Om Forging & Engineering Private Limited, Kolkata V. The Pr. CIT-1, Kolkata, Kolkata

ITA 509/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0711 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: A K TIBREWAL
• Keywords: Bogus purchase; Unexplained expenditure; Opportunity of being heard; Source of fund; Accommodation entries
• Section: 69C; 143(3); 142(1); 147; 263

Judgement Text

1 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & DR.ARJUN LAL SAINI, AM ] ITA NOS.509&510/KOL/2017 ASSESSMENT YEARS : 2010-11 & 2011-12 OM FOREGOING & ENGINEERING (P)LTD. -VERSUS- PR. C .I.T.-1, KOLKATA KOLKATA (PAN:AAACO 3336 L) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI A.K.TIBREWAL, FCA FOR THE RESPONDENT: MD.USMAN, CIT(DR) DATE OF HEARING : 05.12.2017. DATE OF PRONOUNCEMENT : 13.12.2017. ORDER PER N.V.VASUDEVAN, JM: THESE ARE APPEALS BY THE ASSESSEE AGAINST TWO ORDER S BOTH DATED 13.02.2016 OF CIT(A)-1, KOLKATA PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (ACT) FOR A.Y. 2010- 11 AND 2011-12. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ORD ER U/S 263 OF THE ACT WAS PASSED BY CIT IN BOTH THE ASSESSMENT YEARS ARE IDEN TICAL. 3. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SUPPLYING OF ALLOY STEEL. FOR A.Y 2010-11 AND 2011- 12 AN ORDER OF ASSESSMENT U/S 147 R.W.S. 143(3) OF THE ACT WAS PASSED ON 13.03.2015. THE ASSESSMENTS FOR A.Y.2010-11 AND 2011-12 WERE REOPENED U/S 147 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED BY THE AO FROM THE OFFICE OF THE DGIT (INVESTIGATION) MUMBAI. THE INFORMATION RECEIVED FROM DGIT WAS THAT SALES TAX DEPARTMENT OF MAHARASHTRA HAS FORWARDED INFORMATION THAT BOGUS PURCHASE BILLS WERE BEING IS SUED BY SOME OF THE DEALERS TO SEVERAL COMPANIES. SOME OF THE BENEFICIARIES OF SUC H BOGUS BILLS ISSUED BY THE ENTRY OPERATORS IN MUMBAI WERE PERSONS FROM KOLKATA AND A LIST OF SUCH PERSONS WAS ALSO RECEIVED. THE ASSESSEES NAME WAS ALSO FOUND AS A BENEFICIARY IN SUCH LIST. THERE 2 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 WERE IN ALL FOUR PURCHASES WHICH WERE CONSIDERED AS BOGUS BASED ON THE INFORMATION RECEIVED FROM DGIT(INVESTIGATION) MUMBAI, BY THE AO . IN A.Y.2010-11 TWO PURCHASES FROM M/S. DIVYA ENTERPRISE OF RS.12,76,20 5 AND M/S. KAMAL TRADERS OF RS.20,54,707/- WERE CONSIDERED AS BOGUS. IN ALL SU M OF RS.33,30,912/- WAS CONSIDERED AS BOGUS PURCHASES FOR A.Y.2010-11. 4. AS FAR AS A.Y.2011-12 IS CONCERNED THERE WERE FO UR BOGUS PURCHASES FROM THE FOLLOWING PARTIES : I) M/S. TUSHAR ENTERPRISE : RS.3,15,172/- II) ARIHANT SALES CORPORATION : RS.2,97,710/- III) DIVYA ENTERPRISE : RS.32,67,888/- IV) KAMAL TRADERS : RS.34,03,534/- IN ALL THE BOGUS PURCHASES FOR THIS YEAR WAS RS.72, 84,304/-. 5. THE AO WHILE CONCLUDING THE ASSESSMENT U/S 147 O F THE ACT IN HIS ORDER DATED 30.03.2015 FOR BOTH THE ASSESSMENT YEARS ISSUED NOT ICE U/S 143(2) AND 142(1) OF THE ACT CALLING UPON THE ASSESSEE TO FURNISH SEVERAL DE TAILS. THE ASSESSEE HAD FURNISHED CONFIRMATION FROM THE DEALERS WHO WERE ALLEGED TO HAVE ISSUED BOGUS PURCHASE BILLS. THEIR ADDRESSES WERE ALSO FURNISHED. MOST IMPORTANT LY, THE ASSESSEE GAVE DETAILS OF THE PAYMENTS MADE TO THE PARTIES IN A.Y.2010-11 AND 2011-12 WHICH ARE GIVEN AS ANNEXURE I FOR A.Y.2010-11 AND ANNEXURE-II FOR A.Y.2011-12. THE BANK STATEMENT EVIDENCING ENCASHMENT OF CHEQUES FOR PURC HASES WERE ALSO GIVEN TO THE AO. THE AO AFTER TAKING COGNISANCE OF ALL THE DETAILS F ILED CAME TO THE CONCLUSION THAT 3% OF THE BOGUS PURCHASES SHOULD BE TREATED AS INCOME OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS. ACCORDING TO THE A O THE PRACTICE OF OBTAINING FALSE PURCHASE BILLS IS ONLY TO INFLATE THE VALUE OF PURCHASE. THE ACTUA L PURCHASE VALUE FROM THE GREY MARKET WOULD BE MUCH LOWER THAN THE REAL MARKET VA LUE AND BOGUS PURCHASE BILLS AT HIGHER