TaxTMI 
TaxTMI 
2026 (8) TMI 478
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..... 2. That the present appeal before the Hon'ble Income Tax Appellate Tribunal has been filed against the order passed under section 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Mumbai 20 dated 27.03.2025. 3. That the present appeal before the Hon'ble Tribunal has been filed on 30.01.2026 and there is a delay of 244 days in filing the present appeal before the Hon'ble Tribunal. 4. That the delay in filing the appeal was neither intentional nor deliberate but occurred due to bonafide reasons and circumstances beyond the control of the assessee. The assessee is engaged in business activities and is not well versed with the technical legal provisions and appellate remedies available under the Income Tax Act, 1961. The assessee was under a genuine and bonafide belief that once the order under section 263 of the Act had been passed and the consequential proceedings before the Assessing Officer were pending, no separate appeal could be preferred before the Hon'ble Income Tax Appellate Tribunal against the revisionary order itself. 5. That thereafter, the assessee approached and consulted legal coun....
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....davit filed by the assessee. On consideration of the reasons explained in paragraphs 1 to 11 of the affidavit, we are satisfied that the assessee was prevented by sufficient/reasonable cause from filing the present appeal within the prescribed period. The delay does not appear to be deliberate or intentional. In the interest of substantial justice, we condone the delay of 244 days in filing the present appeal and admit the appeal for adjudication on merits. 5. The assessee in its appeal has raised the following grounds:- "1) The Ld. Principal Commissioner of Income Tax erred in passing the order under section 263 of the Income Tax Act, 1961 in spite of the fact that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Ld. Principal Commissioner of Income Tax erred in ignoring all the relevant facts and legal precedents cited by the appellant in support of its claim that in the facts and circumstances prevailing in the case of the appellant, no action under section 263, was called for because the two view are possible and the Ld. AO had adopted the view in favour of assessee. 2) On the facts and circumstance of the case ....
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....tted that since the additional ground filed by the assessee is a legal ground the same be admitted and adjudicated upon. 8. Considering the rival submissions, we admit the additional ground for adjudication being a legal ground. 9. Ld. Counsel, at the outset, submitted that in the case of the assessee, an assessment was completed by the Assessing Officer u/s 143(3) r.w.s. 144B of the Act on 27.12.2022, bringing to tax 25% of the purchases made by the assessee from M/s Mahadev Enterprises and M/s Tirupati Traders, amounting to Rs.1,57,54,693/-. 10. Ld. Counsel submitted that the Assessing Officer, in the course of assessment proceedings, called for various details in respect of purchases made by the assessee from five parties, which are tabulated at page 3 of the assessment order and the assessee had furnished all the details in respect of purchases made from the said parties. Considering the details furnished by the assessee, the Assessing Officer took a view that in respect of two parties, namely M/s Mahadev Enterprises and M/s Tirupati Traders from whom the assessee had made purchases of Rs.1,86,32,000/- and Rs.4,43,86,770/- respectively, the transactions were not genuin....
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....r the assessee further submitted that the assessee had furnished copies of all the invoices. The sales of the assessee were accepted. Without purchases, sales could not have taken place. The assessee's accounts were duly audited. All the payments were made by account payee cheque. The assessee had maintained a stock register and no discrepancies were found by the Assessing Officer. Both parties had given confirmation of purchases. There is no evidence on record to suggest that any cash was received back by the assessee. Ld. Counsel, therefore, submitted that since all these aspects were examined by the Assessing Officer and he had taken a conscious view in estimating the profit element in the said purchases at 25%, merely because the Ld. PCIT was of the view that further inquiry ought to have been conducted or a different addition ought to have been made, the same does not confer jurisdiction u/s 263 of the Act. 15. Ld. Counsel for the assessee submitted that it is a settled position of law that where the Assessing Officer has conducted inquiries and adopted a plausible view, revisional jurisdiction u/s 263 of the Act cannot be invoked merely because the Ld. PCIT is of the o....
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....ant Khandelwal v. PCIT (Central), [2025] 180 taxmann.com 788 (Mumbai - Trib.) (4) Shree Siddhi Infrabuild (P.) Ltd. v. Principal Commissioner of Income-tax, [2025] 172 taxmann.com 232 (Gujarat) (5) Surbhit Impex (P.) Ltd. v.Principal Commissioner of Income-tax - 8 [2025] 180 taxmann.com 351 (Mumbai - Trib.) 20. Ld. Counsel for the assessee, without prejudice to the above, submitted that the Learned PCIT has also erred in alleging that liability standing in the name of M/s Tirupati Traders amounting to Rs. 3,53,87,270/- ought to have been added under section 41(1) of the Act. The provisions of section 41(1) are applicable only where there is remission or cessation of an existing trading liability during the relevant previous year. Also the payment has been received by the assessee in the upcoming assessment years. In the present case, there was no material whatsoever on record to establish any remission or cessation of liability. Merely because the creditor was alleged to be non genuine or because the GST registration was cancelled does not automatically result in cessation of liability under section 41(1) of the Act. Further the transaction is clearly visible i....
