Tribunal overturns Tax Commissioner's revisional order, upholds Assessing Officer's decision

The Tribunal ruled in favor of the assessee, setting aside the revisional order issued by the Principal Commissioner of Income Tax. The Tribunal found that the original assessment by the Assessing Officer was reasonable and based on proper inquiries. It concluded that the revisional jurisdiction was improperly exercised as it sought to substitute the AO's view with that of the Principal Commissioner, contrary to the purpose of Section 263. The Tribunal emphasized that a plausible view taken by the AO cannot be considered erroneous, ultimately allowing the assessee's appeal.

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Issues:
Challenge to invocation of revisional jurisdiction u/s 263 by Ld. Principal Commissioner of Income Tax-32, Mumbai for AY 2014-15.

Analysis:
1. The assessee challenged the revision u/s.263, arguing that the assessment order u/s.143(3) was not erroneous or prejudicial to revenue. The appellant contended that the AO had raised queries on alleged bogus purchases during assessment, and after considering evidence, made a 1.6% addition. The appellant claimed the revision was a change of opinion and violated the law. The appellant also argued that directions given to the AO in the revision order were already complied with during assessment proceedings. The appellant further contended that the revisional jurisdiction should not substitute the AO's view with the Principal Commissioner's view, as it goes against the purpose of Section 263.

2. The Sr. Counsel for the assessee argued that the issue under Sec. 263 was already addressed by the AO during original assessment, and a plausible view was taken after due consideration. The Counsel cited the Tribunal's decision in the assessee's case for AY 2009-10 where a similar revisional order was quashed. The CIT-DR argued that the AO failed to conduct proper inquiries as per Explanation-2 to Sec.263, justifying the exercise of revisional jurisdiction.

3. The Tribunal examined the facts where the assessee, a diamond manufacturing and trading firm, faced an estimated addition of 1.6% for alleged bogus purchases from entities linked to an entry provider group. The AO found the assessee failed to prove the purchases' genuineness, leading to the addition. The AO estimated the suppressed profit based on VAT rates and judicial precedents. The Pr. CIT later opined the order was erroneous, directing a 100% addition, citing a Supreme Court case. The Tribunal found the AO had considered all evidence and made a reasonable estimation, in line with judicial precedents, and ruled that the revision was not justified.

4. The Tribunal referred to a previous case where the revisional jurisdiction was challenged and quashed, emphasizing that a possible view taken by the AO cannot be deemed erroneous. The Tribunal concluded that the revisional jurisdiction was invalidly exercised in the current case, following the same reasoning as the previous decision. Consequently, the revisional order was set aside, and the appeal was allowed.

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