VALUE ARE OBTAINED TO INFLATE COST OF PURCHA SES AND REDUCE PROFIT AS PER BOOKS OF ACCOUNTS. . THE AO WAS ALSO OF THE VIEW THAT FROM T HE QUANTITIES OF STOCK FILED BY THE 3 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 ASSESSEE, IT WAS CLEAR THAT THE SALES WERE MADE TO THE GOVERNMENT AND REPUTED ORGANISATIONS AND THEREFORE THE SALES MADE BY THE A SSESSEE CANNOT BE DISBELIEVED. IN THESE CIRCUMSTANCES, THE AO WAS OF THE VIEW THAT 3 % OF THE BOGUS PURCHASE WOULD BE THE REAL BENEFIT TO THE ASSESSEE IN RESORTING TO OB TAINING BOGUS PURCHASE BILLS. ACCORDINGLY THE AO MADE AN ADDITION OF RS.1,09,420/ - BEING 3% OF RS.33,30,912/- BEING VALUE OF BOGUS PURCHASES IN A.Y.2010-11 AND I N A.Y.2011-12 THE AO MADE AN ADDITION OF RS.2,38,633/- BEING 3% OF THE BOGUS PU RCHASES WORTH RS.72,84,304/-. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE AO IN THIS REGARD :- A.Y.2010-11 HOWEVER AS PER INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT COMMUNICATED BY THE DGIT ( INV.\). MUMBAI AS MENTI ONED EARLIER, THE ASSESSEE COMPANY HAS INFLATED ITS PURCHASE BY PROCURING FAL SE PURCHASE BILLS FROM THE CONCERN CALLED DIVYA ENTERPRISE AND KAMAL TRADERS D URING THE RELEVANT AY. IT IS SOMETIMES A COMMON PRACTICE IN THE BUS INESSES TO INFLATE ITS PURCHASES BY PROCURING FALSE PURCHASE BILLS AT A HIGHER VALU E WHERE AS THE ACTUAL PURCHASE IS MADE FROM THE GREY MARKET PREVALENT IN THE ECONO MY AT A MUCH LOWER PRICE THROUGH' BROKERS OR OTHERS. NORMALLY. THESE ARE MAD E IN QUANTITIES FOR WHICH VERIFIABLE TRANSPORTERS ARC NOT CLAIMED FOR AVOIDI NG REQUIREMENT OF FURTHER ENQUIRIES AND / OR EVIDENCES. THE RELEVANT PAN OF THE SUBMISSION OF THE ASSESSEE DATED 5-9-2014 IS REPRODUCED BELOW : .....IT IS NEEDLESS TO POINT OUT THAT HERE THE G OODS WERE PURCHASED FROM THE ABOVE PARTY IN SMALL QUANTITY VIDE CHALLANS WHICH W ERE CARRIED INWARD TO OUR GODOWN THROUGH HAND' CARTS / LORRIES, THE CARTAGE C HARGES WERE PAID IN CASH TO THELAWALLAS ( HAND CART PULLERS) .. THE ASSESSEE RELIED MAINLY ON THE ISSUE TH AT SALE WAS ALSO MADE TO THE CORRESPONDING PURCHASES AND ALSO REFERRED TO SEVERA L CASE LAWS IN THIS 'REGARDS .THE ASSESSEE ALSO SUBMITTED COPIES OF STOCK REGIST ER SHOWING INWARD QUANTITIES, OUTWARD QUANTITIES,. CLOSING QUANTITIES IN SUPPORT OF HIS QUANTITATIVE PURCHASES AND SALES. COPIES OF SALES. BILLS WERE PRODUCED. IT CANNOT BE RULED OUT THAT, .CONSIDERING TH E NATURE OF GOODS WITH WHICH THE ASSESSEE COMPANY TRADED DURING THE RELEVANT YEAR A RE GENERALLY PURCHASED BY A TRADER FROM THE WHOLESALE MARKET OF THE CITY WHERE THE PRICE REMAINS COMPETITIVE BUT TRANSACTIONS ARE MADE IN KACHCHA BILLS. THE TR ADERS GET THE OPTION TO SUPPRESS BOTH PURCHASE AND CORRESPONDING SALES / TURNOVER. I N THIS CASE THE ASSESSEE MADE 4 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 SALES TO GOVERNMENT AND OTHER REPUTED ORGANIZATIONS AND PERHAPS DID NOT GET CHANCE TO SUPPRESS SALES. AS A RESULT . THERE WAS NECESSITY FOR THE ASSESSEE CO. TO INTRODUCE PURCHASE BILLS TO MANAGE ITS PROFIT TO A DESIRED AND CONSISTENT RATE .THE ATTEMPT OF THE ASSESSEE CO FAILED DUE TO DETECTION OR THE CONCERNED SALES TAX AUTHORITY AND COMMUNICATION IN THIS REGARD BY OFFIC E BY THE DGIT ( INV) . MUMBAI . HOWEVER. IN CONSEQUENCE TO THE FINDINGS OF THE SALES TAX DEPARTMENT IT MAY EASILY BE INFERRED THAT THE ASSESSEE EO. MADE P URCHASES AT A RATE WHICH IS MUCH LOWER THAN THE RATE CLAIMED BY IT OF RS 12,76, 205 + RS.20,54,707 TOTALLING TO RS.33,30,912. AS SUCH . IT CAN BE INFERRED THAT THE ASSESS EE EARNED PROFIT AT A HIGHER RATE THAN THE RATE REFLECTED IN THE AUDITED ACCOUNTS BY SELLING THE GOODS AS ABOVE, IT IS SEEN FROM THE AUDITED ACCOUNTS THAT THE RATE OF GRO SS PROFIT DECLARED BY THE ASSESSEE FROM ITS REGULAR BUSINESS FOR THE YEAR IS 9.48%. THE PURCHASE AS DISCUSSED ABOVE WOULD EARN GROSS PROFIT AT A HIGHER RATE WHICH IS ESTIMATED AT 3% ABOVE THE RATE' DECLARED FROM REGULAR BUSINESS BASE D ON THE DISCUSSION AS .ABOVE THE ADDITIONAL PROFIT EARNED BY THE ASSESSEE IS COM PUTED AS RS (33,30.912 X 109.5-/100) X ( 3 / I 00) WHICH IS RS 109420/- WHIC H IS ADDED TO THE INCOME OF THE ASSESSE. A.Y.2011-12 HOWEVER . AS PER INFORMATION RECEIVED FROM THE SA LES TAX DEPARTMENT COMMUNICATED BY THE DGIT ( INV.