TaxTMI 
TaxTMI 
2025 (12) TMI 673
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....1961 (for short 'the Act') was carried out in the Hawala Traders Group of cases on 31.10.2018. A warrant of authorization u/s. 132 of the Act was issued in the name of Shri Sumit Jindal on 31.10.2018. During the search and seizure action, business premise of Sumit Jindal was also covered. In the search proceedings, certain incriminating documents and materials in the form of soft data were found and seized. During assessment proceedings on perusal of soft data, the AO observed that incriminating documents related to the assessee. Accordingly notice under Section 153C was issued and served on the assessee. Accordingly, assessee filed its original return of income under section 139 on 31.10.2018 declaring taxable income of Rs. 8,94,302. In response to notice u/s. 153C of the Act, assessee filed its return of income on 15.09.2021 declaring the same income as per original return of income. Subsequently, notices u/s. 143(2) and 142(1) were issued and served on the assessee. In response to above notices, assessee filed its written submissions wherein it was submitted that assessee has made purchases from Om Trading Company to the extent of Rs. 1,59,96,530 and the same was sold on profit ....
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.... "5. The assessee submitted reply on 07.01.2025, which is reproduced below: "This is in reply to notice for hearing dated 04.12.2024, whereby your goodself has proposed to revise the order under section 153C dated 21.03.2023 passed by the Assessing Officer, holding the same be erroneous to the extent prejudicial to the interest of revenue. Your honour has raised two issues, one of which reads from the notice as under: "From perusal of assessment record, it is observed that you have made non-genuine purchases Rs. 1,59,96,530/- from M/S Om Trading Company during the year and these purchases have been accounted for through non- genuine bills issued from the dummy entity M/s Om Trading Company of Sh. Sumit Jindal. In statements on oath dated 14.06.2019 and 26.07.2019, Sh. Atul Jain, Director of the assessee company, has admitted that these purchases are bogus and no transport bills are available. As purchases were non-genuine and the bogus transactions of Rs. 1,59,96,530/- were non-genuine, purchases should have been added back u/s. 69C of the Income Tax act, 1961 and taxed as per provisions u/s. 115BBE. However, the AO had added back only Rs. 79,982/- in lieu of com....
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....uine sales bills to the concerns related with M/s Aditya Overseas or M/s Vaksons Metaplast Private Limited. This resulted in increased sales, through which I kept the 00 of bank floating. I also furnished false statement in the bank as to the stock held by me on account of these bogus purchase. It was for the purpose of obtaining loans." 11. From the above, it was clear that the assessee company had taken bogus bills for purchases in the year under consideration and only after taking into consideration the explanation given by the director of the assessee company, the Assessing Officer made an addition only on account of commission on the entries relating to purchases. 12. An addition of Rs. 79,982/- was made by the Assessing Officer in his order dated 21.03.2023 (PB Pg. 115). 13. The assessee had filed the appeal against the said order before the CIT(A) as on 19.04.2023 (PB Pg. 122). 14. Now your goodself has issued notice of hearing under section 263 on the transactions which were there before the Assessing Officer during the assessment proceedings and the appeal against the said issue is pending before the CIT(A) as on today. 1. LEGAL....
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.... under this sub-section shall extend [and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person .. " (i) An issue being subject matter of appeal cannot be raised by the PCIT under section 263 of the Act: - From the perusal of the fact....
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....ts: - - CIT v. Vam Resorts & Hotels Pvt. Ltd., [2019] 418 ITR 723 (All), dt. 20.08.2019, Allahabad High Court - Smt. Sainulaptheen Katheeja Umma v. ITO, I. T.A. No. 2641Chny12022, dt. 15.02.2023, ITAT Chennai - ACC Limited, Cement v. CIT (LTU), ITA No. 35761Mum12019, dt. 08.07.2020, ITAT Mumbai Honourable Delhi High court in [2012] 348 ITR 170 (Del) GURINDER MOHAN SINGH NINDRAJOG v. COMMISSIONER OF INCOME-TAX has visualized in para no 19 and 20 has laid down the guidance when the powers of the Commissioners, in various situations, are validly invoked. The Honourable High court held that ... After considering all these judgments, in a recent decision, the Delhi bench of the ITAT in the case of Hari Mohan Sharma, Madan Mohan Sharma vs. ACIT, ITA No. 2953-541De112018 dt. 31.01.2019, summarised the situation as under: "16. On the basis of the above decision following remedial matrix as per the law is as under :- Sr. No. Situation Remedial Measures under the Income Tax Act a Assessing Officer may accept the return of income without making any addition or disallowance; or U/s 147 of the act subject to limitation....