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....nt of bogus purchases is liable to be brought to tax under section 69C and the appellate authorities are not justified in restricting the addition by estimating only the profit element. The Ld. PCIT, therefore, rightly held that the Assessing Officer ought to have brought the entire unexplained expenditure of Rs.6,30,18,770 to tax under section 69C instead of restricting the addition to 25% of the alleged bogus purchases. The said principle also stands fortified by the decision of the Hon'ble Supreme Court in N.K. Proteins Ltd. v. DCIT [2017], wherein the Hon'ble Supreme Court upheld 100% disallowance of bogus purchases, holding that where the transactions are found to be wholly fictitious and the assessee fails to establish the genuineness of the purchases, the entire amount represents unexplained expenditure liable to be added to the total income. The ratio of the aforesaid decisions squarely applies to the facts of the present case. 4. The Assessing Officer further failed to examine the applicability of section 41(1) in respect of the outstanding liability of Rs.3,53,87,270 shown in the name of M/s Tirupati Traders. Once the said concern was found to be bogus an....
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....e assessee to furnish all the necessary documents to prove that the purchases made from five parties, namely JK Importers, Krishan Enterprises, Mahadev Enterprises, Sri Nanai Enterprises and Tirupati Traders were genuine purchase transactions. The assessee furnished copies of purchase invoices, ledger copies, transport bills/e-way bills, payment details to be reconciled with bank account statements, balance confirmations and submitted that all these purchases were genuine. The Assessing Officer had in fact examined all these evidences during the assessment proceedings and estimated the profit element embedded in the purchases only for the reason that the GST numbers of two out of the five parties were cancelled by the GST department suo motu. It was further contended that the assessee, vide submission dated 19.12.2022, had furnished all the relevant details called for by the Assessing Officer in the questionnaire, namely balance confirmations, ledger accounts, invoice copies, e-way bills for all transactions and bank payment entries during the original scrutiny proceedings. 27. It was also contended by the assessee before the Ld. PCIT that the Assessing Officer observed in the a....
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.... by placing reliance on the decisions of the Hon'ble Supreme Court in the case of CIT vs. Shri Arbuda Mills Ltd. (1998) 231 ITR 50 (SC) and EIMCO K.C.P. Ltd. vs. CIT (2000) 242 ITR 659 (SC). 32. We observe that the Ld. PCIT wrongly placed reliance on the decisions of the Hon'ble Supreme Court in the case of CIT vs. Shri Arbuda Mills Ltd. (supra) and EIMCO K.C.P. Ltd. (supra) to hold that revisional proceedings u/s 263 were valid even though the assessee was in appeal before the Ld. CIT(A). We observe that in the case of CIT vs. Shri Arbuda Mills Ltd. (supra), the Assessing Officer had accepted the claims of the assessee in respect of three items against which no appeal was filed by the assessee. However, the assessee filed an appeal against two items which were not accepted by the Assessing Officer. The Ld. CIT invoked the provisions of section 263 of the Act to revise the assessment order in respect of the three items which had been accepted by the Assessing Officer, against which no appeal had been filed by the assessee. On these facts, the Hon'ble Supreme Court held that CIT had jurisdiction u/s 263 to revise the assessment though appeal is pending before Ld. CIT(A). ....
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....e by the assessee under Section 54 of the Act and it has got nothing to do with the order passed by the Assessing Officer under Section 54F of the Act. The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re-assessment order dated 31.12.2009 stating that his claim for deduction under Section 54 of the Act should be accepted. 23. Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous." 35. Similarly, in the case of CIT vs. Vam Resorts and Hotels Pvt. Ltd. [418 ITR 723], the Hon'ble Allahabad High Court held as under: "As, clause (c) of Explanation 1 to section 263 of the Act provides that when an appeal is p....
