Principal Commissioner Ofincome Tax-9, Kolkata v. Mrs. Premlata Tekriwal

OD-18 & 19 ITAT/28/2022ITAT/29/2022 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OFINCOME TAX-9, KOLKATA -Versus- MRS. PREMLATA TEKRIWAL Appearance:Mr. Soumen Bhattacharyya, Adv....for the appellant. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM -And- Date : 22[nd] November, 2022. The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA The Court: The affidavit of service is kept with therecords. These appeals have been filed by the revenue challenging a common order passed by the Income Tax AppellateTribunal, “B” Bench, Kolkata (the ‘Tribunal’)in a batch ofcases in ITA Nos.1129, 1130 & 1131/Kol/2018 for the assessmentyears 2009-10, 2010-11 and 2011-12 and 2010-11 & 2011-12. Therevenue had preferred appeals against three of the assessmentyears before this Court in ITAT/27/2022, ITAT/32/2022 andITAT/33/2022 and by judgment dated 15[th] July, 2022, the appeal filed by the revenue was allowed. The operative portion of thejudgment reads as follows: “Since the facts are identical, we take up the facts forconsideration in ITAT 27/2022 where the assessee is PremlataTekriwal. The said assessee filed the return and income forthe assessment year 2009-10 declaring a total income ofRs.3,85,822/-. The assessment was reopened based oninformation received from the Director General of Income Tax(Investigation). The reasons for reopening was based oninformation received from Maharastra Sales Tax Departmentwho carried out various searches on the persons/entitiesinvolved in issuance of fictitious purchases. The data ofthe said searches carried out by the Maharastra Sales TaxDepartment were communicated to the Director General ofIncome Tax (Investigation) who, in turn, vide letter dated23rd December, 2013 communicated the details of thefictitious purchases and the name of the assessee was foundin the list as a beneficiary of such accommodation bills.After following the due procedure and discussing the casewith the various representatives of the assessee, theAssessing Officer while completing the assessment by orderdated 28th March, 2016 pointed out that the only inferencecan be drawn is that the assessee did not purchase from theparties mentioned in the said bill and at the same time theassessee did purchase goods from some other suppliers may bewithout the bill. Therefore, the purchase rate mentioned bythe assessee was rejected. With a view to afford opportunityto the assessee to establish genuinity of the purchases,opportunity was given to the assessee. In response to suchopportunity the assessee stated that they are not in aposition to produce the mentioned records and requested totreat 2% of the purported bogus purchase of Rs.54,13,476/-to be added to the total income for the said years. TheAssessing Officer rejected such submission. After doing so he had observed that the assesseegot same benefit of such bogus purchase, there would be nodenial of the fact that the assessee’s estimated income willincrease to a certain extent. After making such anobservation, the Assessing Officer estimates the addition at3% of the bogus purchase and accordingly a sum ofRs.1,62,405/- was added to the total income of the assessee.The Principal Commissioner of Income Tax – 10, Kolkataexercised his power under Section 263 of the Act. It is seenthat the Assessing Officer himself had submitted before thePCIT that an error has occurred in the assessment order.After perusing the entire files as well as the stand takenby the Assessing Officer, the PCIT was of the prima facieopinion that the Assessing Officer failed to take logicalaction on the information available with him and therefore,opined that the assessment order is erroneous in so far asit is prejudicial to the interest of the revenue.Accordingly, the show-cause notice dated 30th January, 2018was issued to the assessee under Section 263 of the Act. Theaverments contained in the show-cause notice are as follows:-“...On examination of your assessment records forthe above mentioned assessment year., it appearsprima facie that there was failure on the part ofthe A.O. to assess the income correctly and as suchthe instant order u/s 143(3)/147 dated 28.03.2016 iserroneous in so far as it is prejudicial to theinterest of the Revenue within the ambit of sec. 263of the Income Tax (IT) Act, 1961.3.On examination of your assessment records for theabove mentioned assessment year, it is observed thatyour case was reopened u/s 147 of the Act, on30/03/2015 on the basis of incriminating informationreceived by the AO. In the said assessment order itwas established that expenditure worth Rs.54,14,476/-, claimed by you as purchase, wasbogus. When expenditure is established as bogus,there is no provision in the act, whereby partialdisallowance to the bogus expenditure can be made.However, in your case, the A.O. has disallowed a sumof Rs.1,62,405/-, being 3% of such bogusexpenditure/purchases whereas the entire amount wasrequired to be disallowed. 