INCOME TAX ACT, 1961

Section 263 Section 68

Revision under section 263 - Erroneous and prejudicial order - Plausible view taken by AO -

Pr. CIT invoked jurisdiction under section 263 on the reasoning that purchases made by assessee from the party, namely, M/s Greenwell Orchard amounting to Rs. 3,92,59,500 were bogus and once purchases were bogus then sales shown by assessee against such purchases were also bogus. But, AO in the assessment framed under section 143(3) read with section 147 has admitted the transaction of purchase and sales as genuine and estimated profit at the rate of 8% of turnover. Therefore, Pr. CIT treated order passed by AO as erroneous and prejudicial to the interest of revenue. Held: Assessee filed balance sheet, tax audit report, bank statement, purchase register, stock register, sales and purchase invoice and confirmation from parties to justify that transactions were genuine. Assessee also filed copies of ledger, bank statement, audit report, stock register, sales invoices etc of buyers. Thus, assessee had furnished necessary documents with respect to parties from whom it had realized the amount against sales made to them and AO had taken a conscious view which was one of the possible view by accepting the purchases and sales as genuine. Even for the sake of adjudication, if assumed that purchases viz. a viz. sales were bogus in the given facts and circumstances, then also entire amount of sales could not be treated as unexplained cash credit of the assessee because assessee had not shown the gross amount of sales as agricultural income, rather it had shown only the difference between purchase and sales, whereas original party, namely, M/s Greenwell Orchard had shown the entire amount of sale as agriculture income without showing any expenses. Accordingly AO in the assessment of M/s Greenwell Orchard had allocated 20% of the sales value as expenses which was subsequently reduced by the CIT(A) to the tune of 5% of the sales value. Thus, entire amount of sales could not be treated as income of assessee and order of the Pr. CIT under section 263 was not sustainable.

Distinguished:Pr. CIT v. Wadhawan Designs 2019 TaxPub(DT) 1177 (Del-HC)Relied:Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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