability of the claim in the light of the provisions section 40A(3) of the Act. Thus order of AO is erroneous being contrary to the provisions of section 43B as well as 40A(3) and therefore, in absence of any inquiry on these two issues the order of the AO has been rightly set aside by the Pr. CIT. Accordingly we do not find any error or illegality in the impugned order of the Pr. CIT. The decisions relied upon by the Ld.AR of the assessee are applicable only in a situation where the AO has conducted an inquiry on an issue and taken a possible view whereas in the case of the assessee there is a complete lack of inquiry on the part of the AO on the two issues; (i) Disallowance u/s 43B (ii) u/s 40A(3) and therefore, the said judgments would not help the case of the assessee. Appeal of the assessee is dismissed.
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