TMI Blog2024 (1) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing the assessment order. The Pr. CIT initiated proceedings u/s 263 by issuing notice dated 06.08.2018 which is extracted in the impugned order as under: Please refer to the assessment order dated 22.12.2016 for A. Y. 2014-15 in your case. On perusal of case record in your case for the A.Y. 2014-15 it is noted that you have furnished your return of income declaring total income at Rs. 14,35,950/- agricultural income at Rs. 75,500/- on 29.09.2014. Assessment in your case u/s 143(3) of IT. Act 1961 was completed by the ITO, Khargone vide order dated 22.12.2016 assessing total income at Rs. 15,85,950/- agricultural income at Rs. 75,500/-. 2. The entire records were gone through by me and on perusal and examination of records it appears that the order dated 22.12.2016 for A. Y. 2014-15 is erroneous as also prejudicial to the interest of revenue on account of passing of the order without making proper enquiries/investigations. 3. As per the information available on records, it is noted that you have not paid the central sales tax (CST) amounting to Rs. 90,022/- as a statutory liability till the date under section 139(1) of the IT. Act. In the computation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order. In reply to the show cause notice the assessee accepted the non-allowability of the claim of outstanding CST being not allowable as per the provisions of section 43B of the Act. On the issue of cash purchase of cotton the assessee contended that he produced books of account, bills and vouchers before the AO and the same were verified on text check basis. The Pr. CIT was not impressed with the reply of assessee on both the issues. Accordingly the Pr. CIT has set aside the assessment order being erroneous so far as prejudicial to the interest of revenue as the AO has not made requisite inquiry and allowed these two claims without conducting a proper inquiry. Since on the issue of non-payment of CST was not disputed by the assessee and therefore, to that extent there was no dispute that the said claim is not allowable as per the provisions of section 43B of the Act. On the second issue the Pr. CIT held that the AO has not examined the issue of disallowance u/s 40A(3) as well as the genuineness of the purchase. Accordingly the AO was directed to re- examine the issue and passed the order as per law after making necessary verification and inquiries/investigation. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 282 2. Ranka Jewellers vs. Addl. CIT 395 ITR 148 (Bom) 3. Attar Singh Gurmukh Singh vs. ITO 191 ITR 667 (SC) 4. ITO vs. Jitendra Kumar Mandlecha 23 ITJ 644 5. Malabar Industrial Co. Ltd. 243 ITR 83 6. CIT vs. Nirav Modi 390 ITR 292 (Bombay HC) 7. CIT vs. Gabriel India Ltd. 203 ITR 108 (Bombay HC) 8. Jeevanlal Ltd. vs. ACIT 208 ITR 407 5. On the other hand, Ld. DR has submitted that the assessee has not disputed the issue of outstanding CST to be disallowed u/s 43B of the Act. Therefore, the order of the AO is erroneous being contrary to the provisions of the Act. He has further submitted that the AO has also not considered survey report and material sent by the investigation wing Khargone while passing assessment order. No inquiry was conducted by the AO in the light of the survey report and therefore, the order of the AO is erroneous as there was no inquiry on the part of the AO in the light of the survey report. Ld. DR has referred to para 3 (iii) of the impugned order wherein the Pr. CIT has pointed out that the violation of provisions of section 40A(3) has been reported in the audit report in form 3 CD as item no.21(d)(A) whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h purchase of more than Rs. 14.90 crore and therefore, prima facie it is clear contravention of the provisions of section 40A(3) of the Act. The assessee can claim that his case falls under the exception provided in Rule 6DD however, same is subjected to the verification of the necessary facts and records. Once the assessee has not produced proper bills and vouchers then it is also difficult to accept the contention of the assessee that his case falls under the exception as per Rule 6DD of the Income Tax Rules. In any case when the AO has not taken up this issue of disallowance u/s 40A(3) then there is no material or explanation on behalf of the assessee in respect of this issue as well as the exceptions provided under Rule 6DD of the Act. Ld. AR has referred to survey report as well as the proposal send by the AO to raise an objection against initiation of the proceeding u/s 263 on the basis of borrowed satisfaction. At the outset, we note that the letter dated 19.06.2019 as referred by the Ld. AR was in response to the assessee s request made after filing this appeal before the Tribunal. Therefore, the said letter of the AO giving details of the report of the Investigation Wing N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renders the assessment order erroneous so far as prejudicial to the interest of revenue. 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. In view of the facts and circumstances as discussed above the order of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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