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TMI Blog2024 (12) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax failed to appreciate that there was no error or prejudice much less both to warrant the invocation of the powers conferred u/s. 263. 5. For that the Principal Commissioner of Income Tax failed to appreciate that 263 proceedings cannot be initiated in the instant case. 6. For that the Principal Commissioner of Income Tax failed to appreciate that the revision proceedings cannot be initiated as the conditions stipulated u/s. 263 were not satisfied in the facts and circumstance of the case. 7. For that the Principal Commissioner of Income Tax failed to appreciate that the Assessing Officer has taken one of the views permissible in law. 8. For that the Principal Commissioner of Income Tax ought not to have directed verification of 90% of purchases when the Assessing Officer has already made 10% disallowance thereof. 9. For that the Principal Commissioner of Income Tax failed to consider the explanations and submissions filed by the appellant during the course of revisionary proceedings. 3. The only issue arises from the above grounds of assessee is revision order passed by the ld.PCIT u/s. 263 of the Act has failed to satisfy the twin conditions i.e., for order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details. Hence these details have not been provided." 5.3 In view of the above discussions, the business purchase for an amount of Rs. 102,43,73,377/- remains unexplained and is being treated as "bogus". As the entire amount of Rs. 102,43,73,377/- couldn't be disallowed, hence, to protect the interest of revenue, a moderate disallowance of business purchase amounting to Rs. 10,24,37,338/- (10% of the total business purchase incurred of Rs. 102,43,73,377/- is hereby made and is treated as unexplained expenditure u/s. 69C of-the IT Act and the same is added back to the total income of the assessee under the head "Income from other sources". Penalty u/s 271AAC(1) is being initiated for under-reporting of income. Tax shall be calculated according to section 115BBE of the Income Tax Act, 1961. 6. Disallowances u/s. 36(1)(va) r.w.s 2(24)(x): On perusal of the audit report in Form 3CB, it is noticed that the assessee has made delayed payments in respect of employee's contribution to PF/ESIC. The said payments have not been deposited by the due dates prescribed as per the provisions of the Employee's State Insurance Act. As per the proviso to section 2(24)(x) the employee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure of Rs. 102,43,73,377 minus Rs. 10,24,37,338 should not be brought to tax." The PCIT accordingly passed revision order u/s. 263 of the Act dated 01.03.2024 directing the AO to verify the following issue i) Disallowance of entire purchases u/s. 69C. Aggrieved, assessee preferred appeal before the Tribunal. 6. The Ld.AR for the assessee assailing the action of the Ld.PCIT stated that the proper verification of issue and necessary verification was not done by the AO before passing the order u/s. 143(3) of the Act was baseless, since the very reason for selection of 'complete scrutiny' under CASS was as under : "Assessee has made substantial purchases from suppliers who are either Non-filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return". The Ld.AR filed a paper book consisting of 103 pages as detailed below: S.No Particulars Page no. 1 Declaration from authorized representative 1 2 Copy of show cause notice issued by Principal Commissioner of Income Tax dated 31.01.2023 2-4 3 Copy of 142(1) notice dated 06.01.2021 5-8 4 Copy of reply filed before NFAC dated 10.03.2021 9-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppliers along with their GST regn. Nos. and addresses (PB page No.18 to 24) by uploading in the Income Tax Portal. - List of purchases filed on 05/04/2021 - Bank statements of Standard Chartered bank, Karur Vysya Bank, State Bank of India, Kotak Mahindra Bank, Indian Overaseas bank, Axis Bank, Indus Ind Bank - Purchase register, Debit Notes register, GSTR 2A from July 2017 to March 2018 onwards - Copies of Purchase Invoices 9. The Ld. AR stated that, the AO again issued notice u/s. 142(1) of the Act on 08/06/2021 seeking the details in annexure to be furnished by the assessee on or before 11/06/2021. "1. Details of unregistered purchases from total purchases made during the year. 2. As per information available, it is found that you have made substantial purchases from suppliers who are either non-filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return. In this regard, please furnish list of suppliers to whom such purchases has been made by you during the year." 10. The assessee filed the response by providing the following details on 19/07/2021 by uploading the list of Purchases from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not required to be registered under VAT/CST Act. Post applicability of GST from 01-07-2017, almost all of our purchases are from registered dealer as evident from GSTR- 2A downloaded from the GSTN Portal and submitted vide our reply dated 19th April, 2021. We are not aware N of any suppliers who have not filed their Business ITR or shown substantially lower turnover in ITR as compared to turnover shown in their GSTR 1 return, since that information is neither available with us nor we are concerned about the same. Based on the above submission, we request you to complete the assessment and oblige. In case you require any further information/clarification, we shall be glad to provide the same on hearing from you." 11. On perusal of replies filed by the assessee, the AO - NFAC again had issued a show causes notice dated 18/08/2021 and 01/09/2021 and in response the assessee had filed the details through income tax portal on 23/08/2021 and 01/09/2021 explaining the entire purchases and other details called for. 12. The Ld.AR summed up his arguments stating that the case selected for complete scrutiny for the specific reason to verify the purchases and the same has been called fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order u/s. 263 of the Ld.PCIT is against the law and facts. The jurisdiction u/s 263 can be exercised only when both the following conditions are satisfied: (i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interest of the revenue, These conditions are conjunctive. In the instant case, there was nothing erroneous and prejudicial. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible as held in the case of Malabar Industrial Company Ltd Vs.CIT (243 ITR 83) (SC) and CIT Vs. Green World Corporation (314 ITR 81)(SC). 17. The Principal CIT can invoke section 263 if on examination of records he forms an opinion that the order passed by the Assessing Authority is erroneous in so far as it is prejudicial to the interest of the revenue. The learned Principal CIT, failed to note that a revision order cannot be passed against an order of assessment merely on the basis that in his opinion, an alternate view is possible. The PCIT, cannot substitute his view in place of that of the Assessing officer merely because the Principal Commissioner of Income Tax thinks that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s partially set aside to verify the 90% purchases for which revisionary proceedings have been initiated. Further, the AO has to clearly bring out whether the addition is under section 68 or 37 and also the AO must clearly bring out the reason for the same (in view of the observations of local committee for grievances against high pitched assessment). 8.1 Further. the Assessing Officer is also directed to take the decision of the High pitched committee into the account issued with reference to the addition made by the AO being 10% of the purchases. As the verification may get linked to the appeal also (for the balance 10% of purchases) the AO is directed to keep the CIT (Appeals) informed." 19. We noted that the PCIT has simpliciter carried out unnecessary exercise by obtaining the information from the AO's order in assessment records, which are entirely considered by the AO in his original assessment u/s. 143(3) of the Act. Further, the PCIT without appreciating the fact that the assessee has achieved a turnover of Rs. 132,12,33,622/- (Net of GST), proposed to make a disallowance of entire purchases of Rs. 102,43,73,377/- is against the basic principal of business. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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