TaxTMI 
TaxTMI 
2026 (7) TMI 353
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....despite the Principal Commissioner of Income Tax (PCIT) having clearly pointed out that the assessment order dated 27.03.2022 was erroneous and prejudicial to the interest of the revenue due to failure on part of the Assessing Officer to make the addition of 100% of the bogus purchase u/s. 69C of the Act instead of 12.5% of the bogus purchase under normal provisions, resulting in underassessment of income and short levy of taxes? (b) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in holding that the view taken by the assessing officer to make addition of 12.5% of the bogus purchases under normal provisions is legally plausible, without considering the fact that once the purchases have been established to be bogus in nature, addition is to be made of the 100% of the bogus purchase u/s. 69C of the Act as per the provisions of section 115BBE of the Income Tax Act, 1961?" 3 The brief facts leading to filing of the present appeal are as under: 3.1 The assessee is a private limited company, inter alia engaged in trading of stainless steel and has filed its Return of Income for the Assessment Year 2016-17 on 11.09.2017 declaring to....
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....ons of the Act. The error in the assessment order has resulted into loss of revenue. The order passed by the Assessing Officer is, thus, erroneous and prejudicial to the interest of the Revenue. Therefore, provisions of section 263 of the Act are applicable in this case. 8. Hence, in exercise of power conferred in me u/s 263 of the Act, I set aside the assessment order passed u/s.147 rw.s 144B of the Income tax Act dated 27.03 2022 for the A.Y 2016-17 with the direction to the AO to pass a fresh assessment order in accordance with law and after duly examining the facts of the case to the extent of the issues discussed supra after giving the assessee a reasonable opportunity of being heard. 9. Revised accordingly u/s. 263 of the Act." 3.4 Being aggrieved by the order passed by the Principal Commissioner of Income Tax, the assessee preferred an appeal before the Tribunal. The Tribunal allowed the appeal preferred by the assessee after observing that the proceedings under Section 263 of the Act cannot be taken as a recourse only for the purpose of substitution of view of the Principal Commissioner of Income Tax with that of the Assessing Officer, if such view by t....
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....judicial to the interest of the revenue, the Principal Chief Commissioner of Income Tax has rightly exercised his revisional powers under Section 263 of the Act. 4.4 It was further submitted by learned Senior Standing Counsel Mr. Dev Patel that the order under Section 263 of the Act was passed after giving ample opportunities to the assessee and after considering the response filed by the assessee, and therefore, the PCIT-1, was right in setting aside the Assessment Order dated 27.03.2022 passed under Section 147 of the Act read with Section 144B of the Act. 5 Having heard the learned Senior Standing Counsel appearing for the appellant and having perused the material on record, it is not in dispute that the Assessing Officer had taken a plausible view and made an addition of 12.5% considering the purchases by the assessee as bogus purchases. The Principal Commissioner of Income Tax has not attached any illegality to the order of the Assessing Officer but has observed that by not considering the total amount of alleged bogus purchases and not taxing the whole amount, the Assessing Officer has made loss to the revenue. It was further observed by the Principal Commissioner of In....
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.... the assessee. Firstly, the counsel for the assessee submitted that he has not made any purchases from M/s. Varia Aluminium Pvt. Ltd. and therefore, there is no question of making any additions so far as bogus purchases are concerned. The second contention of the Counsel for the assessee is that even if the purchases were to be considered as bogus, the assessing officer took a legally plausible view and made a disallowance/addition of 12.5% and added the same to the income of the assessee during the course of assessment proceedings. Thirdly, it was also submitted that the assessing officer had made due enquiries during the course of assessment proceedings and the assessee had also filed reply to the queries made by the assessing officer and hence, evidently in the instant facts there is no lack of enquiry on the part of the assessing officer. Further it was submitted before us that the additions made by the assessing officer are also pending adjudication before Ld. CIT(Appeals) since the assessee has filed appeal against the order passed by the assessing officer. On going to the facts of the instant case, we shall not be commenting specifically on whether the assessee had in fact m....
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.... erroneous have to be read in conjunction and therefore, it is not each and every error in an assessment that invites exercise of powers under Section 263 of the Act, but only orders that are erroneous and prejudicial to the interest of the revenue" 9. In a decision rendered by Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), wherein, while considering the distinction between lack of inquiry and inadequate inquiry, the Hon'ble Court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of Inadequate inquiry: "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 consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue wat that while parsing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment orde....
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.... cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15 Thus. even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore it cannot be said that it is a case of "lack of inquiry". 10. Accordingly, looking into the instant facts, we are of the considered view that the Counsel for the assessee has been able to substantiate that this is not a case of "lack of enquiry" on part of the assessing officer and during the course of assessment proceedings, queries were raised by the assessing officer on this issue and the assessee had also replied to the same Further, we observe that the assessing officer had taken a....