2023 (4) TMI 279 - AT - Income Tax

Tribunal quashes PCIT order under Section 263 of Income Tax Act, allowing assessee's appeal

Subhash Chander Gupta Versus The ITO, Ward 7 (3) Ludhiana

Subhash Chander Gupta Versus The ITO, Ward 7 (3) Ludhiana - TMI Issues Involved:1. Legitimacy of the purchases from M/s Yuvraj Enterprises and M/s Shakti Enterprises.2. Jurisdiction of PCIT under Section 263 of the Income Tax Act after settlement under the Direct Tax Vivad Se Vishwas Act, 2020.3. Adequacy of the Assessing Officer's investigation during the assessment proceedings.Summary:Legitimacy of the Purchases:The Principal Commissioner of Income Tax (PCIT) issued a show cause notice under Section 263 of the Income Tax Act, 1961, stating that the assessee's purchases from M/s Yuvraj Enterprises and M/s Shakti Enterprises were not genuine. The PCIT noted that the Assessing Officer (AO) had reopened the case under Section 147 and completed the assessment with an addition of Rs.1,48,165 by applying a GP rate of 1.03% on total bogus purchases of Rs.1,43,85,000. The statement of Shri Gaurav Pathak/Thakur, proprietor of the two enterprises, confirmed that no actual business was conducted, and the amounts received by cheque were returned in cash. The PCIT concluded that the AO had not conducted adequate enquiries and allowed expenses without verification, rendering the assessment order erroneous and prejudicial to the interests of the Revenue.Jurisdiction of PCIT under Section 263:The assessee contended that the issue had already been settled under the Direct Tax Vivad Se Vishwas Act, 2020, and could not be revisited under Section 263. The Tribunal noted that a Certificate in Form No.5 was issued under the Vivad Se Vishwas Act, confirming the full and final settlement of tax arrears. Section 5(3) of the Vivad Se Vishwas Act explicitly states that no matter covered by such an order shall be reopened in any other proceedings under the Income Tax Act or any other law. The Tribunal referred to multiple judicial precedents, including 'Gopalkrishan Rajkumar vs. PCIT' and 'PCIT vs. Manju Osatwal,' which held that proceedings initiated under Section 263 after a settlement under the Vivad Se Vishwas Act are not sustainable.Adequacy of AO's Investigation:The Tribunal observed that the AO had conducted a thorough enquiry into the purchases in question and made an addition by applying a GP rate. The purchases were entered in the stock register maintained by the assessee, and the AO had taken a plausible view. Therefore, the PCIT's invocation of Section 263 was not justified. The Tribunal also noted that the issue of purchases had been subject to appeal before the CIT(A), and the PCIT could not assume jurisdiction under Section 263 for matters already considered in the appeal.Conclusion:The Tribunal quashed the order passed by the PCIT under Section 263 of the Income Tax Act, holding that the matter had been conclusively settled under the Direct Tax Vivad Se Vishwas Act, 2020, and the AO had conducted adequate enquiries during the assessment proceedings. The appeal of the assessee was allowed.