2021 (6) TMI 70 - AT - Income Tax

Tribunal Overturns PCIT's Section 263 Decision

Amitanil Modi (HUF) Versus Pr. CIT-33, Mumbai

The Tribunal found that the Principal Commissioner of Income Tax's invocation of section 263 was not justified as the Assessing Officer had already ... Revision u/s 263 - Bogus purchases - HELD THAT:- The Jurisdictional High Court in the case of CIT vs Nirav Mody [2016 (6) TMI 1004 - BOMBAY HIGH COURT] has held that when a particular view has been taken by the AO, then on the same reasons, the case of the assessee is not required to be reopened in view of the provisions u/s 263 of the Act CIT vs Amitabh Bachchan,[2016 (5) TMI 493 - SUPREME COURT] has also speaks that where a specific view has been taken by the AO then interference u/s 263 is not permissible. Maharashtra High Court in the case of CIT vs Gabriel India Ltd.[1993 (4) TMI 55 - BOMBAY HIGH COURT] has also speaks the same thing in same sense. The facts of the case relied by the Ld. DR i.e. Sphinx Precision Ltd. Vs. CIT, Shimla [2006 (11) TMI 236 - ITAT CHANDIGARH-A] is quiet distinguishable from the facts of the present case being in this case, there was an error in calculation of deduction u/s 80HHC and an error in calculation of income u/s 115JA and the order of the AO was silent on these issues. Taking into account all these facts and circumstances and considering these facts that the issue has not been considered by the AO, while passing order dated 07/12/2016. Therefore, there is no justification invoking the provision u/s 263 of the Act in accordance with law - Decided in favour of assessee. Issues Involved:1. Validity of the Principal Commissioner of Income Tax (PCIT) invoking section 263 of the Income Tax Act, 1961.2. Justification of the addition percentage applied to bogus purchases.Detailed Analysis:Issue 1: Validity of invoking section 263 of the Income Tax Act, 1961The assessee challenged the validity of the PCIT's invocation of section 263, arguing that the Assessing Officer (AO) had already examined the issue of bogus purchases and made an addition of 2.28% of the total purchases to the income. The PCIT, however, directed the AO to consider an addition of 12.5%, which the assessee contended was not justified. The assessee supported their contention by referencing several judicial precedents, including CIT vs. Nirav Mody, CIT vs. Amitabh Bachchan, and CIT vs. Gabriel India Ltd., which establish that if a specific view has been taken by the AO, interference under section 263 is not permissible.The Revenue, on the other hand, argued that the provisions of section 263 were rightly invoked by the PCIT, citing the case of Sphinx Precision Ltd. vs. CIT, Shimla. The Tribunal reviewed the assessment order dated 07/12/2016, which indicated that the AO had already considered the issue of bogus purchases and added 2.28% of the total bogus purchases to the income. The Tribunal noted that the PCIT invoked section 263 based on information that the assessee was involved in taking bogus purchase entries and that the AO had not made proper inquiries or verification before passing the assessment order.The Tribunal referred to the ITAT Pune Bench's decision in ITA No. 859/Pun/2018, which emphasized that if the AO had already examined the issue and made a conscious decision, the invocation of section 263 was not justified. The Tribunal also cited the jurisdictional High Court's decision in CIT vs. Nirav Mody, which held that when a specific view has been taken by the AO, the case should not be reopened under section 263.Issue 2: Justification of the addition percentage applied to bogus purchasesThe PCIT directed the AO to reconsider the addition percentage applied to bogus purchases, suggesting an increase from 2.28% to 12.5%. The Tribunal reviewed the AO's assessment, which had already considered the gross profit (GP) ratio of 2.28% on the total bogus purchases. The Tribunal noted that the PCIT's directive was based on judgments such as N.K. Proteins vs. DCIT, where the Supreme Court held that addition on the basis of undisclosed income could not be restricted to a certain percentage when the entire transaction was found bogus.However, the Tribunal found that the AO had already examined the facts and made a conscious decision to apply a 2.28% addition. The Tribunal emphasized that just because the PCIT's opinion differed from the AO's, it did not grant the PCIT the power to revise the order under section 263. The Tribunal cited the case of CIT vs. Gabriel India Ltd., which supports the principle that if the AO has taken a specific view, interference under section 263 is not permissible.Conclusion:The Tribunal concluded that the issue of bogus purchases had already been considered by the AO, and the invocation of section 263 by the PCIT was not justified. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee, thereby affirming the AO's original assessment order with the 2.28% addition on bogus purchases.Order Pronounced:The appeal of the assessee was allowed, and the order was pronounced in the open court on 31/05/2021.