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....47 will become otiose." In view of the above, as the same issue is pending adjudication before the CIT(A), your goodself does not have jurisdiction on the same under section 263 of the Act. Not a case of no enquiry: 1.1. It is quite evident from the reading of the section that for invoking the provisions of section 263, the order passed by the A.O. has to satisfy both the conditions stated as under: i. Being erroneous, and ii. Being prejudicial to the interest of revenue. It is a trite law that these twin conditions are must to be fulfilled simultaneously, in order to invoke the provisions of section 263. 1.2. The jurisdiction under section 263 cannot be exercised unless and until the Commissioner makes out that the impugned order of the Assessing Officer is erroneous and is also prejudicial to the interests of the Revenue. Both the preconditions are cumulative, concurrent and must co-exist. If one of it is lacking, the power to revise cannot be exercised. 1.3 "Erroneous" means suffering from errors or mistakes. If the Assessing Officer fails to make an enquiry into the truth of the facts stated in the return f....
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....quiry and eliciting a response from the assessee came to the conclusion that the assessee was entitled to depreciation on the value of securities held on the trading account. The Commissioner could not have treated this findings to be erroneous or to be prejudicial to the interests of the Revenue. The observation of the Commissioner that the Assessing Officer had arrived at a finding without conducting an enquiry was erroneous, since an enquiry was specifically held with reference to which a disclosure of details was called for by the Assessing Officer and furnished by the Assessing Officer and furnished by the assessee." Decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AD is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii....
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....3-47), the director of the assessee company had deposed that the company had purchased purchase bills on commission. (ii) "In notice under section 142(1) dated 13.09.2022 (PB Pg. 57-61) specific question regarding the transactions with the entities controlled by Sh. Sumit Jindal was asked. The questionnaire also included a table with the names of entities controlled by Sh. Sumit Jindal. (iii) The said notice was replied as on 17.10.2022 (PB Pg. 62-65), whereby the assessee gave para wise details of transactions done with the said entities. (iv) The reply was accompanied by the bank statement highlighting the payment done and received from the entity in the year under consideration. (PB Pg.66-72). (v) Details of party wise purchase and party wise sales was also given (PB Pg. 73-76). (vi) Another notice under section 142(1) dated 07.12.2022 (PB Pg. 77-79) was issued again asking for the same transactions. (vii) Said notice was replied vide letter dated 13.12.2022 (PB Pg. 86-87). The reply had clearly stated the modus operandi, as follows: "In respect of the on-going proceedings u/s. 153C, under the instructions of the Ass....
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.... (iv) DIT v. Jyoti Foundation reported in [2013J 357 ITR 388 (Delhi) When the AO during the course of original assessment proceedings made extensive inquiries and was satisfied with the correctness of the claim of the assessee, on the basis of which he made addition of commission income, then the order passed by the AO cannot be held as erroneous so far as prejudicial to the interest of the revenue for want of inquiry. Once the AO has already conducted inquiry during the original assessment then the explanation (2) to section 263 cannot be interpreted in a manner to make inquiries unending. When the AO has examined the issue, applied his mind and reached to a conclusion which is legally a plausible view then your goodself cannot invoke the provisions of section 263 merely, because you do not agree with the view of the AO. The Hon'ble Delhi High Court in case of CIT vs, Sunbeam Auto Ltd. (supra) while dealing an issue of lack of inquiry and inadequate inquiry has held in para 12 as under: "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our c....