4. In view of the above, you are hereby allowed onopportunity of being heard, either personally orthrough an authorized representative, in my officeat 5th floor, Aayakar Bhawan Dakshin, 2 GariahatRoad South, Kolkata – 700068, on 14.02.2018 at 1.00P.M., and show cause as to why an order u/s 263 ofthe I.T. Act shall not be passed in your case,enhancing/modifying/canceling the assessment theassessment order in question or directing a freshassessment to be made.5. In the event of failure to comply with the above,it shall be presumed that your have no objection tothe proposed action and the matter shall befinalised on merits on the basis of material onrecord, without further notice.” Though the show cause notice was served on theassessee none appeared before the PCIT. Thereafter, with aview to offer further opportunity the matter was adjournedtwice. However, the assessee failed to appear. Having left with no option the PCIT proceeded to takefor considering the matter and passed the order dated 5thMarch, 2018. It was held that from materials available onrecord it is proved beyond doubt that the alleged purchaseclaimed by the assessee against the parties were bogus. ThePCIT referred to Section 69C of the Act and pointed out thatonce it is established that the expenditure isunexplained/bogus, the entire amount of bogus expenditure is Though the show cause notice was served on theassessee none appeared before the PCIT. Thereafter, with aview to offer further opportunity the matter was adjournedtwice. However, the assessee failed to appear. Having left with no option the PCIT proceeded to takefor considering the matter and passed the order dated 5thMarch, 2018. It was held that from materials available onrecord it is proved beyond doubt that the alleged purchaseclaimed by the assessee against the parties were bogus. ThePCIT referred to Section 69C of the Act and pointed out thatonce it is established that the expenditure isunexplained/bogus, the entire amount of bogus expenditure is to be added to the total income of the assessee. Reliancewas placed on the decision of the Hon’ble Supreme Court inN.K.Proteins Vs. DCIT [2017] 84 taxmann.com 195(SC).Further, the PCIT pointed out that the assessment officerhad to examine each and every transaction and finally assessthe correct income of the assessee. However, the assessingofficer without arriving at any logical conclusion andwithout conducting any inquiry made a disallowance only tothe extent of 3% of the bogus purchase. With regard to theaspect of the assessing officer as to making inquiries, thePCIT referred to the decision of the Hon’ble Supreme Courtreported in Rampyari Devi Saraogi Vs. CIT (1968) 67 ITR 84,Smt. Tara Devi Aggarwal Vs. CIT (1973) 88 ITR 323 (SC) andthe decision of the other High Courts. Further, the PCITtook note of the Explanation 2 to Section 263 of the Actinserted by the Finance Act, 2015 with effect from 1.6.2015and pointed out if an order has been passed by the AssessingOfficer without making any inquiry or verification then itwould be a case where the order is deemed to be erroneous inso far as it is prejudicial to the interest of the revenue.Accordingly, the PCIT held that the entire expenses has tobe disallowed as being bogus purchases. The AssessingOfficer was directed to reassess the income of the assesseefor the relevant assessment years. The assessee carried the matter on appeal to theTribunal. The Tribunal had allowed the assessee’s appeal byrelying upon the decision of the Coordinate Bench in OmForegoing& Engineering P. Ltd. Vs. PCIT in ITA Nos. 509&510/Kol/2017 for the assessment years 2010-2011 and 2011-2012 dated 13.12.2017 and the decision of this Court in PCITVs. M/s.Subarna Rice Mill, ITAT/196/2015, dated 20.06.2018.Firstly, we find that the decision in Om Foregoing &Engineering Pvt. Limited is clearly distinguishable onfacts. In the said case the assessee had filed records andthe copies of the sales bills etc. were filed in the form of a paper book and on facts the Court found that inquiry wasconducted by the assessing officer and, therefore, theCommissioner was wrong in exercising his power under Section263 of the Act. The facts as mentioned in the said judgmenthad been quoted by the Tribunal in paragraph 6 of its order.Reading of the said order will clearly show that the saiddecision could not have been applied to the assessee’s case.The decision of this Court in the case of M/s.Subarna RiceMill (supra) also is distinguishable on facts as the sourcefrom where the purchases were made was identified. At thisjuncture, it would be relevant to note that when theassessing officer gave an opportunity to the assessee toexplain the transaction, the assessee did not produce anydocument, but stated that 2% of the purported bogus purchasemay be added to the total income. Thus it would mean thatthe assessee had accepted the allegations against them andprecisely for such reason they offered that 2% of the boguspurchase may be added to the total income. If such was thefactual position in the case on hand then it is incumbentupon the Assessing Officer to inquire into the matter andtake the proceedings to the logical end. Having not done so,the PCIT was fully justified in exercising jurisdictionunder Section 263 of the Act. Thus, we are of the view thatTribunal erroneously interfered with the order passed by thePCIT. In the result, the appeals filed by the revenue areallowed and the order passed by the Tribunal is set aside.Consequently, the order passed by the PrincipalCommissioner Of Income Tax – 10, Kolkata dated 5th March,2018 is restored.Accordingly, the substantial questions of law areanswered in favour of the revenue.” Since a common order passed by the learned Tribunalhad been reversed by this Court in the aforementioned appeals,the said decision will apply to the cases on hand as well. For the above reasons, the appeals filed by therevenue (ITAT/28/2022 and ITAT/29/2022) are allowed and theorder passed by the learned Tribunal is set aside. Consequently, the order passed by the PrincipalCommissioner of Income Tax is restored. The substantialquestions of law are answered against the revenue. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) A/s./S.Das.