\). MUMBAI AS MENTI ONED EARLIER, THE ASSESSEE COMPANY HAS INFLATED ITS PURCHASE BY PROCURING FAL SE PURCHASE BILLS FROM THE CONCERN CALLED TUSHAR ENTERPRISE, ARIHANT SALES COR PORATION, DIVYA ENTERPRISE AND KAMAL TRADERS DURING THE RELEVANT AY. IT IS SOMETIMES A COMMON PRACTICE IN THE BUS INESSES TO INFLATE ITS PURCHASES BY PROCURING FALSE PURCHASE BILLS AT A HIGHER VALU E WHERE AS THE ACTUAL PURCHASE IS MADE FROM THE GREY MARKET PREVALENT IN THE ECONO MY AT A MUCH LOWER PRICE THROUGH' BROKERS OR OTHERS. NORMALLY. THESE ARE MAD E IN QUANTITIES FOR WHICH VERIFIABLE TRANSPORTERS ARC NOT CLAIMED FOR AVOIDI NG REQUIREMENT OF FURTHER ENQUIRIES AND / OR EVIDENCES. THE RELEVANT PAN OF THE SUBMISSION OF THE ASSESSEE DATED 5-9-2014 IS REPRODUCED BELOW : .....IT IS NEEDLESS TO POINT OUT THAT HERE THE G OODS WERE PURCHASED FROM THE ABOVE PARTY IN SMALL QUANTITY VIDE CHALLANS WHICH W ERE CARRIED INWARD TO OUR GODOWN THROUGH HAND' CARTS / LORRIES, THE CARTAGE C HARGES WERE PAID IN CASH TO THELAWALLAS ( HAND CART PULLERS) .. THE ASSESSEE RELIED MAINLY ON THE ISSUE TH AT SALE WAS ALSO MADE TO THE CORRESPONDING PURCHASES AND ALSO REFERRED TO SEVERA L CASE LAWS IN THIS 'REGARDS .THE ASSESSEE ALSO SUBMITTED COPIES OF STOCK REGIST ER SHOWING INWARD QUANTITIES, 5 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 OUTWARD QUANTITIES,. CLOSING QUANTITIES IN SUPPORT OF HIS QUANTITATIVE PURCHASES AND SALES. COPIES OF SALES. BILLS WERE PRODUCED. IT CANNOT BE RULED OUT THAT, .CONSIDERING TH E NATURE OF GOODS WITH WHICH THE ASSESSEE COMPANY TRADED DURING THE RELEVANT YEAR A RE GENERALLY PURCHASED BY A TRADER FROM THE WHOLESALE MARKET OF THE CITY WHERE THE PRICE REMAINS COMPETITIVE BUT TRANSACTIONS ARE MADE IN KACHCHA BILLS. THE TR ADERS GET THE OPTION TO SUPPRESS BOTH PURCHASE AND CORRESPONDING SALES / TURNOVER. I N THIS CASE THE ASSESSEE MADE SALES TO GOVERNMENT AND OTHER REPUTED ORGANIZATIONS AND PERHAPS DID NOT GET CHANCE TO SUPPRESS SALES. AS A RESULT . THERE WAS NECESSITY FOR THE ASSESSEE CO. TO INTRODUCE PURCHASE BILLS TO MANAGE ITS PROFIT TO A DESIRED AND CONSISTENT RATE .THE ATTEMPT OF THE ASSESSEE CO FAILED DUE TO DETECTION OR THE CONCERNED SALES TAX AUTHORITY AND COMMUNICATION IN THIS REGARD BY OFFIC E BY THE DGIT ( INV) . MUMBAI . HOWEVER. IN CONSEQUENCE TO THE FINDINGS OF THE SALES TAX DEPARTMENT IT MAY EASILY BE INFERRED THAT THE ASSESSEE CO. MADE P URCHASES AT A RATE WHICH IS MUCH LOWER THAN THE RATE CLAIMED BY IT OF RS 3,5,17 2 + RS.297710 + RS3267888 + RS.3403534 TOTALLING TO RS.7284304/-. AS SUCH . IT CAN BE INFERRED THAT THE ASSESS EE EARNED PROFIT AT A HIGHER RATE THAN THE RATE REFLECTED IN THE AUDITED ACCOUNTS BY SELLING THE GOODS AS ABOVE, IT IS SEEN FROM THE AUDITED ACCOUNTS THAT THE RATE OF GRO SS PROFIT DECLARED BY THE ASSESSEE FROM ITS REGULAR BUSINESS FOR THE YEAR IS 9.48%. THE PURCHASE AS DISCUSSED ABOVE WOULD EARN GROSS PROFIT AT A HIGHER RATE WHICH IS ESTIMATED AT 3% ABOVE THE RATE' DECLARED FROM REGULAR BUSINESS BASE D ON THE DISCUSSION AS .ABOVE THE ADDITIONAL PROFIT EARNED BY THE ASSESSEE IS COM PUTED AS RS (7284304 X 109.2-/100) X ( 3 / I 00) WHICH IS RS 238633/- WHIC H IS ADDED TO THE INCOME OF THE ASSESSE. 6. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE IN AS MUCH AS THE AO HAD NOT EXAMINED THE ADDITION TO BE MADE IN THE LIGHT OF THE PROVISION OF SECTION 69C OF THE ACT. SECTION 69C OF THE ACT READS AS UNDER :- 69C . WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS IN CURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF S UCH EXPENDITURE OR PART THEREOF , OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT , IN THE OPINION OF THE [ASSESSING] OFFICER, SATISFACTORY, THE AMOUNT COVER ED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE TH E INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR: ] 6 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 7. THE CIT WAS OF THE VIEW THAT ONCE THE PURCHASE W AS HELD TO BE BOGUS THE ENTIRE PURCHASE HAS TO BE CONSIDERED AS UNEXPLAINED EXPEND ITURE AND THE ENTIRE VALUE OF PURCHASE WHICH WERE CONSIDERED AS BOGUS OUGHT TO HA VE BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE AO FAILED TO MAKE THE AFORESAID ADDITION HIS ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE. 8. IN REPLY TO THE AFORESAID SHOW CAUSE NOTICE THE ASSESSEE SUBMITTED THAT FULL AND COMPLETE DETAILS OF PURCHASES AND SALES AND COPIES OF ALL BILLS OF PURCHASES FROM THE FOUR PARTIES WERE FILED TO SHOW THAT THE PURCHASES WERE GENUINE AND THAT ALL PAYMENTS FOR SUCH PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQU ES. THE ASSESSEE SUBMITTED THAT THE PURCHASES WERE MADE FROM THE FOUR PARTIES IN CO URSE OF ITS BUSINESS OF TRADING FOR RE-SALE. THE ASSESSEE POINTED OUT THAT IT FURNISHED THE DETAILS OF CORRESPONDING SALES OF THE PURCHASES MADE FROM THE FOUR PARTIES AND FILED EVIDENCE BEING CORRESPONDING SALE BILLS AND CHALLANS ETC. THE ASSESSEE ALSO FURNISHED A STATEMENT SHOWING THE SOURCE OF THE FUNDS AGAINST THE PURCHASES MADE FROM THE AFORE SAID FOUR PARTIES THE ASSESSEE POINTED OUT THAT IT PRODUCED ITS AUDITED BOOKS OF A CCOUNTS INCLUDING CASH BOOK, BANK STATEMENTS AND STOCK REGISTER AND CLAIMED THAT WHEN THE SALES ARE NOT DOUBTED AND ACCEPTED AS GENUINE THEN THE CORRESPONDING PURCHASE S HAVE TO BE ACCEPTED. 9. THE ASSESSEE POINTED OUT THAT THE ASSESSING OFFI CER, ON EXAMINATION OF THE DOCUMENTS AND EVIDENCE AND THE BOOKS OF ACCOUNTS FO UND THAT THERE WAS NO DISCREPANCY IN THE STOCK OF THE GOODS AND ON THE BA SIS OF THE EVIDENCE AND MATERIAL ON RECORD HE CAME TO A CONCLUSION THAT ADDITION OF 3% OF DISPUTED PURCHASES ALONE SHOULD BE ADDED AS INCOME. THE ASSESSEE ARGUED THAT THE AF ORESAID VIEW OF THE ASSESSING OFFICER IS A POSSIBLE VIEW AND IN TUNE WITH THE FA CTS OF THE CASE AND DECISIONS RENDERED BY JUDICIAL FORUMS ON SIMILAR FACTS. THE ASSESSEE DREW ATTENTION OF CIT TO THE FOLLOWING DECISIONS WHERE, ON SIMILAR FACTS, I T HAS BEEN HELD THAT THE ALLEGED BOGUS PURCHASES COULD NOT BE DISALLOWED BUT ADDITION OF C ERTAIN PERCENTAGE COULD, AT BEST, BE ADDED . 7 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 (I) IN CIT VS. SMITH P. SHETH [2013] 38 TAXMANN.CO M 385 (GUJARAT) THE HON'BLE GUJARAT HIGH COURT HELD THAT WHERE PURCHASES WERE N OT BOGUS BUT WERE MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN BOOKS OF ACCO UNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF ASSESSEE (II) IN CIT VS. SATYANARAYAN P. RATHI [2013] 38 TAX RNANN.COM 402 (GUJ) - THE HIGH COURT OF GUJARAT HELD THAT WHERE PURCHASE OF RAW MA TERIAL WAS NOT MADE FROM PARTY FROM WHOM ASSESSEE CLAIMED BUT SUCH MATERIAL WAS PU RCHASED FROM OPEN MARKET INCURRING CASH PAYMENT, ONLY PROFIT ELEMENT OF SUCH PURCHASES AND NOT ENTIRE PURCHASES WAS TO BE ADDED TO INCOME OF ASSESSEE. 