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....ved that a notice u/s. 153C of the Income Tax Act was issued upon you on 20.07.2021 requiring to prepare true and correct return of total income within 10 days. However in response to the notice u/s. 153C of the Act you filed your ITR on 15.09.2021 after a delay of 2 months, declaring an income of Rs. 8,94,302. No interest u/s. 234A of I. T. Act has been charged in the computation of income." The issue of mistake in computing the interest under section 234A can at best be termed as a mistake apparent from record, which may be rectified under section 154 of the Act. Provisions of section 263 give jurisdictional power whereas provisions of section 154 gives power of rectification. It will not be correct to say that "rectification" is equal to "revision" under the Act. Term "erroneous" used in the section 263 is to be read relating to jurisdictional error on the part of the Assessing Officer in exercise of his powers vested under the law. It cannot be read as to a "mistake" which is rectifiable under the provisions of section 154 either suo moto or on the for application of the assessee. Error committed by the Assessing Officer must be an error of jurisdicti....
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....me on these transactions. The reason behind purchasing these bills was also explained to the Assessing Officer. Therefore in such a scenario at most an addition on account of commission is an appropriate addition. Thus, in such circumstances, no adverse inference can be drawn under the garb of revisionary proceedings u/s. 263 of the Act. Keeping in view the facts mentioned above and submissions along with various documentary evidences placed on record, your honor is requested to kindly drop the proceedings under section 263 of the Act." 6. I have considered facts of the case, the assessment order as well as submissions of the assessee. The first legal issue raised by the assessee is that an issue being subject matter of appeal cannot be raised by the PC IT under section 263 of the Act. It was submitted that the order of AO passed on 21.03.2023 was taken in appeal before the Ld. CIT(A) as on 19.04.2023 (PB Pg 122':126). It was clear that the subject matter of the appeal was the commission on bogus purchases made by the assessee and the same has been raised in the notice under section 263 of the Act. Reliance was placed upon provisions of Explanation-1 to Sectio....
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....63 is bad in law in the absence of twin conditions of the order passed by the A.O. being erroneous as well as prejudicial to the interest of the Revenue having been satisfied. 3. On the facts and circumstances of the case, the order passed by the learned Pr. CIT has erred in rejecting the contention of the assessee that his action of assuming jurisdiction under section 263 is bad in law, as the issues raised in show cause notice under section 263, already being a matter pending before the Commissioner of Income Tax (Appeals) [CIT(A)), the jurisdiction under section 263 is in violation of Clause (c) of the Explanation under sub section (1) of section 263. 4. (i). On the facts and circumstances of the case, the learned Pr.CIT has erred both on facts and in law in ignoring the fact that the issues raised by him in notice under Section 263 were before the A.O. and as such the jurisdiction on these issues under Section 263 cannot be assumed by him. (ii). That the learned Pr.CIT has erred both on facts and in law in ignoring the contention of the appellant that the proceeding under Section 263 cannot be used for substituting opinion of the A.O. by that of the P....
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....d. She prayed that proceeding initiated u/s. 263 is bad in law as per the provisions of Section 263 of the Act. 8. On the other hand, ld. DR of the Revenue relied on page 8 of the impugned order wherein ld. PCIT has discussed the whole facts on record and accordingly he supported the findings of the ld. PCIT and justified that proceedings initiated are proper. Further he submitted that ld. PCIT has not only raised the issue of bogus purchases and also raised the issue of not charging interest u/s. 234A of the Act. 9. Considered the rival submissions and material available on record. We observed that during search proceedings, certain incriminating material was found in the case of Sumit Jindal. Based on the incriminating material, proceedings u/s. 153C were initiated in the case of assessee. During assessment proceedings, Director of the assessee company accepted the fact that he has taken accommodation entries from Sumit Jindal, both purchases as well as sales. In that process, he has only earned 0.50% of the value of the transactions. Based on the above findings, the AO has restricted the addition to the extent of income earned by the assessee. Accordingly, AO has completed....