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TMI Blog2019 (12) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... tting aside the said asst. order for verification of the following issues - a. Genuineness of total URD purchase and determine the quantum of such purchase which is non verifiable. b. The genuineness of the corresponding sales shown by the assessee against such purchases. c. Reasonable estimation of net profit on bogus purchases. 2] The learned Pr. CIT failed to appreciate that the asst. order passed by the learned A.O. was neither erroneous nor prejudicial to the interest of the revenue and hence, the revision order passed law. u/s 263 is bad in 3] The learned Pr. CIT erred in holding that in the course of search, evidences were found of bogus purchases made by the assessee without appreciating that no such evidence was found in the course of search proceedings and therefore, no addition on account of URD purchases was warranted in the absence of any incriminating evidence found as a result of search. 4] The learned Pr. CIT failed to appreciate that since no incriminating evidence was found in the course of search in respect of the purchases made by the assessee, no addition was warranted and hence, there was no reason to revise the asst. order directing the learned A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr.CIT refers to the allegation of bogus purchases (of course, not spoken in the language of VAT defaulter short listed by the Maharashtra Sales Tax Department and mentioned about the estimation of profit @ 12.5% to 25%. At the end of the proceedings, the Pr.CIT discussed these facts in para 13 and its sub-paragraphs. For the sake of completeness, the said para 13 and its subparagraphs are extracted hereunder :- "13. I have carefully considered the facts of the case and submission of the assessee. The point raised by the Ld. A.R that since it is a closed assessment no addition on account of URD purchase can be made by the A.O has no merit. As stated above during the course of search proceeding evidence of bogus purchase in the form of URD purchase was found. Accordingly during post search in-depth investigation of the URD purchases were made and found that the self generated purchase vouchers of URD purchase debited in the books of the company were not verifiable. Hence, the Self generated purchase vouchers were prima facie found to be bogus and incriminating material for the purpose of section 153A of the Income Tax Act. 13.1 The submission of the assessee that there was only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax, (2000) 243 ITR 83 (SC), it was held as under: by the Hon Tale supreme Court - "An incorrect assumption of facts or an application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.... The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue..... The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. On the facts of that case, the matter was decided by Hon'ble Supreme Court in favour of the revenue observing as under:- "The Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer as erroneous & prejudicial to the interest of revenue. 14. Accordingly, the assessment order u/s. 143(3) read with section 153A dtd. 30/12/2016 for AY 2009-10, is hereby set aside to the file of assessing officer to be framed de-novo. While making fresh assessment order the Assessing officer shall take into account the issues already considered/additions made in the order dated 30/12/2016 and complete the assessment after making necessary verification of following issues after giving reasonable opportunity to the assessee- (a) The genuineness of the total URD purchase and determine the quantum of such purchase which are non verifiable. (b) The genuineness of the corresponding sales shown by the assessee company against such purchases. (c) Reasonable estimation of net profit on bogus purchase taking into account the facts and circumstances of case and finding and also in view of the decisions of the various Courts and Tribunals on the issue." 7. From the above extract, it is evident that, in the opinion of the Pr.CIT(C), the order passed by the Assessing Officer u/s 153A r.w.s. 143(3) of the Act constitutes an order with "complete lack of application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into with the said persons. 4. 10.11.2016 421 to 679 - PB No.1 The assessee submitted additional details in respect of the persons from whom URD purchases were made and included in the list of 232 persons. 5. 14.11.2016 681 to 939 - PB The assessee submitted detailed reply clarifying its case stating that the notices sent to most of the customers had been returned, there was no reason to hold that the purchases were made are bogus. 6. 10.11.2016 941 to 958 = BP No.2 The Assessing Officer issued further notice asking the assessee to clarify on certain issues. 7. 03.12.2016 1435 to 1569 - PB No.2 The assessee submitted confirmations of a view customers and also details of the URD purchases made. 8. 14.12.2016 1571 to 1731 - PB No.3 The assessee submitted additional details to the Assessing Officer. 9. 16.12.2016 1733 to 1735 - PB No.3 The Assessing Officer again issued notice asking the assessee to clarify certain issues regarding the URD purchases. 10. 22.12.2016 1743 to 1783 - PB No.3 The assessee gave a chart of the total URD purchases made from 79 customers to whom summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer verified this issue of URD purchases deeply and invoked all the available provisions of the Act before took a view in favour of making addition @ 2% of the URD Purchases made in cash. Further, ld. Counsel for the assessee filed a written submission in this regard to consolidate his stands on the issue. 13. Per contra, ld. DR for the Revenue relied heavily on the order of the Pr.CIT. Brining our attention to the provisions of Explanation 2 of section 263 of the Act, ld. DR submitted that it is the case of making order by the Assessing Officer allowing certain reliefs without enquiring into the claims of the assessee. He also submitted fairly that it is the case of inadequate enquiry. In a way, ld. DR appreciated the facts that it is not a case of complete lack of application of mind. Further, he also agreed to the facts that the said expression do not find place in the provisions of section 263 of the Act. Decision on Validity of Order u/s 263 of the Act 14. We heard both the sides on this limited issue relating to the validity of the jurisdiction of the Pr.CIT. We have analyzed the show cause notice issued by the Pr.CIT and order passed by him. It is an u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made out a case to allege that the Assessing Officer is of complete lack of application of mind. Further, contrary to the same, we find the Assessing Officer and his team invoked the provisions of section 131 of the Act regarding the statement of the URD purchases and examining the Paper Books filed by the assessee on this issue etc before a view is taken about the requirement of making disallowance at the rate of 2% of such URD purchases in cash. Para 11 of this order contains the chronology of events and the Assessing Officer's effects in scrutinizing the same issue relating to URD purchases. Thus, it is a case of taking a view on the matter by the Assessing Officer. Pr.CIT decision to take another possible view, which is not permitted in law. Therefore, from the above, it is not a case for assumption of jurisdiction u/s 263 of the Act in all the appeals under consideration. Accordingly, the relevant grounds raised by the assessee on legal issue in all the seven appeals are allowed. 16. Considering the relief granted to the assessee on legal issue, the adjudication of other merits related grounds becomes academic exercise only. Therefore, the other grounds raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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