10. WITH REGARD TO THE ALLEGATION OF THE CIT IN TH E SHOW CAUSE NOTICE U/S 263 OF THE ACT THAT THE ASSESSING OFFICER DID NOT EXAMINE THE APPLICABILITY OF SECTION 69C OF THE ACT AND DID NOT MAKE ADDITION OF THE WHOLE AMOUNT O F ALLEGED BOGUS PURCHASES AND THEREFORE THE ASSESSMENT ORDER PASSED BY HIM WAS ER RONEOUS, THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 69C ARE NOT APPLICAB LE. THE ASSESSEE POINTED OUT THAT THE SOURCE OF PAYMENTS FOR PURCHASES WERE EXPLAINED AN D THE PURCHASES WERE DULY RECORDED IN ITS BOOKS OF ACCOUNTS AND THE PAYMENTS FOR SUCH PURCHASES WERE MADE FROM THE DISCLOSED BANK ACCOUNT OF THE ASSESSE. THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF ITS CLAIM THAT SE CTION 69C OF THE ACT WAS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE AS SESSEEES CASE. (I) ACIT VS. SHRI RAMILA PRAVIN SHAH [ITA NO. 5246/ MUM/2013]DT. 5.3.2015 -IN THIS CASE THE ASSESSING OFFICER NOTICED THAT THE SALES T AX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA HAS LISTED OUT NAMES OF CERTAIN DEALERS , WHO WERE ALLEGED TO HAVE, BEEN PROVIDING ACCOMMODATION ENTRIES WITHOUT DOING ACTUA L BUSINESS. THE ASSESSING OFFICER NOTICED THAT. THE ASSESSEE MADE PURCHASES T O THE TUNE OF. RS.28.08 LAKHS FROM SOME OF THE PARTIES, WHOSE NAMES FOUND PLACE IN THE LIST PROVIDED BY THE SALES TAX DEPARTMENT. THE AO TOOK THE VIEW THAT THE PURCHASES TO THE TUNE OF RS.28.08 LAKHS HAVE TO BE TREATED AS UNEXPLAINED EXPENDITURE. ACCO RDINGLY, HE ASSESSED THE SAME U/S 69C OF THE ACT. ON APPEAL BEFORE LD. CIT(A), DELETE D THE ADDITION MADE UNDER SECTION 8 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 69C OF THE ACT RELYING ON THE DECISION OF HONBLE B OMBAY HIGH COURT IN THE CASE OF CLT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD [2013] 35 TAXMANN.COM 215 (CAL) WHEREIN THE HIGH COURT HELD THAT WHEN PURCHASES W ERE ALL SUPPORTED BY BILLS AND ONCE THE SALES ARE ACCEPTED THE PURCHASES CANNOT TR EATED AS INGENUINE. THE ADDITION MADE UNDER SECTION 69C WAS DELETED. (II) CIT VS. RADHIKA CREATION [2011] 10 TAXMANN.COM 138 (DELHI) - IN THIS CASE THE ISSUE BEFORE HON'BLE DELHI HIGH COURT WAS AS TO WHE THER ADDITION COULD BE MADE UNDER SECTION 69C OF THE ACT IN RESPECT OF EXPENDIT URES DEBITED IN THE BOOKS OF ACCOUNTS BUT WERE FOUND TO BE UNAUTHENTICATED. THE HON'BLE DELHI HIGH COURT HELD THAT THE FOCUS OF SECTION 69C IS ON SOURCE OF EXPEN DITURE AND NOT AN AUTHENTICITY OF EXPENDITURE ITSELF AND. THEREFORE WHEN EXPENDITURE IN QUESTION WAS SHOWN IN REGULAR BOOKS OF ACCOUNT OF ASSESSEE, THE TRIBUNAL WAS JUS TIFIED IN DELETING THE ADDITION BY HOLDING THAT SOURCE OF EXPENDITURE WAS EXPLAINED. 11. THE ASSESSEE THUS SUBMITTED THAT THE ASSESSING OFFICER WAS WHOLLY JUSTIFIED IN NOT ADDING BACK THE ENTIRE AMOUNT OF ALLEGED BOGUS PURCHASES IN AS MUCH AS THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES FROM TH E DISCLOSED BANK ACCOUNT AND WERE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER AND HE VERIFIED THE SAME. THE ASS ESSING OFFICER MADE OTHER INQUIRIES ALSO AS WOULD BE EVIDENT FROM THE ASSESSM ENT RECORDS AND THEREUPON HE CAME TO CONCLUSION THAT THE ADDITION OF THE ENTIRE AMOUN T OF ALLEGED BOGUS PURCHASES COULD NOT BE MADE UNDER SECTION 69C OF THE ACT AND DECIDE D TO MAKE ADDITION OF RS.2,38,633 FOR POSSIBLE INFLATION OF PURCHASES. 12. THE ESTIMATED ADDITION WAS MADE BY HIM AFTER MA KING INQUIRY AND AFTER CONSIDERING THE ENTIRE FACTS OF THE CASE. THUS THE ASSESSING OFFICER'S VIEW WAS ONE OF THE LEGAL VIEW AND THEREFORE THE ASSESSMENT ORDER P ASSED BY HIM COULD NOT BE HELD TO BE ERRONEOUS. THE ASSESSEE RELIED ON THE OBSERVATIO NS AT PAGE 88 OF THE JUDGMENT OF HON'BLE SC IN THE CASE OF MALABAR INDUSTRIAL CO. LT D. (2000) 243 ITR 83 (SC) 'FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ON E OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE; OR WHERE TWO VIEWS ARE 9 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME- TAX OFFICER IS UNSUSTAINABLE IN LAW.' 13. THE VIEW OF THE ASSESSING OFFICER BY NOT MAKI NG ADDITION UNDER SECTION 69C OF THE ACT COULD NOT BE HELD TO BE UNSUSTAINABLE IN LA W IN VIEW OF THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF RADHIKA CRE ATION (SUPRA). 