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2016 (9) TMI 1197 - GUJARAT HIGH COURT

2016 (9) TMI 1197 - GUJARAT HIGH COURT - [2017] 394 ITR 179 - Revision u/s 263 - Gross Profit ratio - disallowance of expenditure - additions on account of bogus purchases - Held that:- Assessing Officer disallowed the entire expenditure 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 as .....

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connected 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 element. It is true that increasing the Gross Pro .....

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ld have automatic and direct impact on bringing up the Gross Profit ratio of the assessee during such year. Without there being any further material suggesting that other purchases were also not genuine, further increase of the Gross Profit ratio, was an option simply not available with the Assessing Officer. - SPECIAL CIVIL APPLICATION NO. 5813 of 2004 With SPECIAL CIVIL APPLICATION NO. 5815 of 2004 - Dated:- 26-9-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR B S SOP .....

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f 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 .....

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essment on 29.11.2000. In such reasons, he had recorded at considerable length the materials at the command of the department to prima facie suggest that the purchases made by the assessee from F.H. Rizvi were bogus. During the assessment, pursuant to such notice, the Assessing Officer confronted the assessee with various purchases made from F.H. Rizvi and also fluctuations in Gross Profit ratio of the company from year to year. Despite opposition from the assessee, the Assessing Officer held th .....

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rchases. The Commissioner desired to take such order of assessment in revision, for which purpose, he issued the impugned notice dated 22.1.2004. In the notice itself, he 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 I .....

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therefore intend to make an order under section 263 of the IT Act either setting aside the AO's order under section 143(3) read with section 147 dtd 26.3.2002 or modifying the said order so as to rectify the aforesaid error for both assessment yeas. 3. Pursuant to such notice, the Commissioner passed order dated 1.3.2004 in which he directed the Assessing Officer to investigate the angle of increase in Gross Profit ratio. 4. The petitioner has challenged such notice on multiple grounds. Fact .....

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therefore, could not have invoked the powers under section 263 of the Act. 3) The reasons recorded by the Commissioner were totally incorrect that once the Assessing Officer had disallowed the entire expenditure, the question of thereafter increasing the Gross Profit ratio would not arise. The addition would have automatic impact on the Gross Profit ratio. 6. Mr. Parikh for the Revenue, on the other hand, opposed the petition contending that the Commissioner had recorded proper reasons. The Ass .....

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be gathered that the purchases made by the petitioner from the said person were bogus. On such basis, the notice for reopening was issued. In the reasons recorded, the Assessing Officer referred to such search in case of F.H. Rizvi and the materials collected by the department during such search operations. Allegedly, the assessee had made purchases from three concerns i.e. F.F. Pharmaceuticals, R.K. Agencies and R.V. Chem and all these purchases, according to the Assessing Officer, were bogus. .....

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ods. Both these defences of the assessee were rejected by the Assessing Officer. He held that the statement of F.H. Rizvi included sales other than those made to Sun Pharma and that the assessee failed to establish that purchases from concerns of F.H. Rizvi were genuine. Interalia on such grounds, the Assessing Officer disallowed the entire expenditure and added back the entire sum of ₹ 62.75 lacs. The contention of the assessee that if at all the purchases were bogus even the sales should .....

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