Revision under Section 263 on alleged bogus purchases fails where AO took a plausible view; revision set aside

Revision under section 263 challenged the assessment made on alleged bogus purchases; the tribunal held that where the assessing officer issued statutory notices, called for information from third parties, considered submissions and adopted a permissible view, the revisional authority cannot substitute that plausible view by declaring the order erroneous or prejudicial to revenue. The revisional proceedings therefore amounted to a wrongful assumption of jurisdiction, and the revision was set aside. Reference was made to the principle that an AO's plausible view is not to be overturned lightly, resulting in relief to the assessee.

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Issues: Whether the Principal Commissioner of Income Tax rightly exercised jurisdiction under section 263 of the Income-tax Act, 1961 by holding the assessment for A.Y. 2021-22 to be erroneous and prejudicial to the interests of Revenue under Explanation 2 clauses (b) and (d) to section 263 in respect of alleged bogus/unverified purchases.

Analysis: The assessment record shows issuance of statutory notices under sections 142(1) and 143(2), issuance of notices under section 133(6) to suppliers, production of purchase invoices, bank statements and supplier ledgers by the assessee, and active participation in assessment and appellate proceedings. Legal principles require that jurisdiction under section 263 may be exercised only where there is lack of inquiry or the view taken by the assessing officer is unsustainable in law; mere disagreement with a permissible view or estimation does not sustain revisional jurisdiction. Recent authorities relied upon by the revisional authority were examined and found factually distinguishable on account of non-cooperation, ex-parte assessments or lack of evidentiary support in those cases. The assessment officer had adopted one of the courses permissible in law after making inquiries; inadequacy of inquiry alone is not a ground for invoking section 263 where inquiries were in fact conducted and a plausible view was taken.

Conclusion: The exercise of revisional jurisdiction under section 263 is not sustainable; the impugned revision order is set aside and the appeal is allowed in favour of the assessee.

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