14. THE CIT HOWEVER WAS OF THE VIEW THAT THE AO DID NOT MAKE ANY ENQUIRY IN THE LIGHT OF THE PROVISION OF SECTION 69C OF THE ACT A ND FOR FAILURE TO MAKE ENQUIRY WHICH HE OUGHT TO HAVE MADE THE ORDER OF THE AO TO BE HEL D AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THIS REGARD THE CIT PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE EN TERPRISES VS ACIT 99 ITR 375. THE CIT ULTIMATELY SET ASIDE THE ORDER OF THE AO BY CONCLUDING AS FOLLOWS :- 11. IT MAY BE FURTHER NOTICED. THAT IN ORDER TO PR OVIDE CLARITY ON THE ISSUE OF 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE', A NEW EXPLANATION HAS BEEN INSERTED TO CLARIFY THAT AN OR DER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER. (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH, SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WIT H ANY DECISION, PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDICTIONAL HIGH C OURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. THIS AMENDMENT TAKES EFFECT FROM 1-6-2015. 12 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS OF HON'BLE SUPREME COURT AND HO N'BLE HIGH COURT AND IN ACCORDANCE WITH THE AMENDMENT MADE IN SECTION-263 O F THE ACT WITH EFFECT FROM 01.06.2015, I HOLD THAT THE IMPUGNED ASSESSMENT ORD ER DATED 30.03.2015 PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTERESTS OF THE 10 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 REVENUE. I FURTHER HOLD, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, THAT THE IMPUGNED ASSESSMENT ORDER DATED 30.03.2015 IS LIABLE TO SET-ASIDE. THEREFORE, I SET ASIDE THE SAID ASSESSMENT ORDER DI RECTING THE PRESENT A.O. TO FRAME THE ASSESSMENT AFRESH AFTER CONSIDERING THE A FORESAID OBSERVATIONS, HON'BLE SUPREME COURT AND HON'BLE HIGH COURT DECISIONS AND THE PROVISIONS OF SEC.69C OF I.TACT. 1961. 13. IN THE RESULT, THE ASSESSMENT ORDER 147 DATED 3 0.03.2015 FOR A.Y.2012-13 IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO PASS A FRESH ASSESSMENT ORDER AFTER CONSIDERING THE AFORESAID OB SERVATIONS, AS PER LAW AND AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. 15. AGGRIEVED BY THE AFORESAID ORDERS OF CIT THE AS SESSEE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 16. WE HAVE HEARD THE SUBMISSIONS OF THE LD.COUNSEL FOR THE ASSESSEE, WHO FIRSTLY REITERATED THE SUBMISSIONS AS WERE MADE IN REPLY TO THE SHOW CAUSE NOTICE U/S 263 OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT IN THE IMPUGNED ORDER THE CIT HAS RELIED ON THE EXPLANATION 2 TO SECTION 263 OF THE A CT (EXTRACTED IN PARAGRAPH 9 OF THIS ORDER ) WHICH WAS INSERTED IN THE ACT BY THE FINANC E ACT 2015 W.E.F. 01.04.2015. IT WAS SUBMITTED BY HIM THAT IT HAS BEEN HELD IN THE F OLLOWING DECISIONS OF ITAT THAT THE AFORESAID AMENDMENT CANNOT OVER RIDE THE STATUTORY REQUIREMENTS OF A CONCLUSION BY CIT IN AN ORDER PASSED U/S 263 OF THE ACT THAT AN O RDER IN QUESTION WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. I) ITA NO.3205/DEL/2017IN THE CASE OF M/S AMIRA PURE FOODS PVT. LTD. VS PR.CIT ORDER DATED 29.11.2017. II) ITAT B BENCH IN ITA NO.2690/MUM/2016 AND 2691/M UM/2016 IN THE CASE OF SHRI NARAYAN TATU RANE VS ITO, MUMBAI ORDER DATE D 06.05.2016. 17. HE ALSO SUBMITTED THAT THE QUESTION OF APPLICAT ION OF SECTION 69C OF THE ACT IN THE PRESENT CASE IS NOT WARRANTED. IN THIS REGARD H E DREW OUR ATTENTION TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS RADHIKA CREATION (SUPRA). 11 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 18. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PR.CIT VS RAMA SHANKAR YADAV ( 2017) 85 TAXMAN.COM 173 (ALL) WHEREIN IT WAS HELD THAT THE PROVISION OF SECTION 6 9C OF THE ACT ARE NOT MANDATORY AND THAT ASSESSING AUTHORITY HAS FULL DISCRETION EITHER TO ADD OR NOT TO ADD UNEXPLAINED EXPENDITURE IN INCOME OF ASSESSEE BASED UPON SOUND JUDICIAL PRINCIPLES . 19. THE OTHER SUBMISSIONS MADE BEFORE THE CIT WERE REITERATED. 