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....nto business of manufacturing and trading of laboratory grown cut and polished diamonds. In the present case, assessee had filed return of income on 23.02.2022 declaring total income of Rs.2,41,89,710/-. The case was selected for Complete Scrutiny for the reason that business purchases need to be verified for their genuineness. The assessment was completed under section 143(3) r.w.s. 144B of the Act assessing total income at Rs. 3,37,35,741/, after making addition of Rs. 95,46,031/- u/s 37 of the Act on account of unverified business purchases. 3.1 The ld. PCIT on examination of the records found that the AO in order to verify the genuineness of purchases made by the assessee company issued notices u/s.133(6) of the Act to several parties from whom purchases were shown to have been made, out of which the assessee, however, could not prove genuineness and creditworthiness of the purchases totalling Rs.9,41,47,312/- from three of the parties namely R. K. Diam Private Limited, Rupesh kumar Hitendra kumar Khatri and Ketan Hitendra kumar Khatri. Accordingly, the purchases from the said parties were treated as bogus purchases. Enquiries also revealed unverified purchases amounti....
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.... proceedings and there is no bar in the Act that both proceedings cannot run simultaneously. While completing the assessment the Assessing Officer failed to make addition of entire bogus purchase transaction of Rs.9,41,47,312/- but restricted the addition to only 10% of the said amount. In this regard it is stated that the hon'ble Supreme Court in the case of N. K. Proteins Ltd. vs. DCIT (2017) 84 taxmann.com 195 (SC) had dismissed the SLP of the said company against the decision of100% of bogus purchases were added to the total income. Accordingly, after invoking the provisions of section 263 of the Act, the AO was directed to take further necessary action in this regard. In addition, the A.O. was also directed to examine the facts of the case and to initiate penalty as per the provisions of the Act. 4. Before us, the ld. CIT(DR) relied on the order of ld. PCIT. It is stated that he correctly assumed jurisdiction as there was no basis for making addition on estimate no basis when the transactions could not be proved. He placed reliance on the decision in the case of Kanak Impex in ITA No.791 of 2021(Bom). Per contra, the ld.AR vehemently contested the revision order b....
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....w taken by the Assessing Officer is unsustainable in law". Thus, in our considered view following Apex Court ruling the Revision orders passed by Ld. PCIT are not sustainable in law. Reliance was placed on the decisions of the jurisdictional High Court in the case of CIT vs Gabriel India Ltd.((203 ITR 108) (Bom)(HC) and American Spring and Processing Works P. Ltd(2023) 295 Taxman 438(Bom) and also B.T. Global Communications India Ltd (2024) 466 ITR 714(Del) wherein revisions orders were not sustained as the AO taken one of the plausible views different from that of the PCIT. 5. We have carefully examined the facts of the case. We find that as per the assessment order, the AO has discussed all the relevant facts of the above purchases and the details submitted. It was observed by him that the some of the parties did not comply with notice u/s 133(6) of the Act. Finally, he rejected the genuineness of the said purchase transaction and made part disallowance at the rate of 10% of the said unverified transactions. Thus, we notice that a detailed enquiry is evident from the assessment order. In this case, during the assessment the AO issued query memos to the assessee, calling ....
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....53 ITR 225(SC), the Court inter alia held that under section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income-tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co- terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do......." These observations are squarely applicable to the interpretation of section 251(1)(a) of the Act. Even otherwise, an appellate authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. The appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. 5.3 Accordingly, we hold that the issue of disallowance of p....
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....finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity." 5.5 The hon'ble Supreme Court in the another case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd. [2020] 114 taxmann.com 545 (SC), dismissed the Revenue's SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law. 5.6 Moreover, where two views are possible and the AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the AO is unsustainable in law or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. Making estimated addition on unproved purchases itself is a debatable issue with various contrary judicial decisions. In such a situation also, the AO having taken one of the plausible views cannot be faulted with. 5.7 In view of the afo....
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....and confirmed by Ld. CIT(A), we have perused this aforesaid judgment. We observe that in para 4, Hon'ble Court noted the factual position that assessee did not appear before the Ld.AO during the course of assessment proceedings and failed to prove the genuineness of the purchase. The said assessment was completed ex-parte u/s. 144. r.w.s 147 of the Act. Hon'ble Court also observed in para 17 about the non-appearance of assessee before the Ld.AO for which there is no justification. Again, it noted in para 29 that the assessee chose not to attend the reassessment proceedings even though the notices were sent by post, email and affixture. Accordingly, in para 13, Hon'ble Court concluded that assessee having not joined the reassessment proceedings, the contention raised by the assessee are to be rejected. Observation of the Hon'ble Court while rejecting the contention of the assessee are: "30. We fail to understand that the respondent-assessee having consciously and intentionally decided not to join the investigation, cannot now contend that the appellant-revenue should have given them all the details before making the addition. In our view, such a conduct of t....