2026 (2) TMI 152 - AT - Income Tax

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 ... Revision u/s 263 - Estimation of income on bogus purchases - lack of inquiry v/s inadequacy of inquiry - phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the AO HELD THAT:- We find force in the argument of the assessee that the plausible view in the factual matrix of the case having been taken by the AO cannot be substituted by the Ld. PCIT by assuming Jurisdiction u/s 263 of the Act - See Malabar Industrial Co. Ltd [2000 (2) TMI 10 - SUPREME COURT] As necessary statutory notices u/s 142(1) and 143(2) of the Act were issued along with show cause notice to which detail submission were made by the assessee. AO has also issued notice u/s 133(6) of the Act to the various entities from whom the alleged bogus purchases were made and after due deliberation and consideration of all the submissions, the assessment order was passed wherein the reply of the assessee was not considered and instead of granting relief, disallowance of expenditure spent on purchases was made and as such clause b of explanation 2 to Section 263 of the Act does not get attracted. We are of the considered opinion that the Ld. PCIT has assumed the Jurisdiction wrongly and his observation that the assessment order is hit by Clause b and d of Explanation 2 of Section 263 of the Act are found to be not supported by facts and the law. AO has adopted one of the courses permissible in law and there is nothing brought to our notice which may suggests that the view taken by the AO is unsustainable in law. Impugned order is not sustainable and accordingly set aside. The question framed is accordingly decided in negative i.e. against the revenue and in favour of the assessee. 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.