| The Tax Publishers2020 TaxPub(DT) 0516 (Mum-Trib) INCOME TAX ACT, 1961
Section 263
Since decision of AO in making addition applying the profit rate was in consonance with various judicial precedents available on the issue and it could not be considered to be an erroneous view as it is a possible view, moreover, the allegation of PCIT that AO overlooked the material on record and has not made any enquiry which ought to have been made, appears to be on wrong assumption of facts, therefore, notice issued under section 263 was bad in law.
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Revision under section 263 - Validity - Bogus purchases - AO made disallowance @ 12.5%
Assessee company was engaged in the business of trading in ferrous and non-ferrous metals. AO found that purchases from four parties were non-genuine as the concerned parties were identified as hawala operators providing accommodation bills. After verifying the evidences furnished by assessee, AO was of the view that assessee was not able to establish on record that purchases were made from the declared source. Thus, he held that purchases made by the assessee cannot be accepted as genuine and estimated the profit margin on the non-genuine purchases @ 12.5%. After examining the assessment records, Pr. CIT was of the view that assessment orders passed estimating the income on non-genuine purchases @ 12.5% was erroneous and prejudicial to the interests of revenue, because, once AO had concluded that purchases were bogus, he could not have estimated the income on such purchases by applying the rate of 12.5%.Held: High Court in Mohommad Haji Adam & Co. ([Income Tax Appeal No. 1004 of 2016 with 1013 of 2016 with 1059 of 2016 with 1064 of 2016 with 1075 of 2016 with 1095 of 2016 with 1204 of 2016 with 1012 of 2016, dt. 11-2-2019]) had held that even if the purchases were found to be bogus, however, entire purchases could not be added if the sales were not doubted or disputed. Decision of AO in making addition applying the profit rate is in consonance with various judicial precedents available on the issue. Therefore, it could not be considered to be an erroneous view as it is a possible view. Moreover, the allegation of PCIT that AO overlooked the material on record and has not made any enquiry which ought to have been made, appears to be on wrong assumption of facts, hence, not tenable.
REFERRED : CIT & Anr. v. Greenworld Corporation & Ors. (2009) 314 ITR 81 (SC) : 2009 TaxPub(DT) 1713 (SC), Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC), Shoreline Hotel Pvt. Ltd. v. CIT (2018) 98 Taxmann.com 234 (Bom.) : 2018 TaxPub(DT) 6459 (Bom-HC), CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj.) : 2013 TaxPub(DT) 2115 (Guj-HC) and CIT v. Gokuldas Exports & Ors. (2011) 333 ITR 214 (Karn) : 2011 TaxPub(DT) 11 (Karn-HC).
FAVOUR : In assessee's favour.
A.Y. : 2010-11 & 2011-12
IN THE ITAT, MUMBAI BENCH
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