2022 (6) TMI 188 - AT - Income Tax

Tribunal overturns tax revision order for 2010-11 and 2011-12 assessments.

The Tribunal set aside the revision order passed by the Principal Commissioner of Income Tax under Section 263 for assessment years 2010-11 and 2011-12. ... Revision u/s 263 - bogus purchase - PCIT concluded that assessee has failed to establish the nexus between the purchases and sales during this proceedings - HELD THAT:- PCIT merely alleged that the AO has not conducted any enquiry or made any addition relating to the issues highlighted in information received from Investigation Wing, Mumbai. PCIT also did not mention as to how the issue of bogus purchase from aforesaid 2 entities, in respect of which assessee is alleged to be the beneficiary, is proved in the present case vis-à-vis the details filed by the assessee before the Assessing Officer and also produced before the learned PCIT. It is also not the claim of Revenue that the details filed before the Assessing Officer during the reassessment proceedings as well as during proceedings under section 153A of the Act were not sufficient to decide whether the purchases made by the assessee from the aforesaid 2 entities were bogus. Merely by referring to clause (a) and (b) of Explanation – 2 to section 263 of the Act, the learned PCIT alleged that the assessment order is erroneous insofar as it is prejudicial to the interest of revenue. Neither in revision proceedings under section 263 nor during the hearing before us, it has been pointed out as to what enquiry was not conducted by the Assessing Officer with regard to the issue of bogus purchase, which can lead to the conclusion that the assessment order is erroneous and prejudicial to the interest of revenue. Further, during the hearing before us it was submitted by the learned DR that mere filing of submissions by the assessee would not lead to the conclusion that same has been considered by the Assessing Officer while passing the assessment order. Thus, in view of the above once submission/reply filed by the assessee, pursuant to enquiry by the Assessing Officer, are accepted by the Assessing Officer then finding on that particular aspect is not necessary to be recorded by the Assessing Officer. Further, it has not been denied in the present case that though the proceedings under section 147 of the Act may have been abated, as a result of search action, all the information filed by the assessee in response to notice(s) under section 143 (2) of the Act, during reassessment proceedings, were available with the Assessing Officer. Therefore, we are of the considered opinion that clauses (a) and (b) of Explanation–2 to section 263 of the Act are not applicable to the facts of the present case and thus the revision order passed by the learned PCIT under section 263 of the Act is set aside. - Decided in favour of assessee. Issues Involved:1. Legitimacy of the Principal Commissioner of Income Tax (PCIT) invoking Section 263 of the Income Tax Act.2. Validity of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act.3. Sufficiency of enquiries conducted by the Assessing Officer (AO) regarding alleged bogus purchases.4. Applicability of Explanation 2 to Section 263 of the Income Tax Act.Detailed Analysis:Issue 1: Legitimacy of the Principal Commissioner of Income Tax (PCIT) invoking Section 263 of the Income Tax Act.The assessee challenged the PCIT's order dated 09.03.2021, issued under Section 263 of the Income Tax Act, 1961, which set aside the assessment order and directed the AO to undertake assessment proceedings de novo. The PCIT argued that the AO did not conduct necessary enquiries regarding the alleged bogus purchases from Minal Gems and Jewel Diam, thus rendering the assessment order erroneous and prejudicial to the interests of the Revenue. The assessee contended that all required documents and evidence were provided during the assessment proceedings, and the AO had made proper enquiries, making the invocation of Section 263 unjustified.Issue 2: Validity of the assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act.The initial assessment order was passed under Section 143(3) of the Act, assessing the income of the assessee at Rs. 73,320. Subsequent reassessment proceedings were initiated under Section 147 based on information from the Investigation Wing, alleging that the assessee was a beneficiary of bogus purchases amounting to Rs. 2,31,96,950. The reassessment proceedings were abated due to a search and seizure action under Section 132, and the AO again assessed the income at Rs. 73,320 under Section 143(3) read with Section 153A. The PCIT later invoked Section 263, alleging that the AO did not properly examine the bogus purchase issue.Issue 3: Sufficiency of enquiries conducted by the Assessing Officer (AO) regarding alleged bogus purchases.During the reassessment proceedings, the AO issued notices under Sections 143(2) and 142(1), which the assessee duly responded to by providing detailed documents, including confirmations, affidavits, bank statements, stock registers, export invoices, and purchase invoices. The AO considered these submissions and passed the assessment order. The Tribunal noted that the AO had made reasonable enquiries and that the details provided by the assessee were sufficient to address the issue of bogus purchases. The Tribunal emphasized that the AO is not required to doubt every claim made by the assessee and that a reasonable prima facie scrutiny is sufficient.Issue 4: Applicability of Explanation 2 to Section 263 of the Income Tax Act.The PCIT invoked clauses (a) and (b) of Explanation 2 to Section 263, alleging that the assessment order was erroneous and prejudicial to the interests of the Revenue due to the AO's failure to make necessary enquiries. However, the Tribunal found that the AO had conducted adequate enquiries and that the details provided by the assessee were sufficient. The Tribunal highlighted that the role of the AO is similar to that of a statutory auditor, who is not required to investigate every claim but to conduct a reasonable scrutiny. The Tribunal concluded that the conditions for invoking Explanation 2 to Section 263 were not met in this case.Conclusion:The Tribunal set aside the revision order passed by the PCIT under Section 263 for both assessment years 2010-11 and 2011-12, holding that the AO had conducted sufficient enquiries and that the assessment order was not erroneous or prejudicial to the interests of the Revenue. The appeals by the assessee were allowed.