TMI Blog2016 (9) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gross Profit from one claimed by the assessee in the original return. Only on this ground, the order of assessment can be stated to be neither erroneous nor prejudicial to the Revenue. If the Commissioner had an angle of further inquiry to be made with respect to purchases from party unconnected to F.H. Rizvi, such angle has not come on record. The notice issued by the Commissioner does not suggest that since it was found that all purchases from F.H. Rizvi by the petitioner were bogus, the Assessing Officer could have inquired into the genuineness of the remaining purchases also. All that the Commissioner conveyed by way of reasons in the impugned notice was that the Assessing Officer did not bear in mind the Gross Profit ratio ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions etc. For the assessment year 1993-1994, the petitioner filed the return of income on 29.12.1993 declaring a total loss of ₹ 1.29 crores (rounded off). The Assessing Officer confirmed the assessment under section 143(3) of the Income Tax Act ( the Act for short) on 29.3.1995 and assessed loss at ₹ 22 lacs (rounded off). The assessee filed appeal against such order. CIT(Appeals) by an order dated 24.3.1999 assessed the loss at ₹ 1.26 crores and thereby substantially allowing the appeal of the assessee. While these assessment proceedings thus achieved finality, the department in December 1999 carried out search operations on one F.H. Rizvi of Mumbai. During search operations, the Revenue collected documents and stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had recorded his reasons for revising the order, relevant portion of which reads as under : On going through the records of the incometax assessment proceedings in your case for assessment year 1993-1994 and 19951996 it is noticed that the assessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the IT Act dtd. 26.3.2002 for the AY 9394 9596 is erroneous in so far as it is prejudicial to the interest of the revenue on the following ground : Since bogus purchases from Shri F.H. Rizvi and h is associates, a bogus concerns in the nature of nonexisting agencies, were disallowed and added to total income, G.P. should invariably be increased and hence the difference of percentage of G.P. is required to be adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, opposed the petition contending that the Commissioner had recorded proper reasons. The Assessing Officer had not ascertained the impact of fluctuating Gross Profit ratio. The purchases made by the assessee from F.H. Rizvi were found to be bogus. The Commissioner should therefore, be permitted to proceed further with the impugned notice. 7. As noted, once the assessment of the petitioner for the assessment year 1993-1994 was completed and even the appellate order was passed, the department came upon certain materials during survey at the premises of one F.H. Rizvi from which it could be gathered that the purchases made by the petitioner from the said person were bogus. On such basis, the notice for reopening was issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure and added back the full sum of ₹ 62.75 lacs shown to have been expended by the assessee for purchases from F.H. Rizvi concerns. There was no further material with the Assessing Officer or even possible avenue for inquiring whether remaining purchases of assessee were genuine or not. There was thereafter, no further scope of making addition in the guise of adjusting the Gross Profit ratio. The disallowance itself would automatically reflect in increasing the Gross Profit from one claimed by the assessee in the original return. Only on this ground, the order of assessment can be stated to be neither erroneous nor prejudicial to the Revenue. If the Commissioner had an angle of further inquiry to be made with respect to purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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