AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2024 (12) TMI 695
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances of the case 4. For that the Principal Commissioner of Income Tax failed to appreciate that there was no error or prejudice much less both to warrant the invocation of the powers conferred u/s. 263. 5. For that the Principal Commissioner of Income Tax failed to appreciate that 263 proceedings cannot be initiated in the instant case. 6. For that the Principal Commissioner of Income Tax failed to appreciate that the revision proceedings cannot be initiated as the conditions stipulated u/s. 263 were not satisfied in the facts and circumstance of the case. 7. For that the Principal Commissioner of Income Tax failed to appreciate that the Assessing Officer has taken one of the views permissible in law. 8. For that the Principal Commissioner of Income Tax ought not to have directed verification of 90% of purchases when the Assessing Officer has already made 10% disallowance thereof. 9. For that the Principal Commissioner of Income Tax failed to consider the explanations and submissions filed by the appellant during the course of revisionary proceedings. 3. The only issue arises from the above grounds of assessee is revisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er: "The assessee explains that the nature of business is such that it is not possible to maintain day to day stock register showing quantitative details. Hence these details have not been provided." 5.3 In view of the above discussions, the business purchase for an amount of Rs. 102,43,73,377/- remains unexplained and is being treated as "bogus". As the entire amount of Rs. 102,43,73,377/- couldn't be disallowed, hence, to protect the interest of revenue, a moderate disallowance of business purchase amounting to Rs. 10,24,37,338/- (10% of the total business purchase incurred of Rs. 102,43,73,377/- is hereby made and is treated as unexplained expenditure u/s. 69C of-the IT Act and the same is added back to the total income of the assessee under the head "Income from other sources". Penalty u/s 271AAC(1) is being initiated for under-reporting of income. Tax shall be calculated according to section 115BBE of the Income Tax Act, 1961. 6. Disallowances u/s. 36(1)(va) r.w.s 2(24)(x): On perusal of the audit report in Form 3CB, it is noticed that the assessee has made delayed payments in respect of employee's contribution to PF/ESIC. The said payments h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vered by the such expenditure may be deemed to be the income of the assessee. Hence, there is no provision in the above section to tax the unexplained expenditure on percentage basis. Hence, the assessee was asked to show cause why balance expenditure of Rs. 102,43,73,377 minus Rs. 10,24,37,338 should not be brought to tax." The PCIT accordingly passed revision order u/s. 263 of the Act dated 01.03.2024 directing the AO to verify the following issue i) Disallowance of entire purchases u/s. 69C. Aggrieved, assessee preferred appeal before the Tribunal. 6. The Ld.AR for the assessee assailing the action of the Ld.PCIT stated that the proper verification of issue and necessary verification was not done by the AO before passing the order u/s. 143(3) of the Act was baseless, since the very reason for selection of 'complete scrutiny' under CASS was as under : "Assessee has made substantial purchases from suppliers who are either Non-filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return". The Ld.AR filed a paper book consisting of 103 pages as detailed below: S.No Particulars ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... purchases by the AO. Further, the assessee had stated that the payments to suppliers are duly made by account payee cheques or through electronic modes and reflected in the bank statements. These supplies have been declared as turnover in their respective GST returns by the suppliers, which has been extracted from the GST portal to prove the genuineness of purchases. The assessee also had filed the entire list of suppliers along with their GST regn. Nos. and addresses (PB page No.18 to 24) by uploading in the Income Tax Portal. - List of purchases filed on 05/04/2021 - Bank statements of Standard Chartered bank, Karur Vysya Bank, State Bank of India, Kotak Mahindra Bank, Indian Overaseas bank, Axis Bank, Indus Ind Bank - Purchase register, Debit Notes register, GSTR 2A from July 2017 to March 2018 onwards - Copies of Purchase Invoices 9. The Ld. AR stated that, the AO again issued notice u/s. 142(1) of the Act on 08/06/2021 seeking the details in annexure to be furnished by the assessee on or before 11/06/2021. "1. Details of unregistered purchases from total purchases made during the year. 2. As per information available, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from suppliers who are either non-filer(s) or have filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return. In this regard, please furnish list of suppliers to whom such purchases has been made by you during the year We wish to reiterate that it is our company policy to purchase goods from registered suppliers only. However, before the applicability of GST many of our supplies like textiles sarees etc., were exempt from VAT/CST and the suppliers were not required to be registered under VAT/CST Act. Post applicability of GST from 01-07-2017, almost all of our purchases are from registered dealer as evident from GSTR- 2A downloaded from the GSTN Portal and submitted vide our reply dated 19th April, 2021. We are not aware N of any suppliers who have not filed their Business ITR or shown substantially lower turnover in ITR as compared to turnover shown in their GSTR 1 return, since that information is neither available with us nor we are concerned about the same. Based on the above submission, we request you to complete the assessment and oblige. In case you require any further information/clarification, we shal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elvinator of India Ltd (256 ITR 1) (Delhi FB), was upheld by the Supreme court in Commissioner of Income Tax Vs. Kelvinator Of India Ltd ( 320 ITR 561)(SC). In light of the above arguments, the Ld.AR prayed for setting aside the order of the Ld.PCIT. 15. Per contra, the Ld.DR relied on the order of the Ld.PCIT and prayed for upholding the same by dismissing the appeal of the assessee. 16. We have heard the rival contentions and perused the orders of the AO and that of the PCIT along with the various case laws referred by the ld.AR to claim that the order u/s. 263 of the Ld.PCIT is against the law and facts. The jurisdiction u/s 263 can be exercised only when both the following conditions are satisfied: (i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interest of the revenue, These conditions are conjunctive. In the instant case, there was nothing erroneous and prejudicial. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible as held in the case of Malabar Industrial Company Ltd Vs.CIT (243 ITR 83) (SC) and CIT Vs. Green World Corporatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and prejudicial to the interest of the revenue. Accordingly, the assessment order is hereby PARTLY SET ASIDE u/s 263 of the Act, with a direction to the Assessing Officer to examine 90% of the purchases, as discussed in the order, during the Accounting Year in question and pass a fresh order after granting opportunity to the assessee, within the stipulated time. 8. This is in respect of 90% of purchases which are under verification in Revision proceedings. For the balance 10% of purchases addition made in the Assessment order, the assessee is on appeal. Hence, the Assessment order is partially set aside to verify the 90% purchases for which revisionary proceedings have been initiated. Further, the AO has to clearly bring out whether the addition is under section 68 or 37 and also the AO must clearly bring out the reason for the same (in view of the observations of local committee for grievances against high pitched assessment). 8.1 Further. the Assessing Officer is also directed to take the decision of the High pitched committee into the account issued with reference to the addition made by the AO being 10% of the purchases. As the verification may get linked to ....