20. THE LD. DR, ON THE OTHER HAND, RELIED ON THE OR DER OF THE CIT. ACCORDING TO HIM THE AO HAS PASSIVELY ACCEPTED THE SUBMISSIONS OF TH E ASSESSEE. HE OUGHT TO HAVE ADDED THE ENTIRE VALUE OF BOGUS PURCHASE OR SHOULD HAVE MADE ENQUIRIES ON THIS LINE. FAILURE TO DO SO RENDERED HIS ORDER ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. 21. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. FIRST ASPECT WHICH WE NEED TO SEE IS AS TO WHAT WAS THE E NQUIRY MADE BY THE AO WHILE COMPLETING THE ORDER OF ASSESSMENTS FOR A.Y.2010-11 AND 2011-12 WHICH ASSESSMENTS WERE REOPENED BASED ON THE INFORMATION RECEIVED FRO M DGIT (MUMBAI) ABOUT THE ASSESSEE HAVING OBTAINED BOGUS RECEIPTS FROM PARTIE S IN MUMBAI EVIDENCING PURCHASES. IN A NOTICE DATED 22/07/2014 FOR A.Y.201 1-12 (COPY AT PAGE 22 TO 23 OF PAPER BOOK) THE AO CALLED UPON THE ASSESSEE TO GIVE QUANTITATIVE DETAILS OF PURCHASES AND SALES AND DETAILS OF OPENING AND CLOSING STOCK. IN A.Y. 2010-11 AND 2011-12 THE AO HAS ACKNOWLEDGED IN THE ORDER OF ASSESSMENT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FILED VARIOUS SUBMISSIONS AD ACCOUNT STATEMENTS INCLUDING COPY OF BILLS ETC SHOWING PURCHASES FROM THE FOUR PARTIES WHICH ACCORDING TO THE INFORMATION RECEIVED FROM DGIT(MUMBAI) WERE BOGUS. THE ASSESSEE ALSO FILED DETAILS OF CORRESPONDING SALES AGAINST PURCHASES FROM THE A FORESAID FOUR PARTIES. THESE DETAILS ARE PLACED AT PAGE 46 TO 48 AND 57-60 OF THE ASSESS EES PAPER BOOK FOR A.Y.2010-11 AND 2011-12 RESPECTIVELY. THE ASSESSEE ALSO FILED C ONFIRMATION FROM THE FOUR PARTIES THE PURCHASES FROM WHOM IT WAS ALLEGED BY THE REVEN UE TO BE BOGUS. THESE 12 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 CONFIRMATIONS ARE PLACED AT PAGES 40 TO 45 AND 41 T O 56 OF THE ASSESSES PAPER BOOK FOR A.Y.2010-11 AND 2011-12. THE ASSESSEE ALSO FILED A LL COPIES OF SALES BILLS OF ALL SALES EFFECTED BY IT DURING THE PREVIOUS YEAR RELEVANT TO A.Y.2010-11 AND 2011-12. THESE DETAILS ARE AVAILABLE AT PAGE 69-153 AND 91-203 OF ASSESSEES PAPER BOOK FOR A.Y.2010-11 AND 2011-12 RESPECTIVELY. THE STATEMENT SHOWING THE SOURCE OF FUNDS AND THE MODE OF PAYMENT FOR THE PURCHASES WHICH WER E CLAIMED BY THE REVENUE TO BE BOGUS WERE ALSO FURNISHED. THESE DETAILS ARE GIVEN AS ANNEXURE I AND ANNEXURE-II RESPECTIVELY FOR A.Y.2010-11 AND 2011-12 TO THIS OR DER. 22. IN THE LIGHT OF THE INFORMATION RECEIVED FROM D GIT (INVESTIGATION), MUMBAI, AND THE EVIDENCE FILED BY THE ASSESSEE CLAIMING THA T PURCHASES FROM THE AFORESAID FOUR PARTIES WERE GENUINE, THE AO CONCLUDED THAT THE PUR CHASES FROM THE FOUR PARTIES WERE NOT GENUINE.. THIS CONCLUSION WAS BASED ONLY ON THE INFORMATION RECEIVED BY THE AO FROM THE DGIT (INVESTIGATION), MUMBAI. AFTER DRAWIN G THE ABOVE CONCLUSION THE ISSUE BEFORE THE AO WAS AS TO WHETHER THE ENTIRE VALUE OF PURCHASES SHOULD BE ADDED TO THE TOTAL INCOME. TOWARDS THIS OBJECTIVE THE AO EXAMINE D THE SALES AND FOUND THAT THE QUANTITY OF PURCHASES AND CORRESPONDING SALES MATCH ED. THE STOCK REGISTER FOR A.,Y.2010-11 AND 2011-12 FILED BY THE ASSESSEE BEFO RE THE AO ARE AT PAGES 33 TO 39 AND 36 TO 40 OF THE PAPER BOOK FILED BY THE ASSESSE E FOR A.Y.2010-11 AND 2011-12 RESPECTIVELY. 23. ON EXAMINATION OF THE DETAILS THE AO FOUND THAT THE SALES WERE MADE TO GOVERNMENT AND REPUTED PARTIES AND THEREFORE THE SA LES AS CLAIMED BY THE ASSESSEE WERE GENUINE. ONCE THE SALES ARE GENUINE CORRESPOND ING PURCHASES ALSO CANNOT BE DENIED. THE ONLY POSSIBILITY IN THE GIVEN CIRCUMSTA NCES WAS TO PROCEED ON THE THEORY THAT THE PURCHASES WERE MADE BY THE ASSESSEE IN THE GREY MARKET AT A LESSER PRICE AND THE BOGUS BILLS WERE OBTAINED TO SHOW HIGHER PURCHA SE PRICE AND REDUCE THE PROFIT MARGIN AS PER THE BOOKS OF ACCOUNTS. THE AO ADOPTED THIS COURSE AND ESTIMATED THE POSSIBLE SUPPRESSION OF