Lavesh Agarwal Vs PCIT (ITAT Mumbai)
Mumbai ITAT Quashes Section 263 Revision: AO’s 25% Bogus Purchase Addition Held to Be a Possible View
The Mumbai ITAT quashed the revisionary order passed under Section 263, holding that where the Assessing Officer had conducted detailed enquiries and adopted a possible view by estimating profit at 25% of alleged bogus purchases, the PCIT could not invoke revision merely because he preferred 100% disallowance.
The assessee, engaged in the scrap trading business, had disclosed purchases of about ₹168.85 crore, out of which purchases of ₹139.10 crore were made from suppliers whose GST registrations were cancelled or who had not filed GST returns. During scrutiny, the Assessing Officer examined purchase invoices, stock records, bank payments, confirmations and sales records, rejected the books under Section 145(3), and made an addition of ₹34.77 crore, being 25% of the disputed purchases.
The PCIT invoked Section 263 on the ground that in the immediately preceding assessment year similar enquiries had led to 100% disallowance of purchases from certain suppliers and therefore the Assessing Officer ought to have disallowed the entire amount instead of restricting the addition to 25%. According to the PCIT, failure to make full disallowance rendered the assessment order erroneous and prejudicial to the interests of the Revenue.
The Tribunal, however, found that the Assessing Officer had carried out detailed enquiries, examined the material placed on record, analysed the suppliers, considered the GST-related discrepancies and consciously adopted an estimation approach. The assessment order itself reflected application of mind and could not be characterised as a case of lack of enquiry. At best, the PCIT was alleging inadequate enquiry or seeking to substitute his own opinion for that of the Assessing Officer.
The ITAT reiterated the settled principle that Section 263 cannot be invoked merely because the PCIT prefers another view or believes a higher addition should have been made. Once the Assessing Officer has taken one of the legally permissible views after conducting enquiries, the assessment order cannot be revised simply on account of a difference of opinion.
Accordingly, the Tribunal held that the twin conditions of “erroneous” and “prejudicial to the interests of the Revenue” were not satisfied. The revision order passed under Section 263 was therefore quashed and the assessment order making an addition of 25% of the disputed purchases was restored.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