REVENUE. THE COURSE ADOPTE D BY THE AO WAS THEREFORE A POSSIBLE VIEW IN LAW. 13 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 24. IN THE IMPUGNED ORDER THE CIT IS OF THE OPINION THAT THE AO OUGHT TO HAVE INVOKED THE PROVISIONS OF SEC.69C OF THE ACT AND OU GHT TO HAVE ADDED THE ENTIRE VALUE OF BOGUS PURCHASES AND THAT HE FAILED TO MAKE ENQUI RIES WHILE COMPLETING THE ASSESSMENT ON THE APPLICABILITY OF THE PROVISIONS O F SEC.69C OF THE ACT TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE . SECTION 69C OF THE ACT PROVIDES THAT WHERE, IN ANY FINANCIAL YEAR, THE ASSESSEE HAS INCURRED AN EX PENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION, IF IT IS OFFERED BY HIM, IS NOT, IN THE OPINION OF THE AO, SATISFACTORY., THE AMOUNT COVERED BY THAT EXPENDITURE OR PART THEREOF, MAY BE DEEMED TO BE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. IN THE PRESENT CASE, THE ASSES SEE HAS SHOWN THE EXPENDITURE ON PURCHASES IN THE BOOKS OF ACCOUNTS AND EXPLAINED TH E SOURCE OF PAYMENT THROUGH BANKING CHANNELS. IN SUCH CIRCUMSTANCES, THERE WAS NO BASIS TO SAY THAT APPLICABILITY OF THE PROVISIONS OF SEC.69C OF THE ACT WERE NOT EN QUIRED INTO BY THE AO WHILE CONCLUDING THE ASSESSMENT. THE HONBLE ALLAHABAD H IGH COURT IN THE CASE OF PR. CIT VS RAM SHANKAR YADAV (SUPRA) HELD THAT PROVISIONS O F SEC.69C OF THE ACT ARE NOT MANDATORY AND THE AO HAS DISCRETION TO ADD OR NOT T O ADD UNEXPLAINED EXPENDITURE BASED ON SOUND JUDICIAL PRINCIPLES. 25. IN THE IMPUGNED ORDER, THE CIT HAS OBSERVED THA T THE AO OUGHT TO HAVE MADE ENQUIRIES FROM THE ALLEGED BOGUS PURCHASE BILL/ENTR Y PROVIDERS AND HELD THAT PURCHASES WERE BOGUS. THE AO HAS ALREADY HELD THAT THE PURCHA SES WERE BOGUS AND THE ONLY QUESTION BEFORE HIM WAS AS TO WHETHER THE ENTIRE PU RCHASES OUGHT TO BE ADDED AS INCOME OR ONLY A PORTION OF THE PURCHASES TOWARDS I NFLATED COST. 26. THE CIT HAS MADE REFERENCE TO EXPLANATION-2 TO SEC.263 OF THE ACT INTRODUCED BY THE FINANCE ACT, 2015. EXPLANATTION-2 SO INTRODU CED SETS OUT CASES IN WHICH ORDER OF THE AO CAN BE DEEMED AS ERRONEOUS. THE SAID EXPL ANATION DOES NOT DISPENSE WITH COMPLIANCE OR EXISTENCE OF (I) THERE BEING NO ENQUI RY MADE BY THE AO; (II) THE AOS CONCLUSION BEING CONTRARY TO CBDT CIRCULAR OR (III) AGAINST DECISION OF JURISDICTIONAL HIGH COURT OR SUPREME COURT. IN THE PRESENT CASE TH E CIT IN THE IMPUGNED ORDER HAS 14 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12 NOT BROUGHT FACTS TO SHOW THE EXISTENCE OF ABSENCE OF ENQUIRY ESPECIALLY WHEN THE AO HAS ALREADY CONCLUDED THAT THE PURCHASES BY THE ASS ESSEE FROM FOUR PARTIES MENTIONED BY THE DGIT(INVESTIGATION) MUMBAI IN ITS REPORT WER E BOGUS. THE DECISION OF THE MUMBAI AND DELHI ITAT IN THE CASE OF M/S. SHRI NARA YAN TATU RANE (SUPRA) AND M/S. AMIRA PURE FOODS (P) LTD (SUPRA) CITED BY THE LD. A R CLEARLY SUPPORTS THE VIEW THAT EXPLANATION 2 TO SEC.263 OF THE ACT WILL NOT BE O F ANY ASSISTANCE TO THE PLEA OF THE REVENUE UNLESS THE FACTS AND CIRCUMSTANCES SET OUT THEREIN EXISTS IN A GIVEN CASE. 27. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE O RDERS OF THE AO WERE NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE FOR FAILURE TO MAKE ENQUIRY ON THE APPLICABILITY OF SEC.69C OF THE ACT. WE, THEREF ORE, QUASH THE ORDERS U/S 263 OF THE ACT AND ALLOW THE APPEALS OF THE ASSESSEE. 28. IN THE RESULT THE APPEALS ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017. SD/- SD/- [DR.A.L.SAINI] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13.12.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.OM FOREGOING & ENGINEERING PRIVATE LIMITED, 28, S TRAND ROAD, 2 ND FLOOR ROOM NO.204, KOLKATA-700001. 2.PR.C.I.T-1, KOLKATA. 3.. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHES 15 ITA NOS.509&510/KOL/2017 OM FORGING & ENGINEERING ( P)LTD. A.Y.2010-11 & 2011-12