KETAN GORI,JAMNAGAR V. INCOME TAX OFFICER, WARD 2(10), JAMNAGAR

ITA 42/RJT/2025

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The case involves Ketan Gori, the assessee, who appealed against the order of the Principal Commissioner of Income-tax (PCIT), Jamnagar, which was passed under section 263 of the Income-tax Act, 1961. The PCIT's order was based on the grounds that the Assessing Officer (AO) failed to verify the genuineness of purchases made by the assessee from certain suppliers, which were flagged as suspicious. The Tribunal examined the materials on record, including the responses and documents submitted by the assessee during the assessment proceedings, and found that the AO had conducted a thorough examination and inquiry. The Tribunal noted that the PCIT's revision was based on a mere change of opinion and did not consider the substantial evidence provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716895 (ITAT-RAJKOT)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2021-2022
• Appeal Filed On: 21-01-2025
• Other Referred Cases: CIT vs. Sunbeam Auto Ltd., Malabar Industrial Co. Ltd. vs. CIT, Ranka Jewellers vs. Addl. CIT, Smt. Juthika Kar vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PUNGLIA; LD.
• Assessee Lawyers: SAGAR SHAH; LD
• Keywords: Difference of opinion; Change of opinion; Unexplained expenditure; Third party statement; Assessment record; Revision of order; Bogus
• Section: 143(3); 142(1); 263; 133(6); 69C

Judgement Text

"आयकर अपीलȣय अͬधकरण, राजकोट Ûयायपीठ, राजकोट। IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं/.ITA No.42/RJT/2025 Ǔनधा[रणवष[ / Assessment Year: 2021-22 Ketan Gori Plot No.3009 GIDC Phase-III Dared. PAN : AHPPG 5892 A बनाम Vs. The Pr.CIT Jamnagar. (अपीलाथȸ/assessee) : (Ĥ×यथȸ/Respondent) Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Sagar Shah, ld.AR राजèव कȧ ओर से/Revenue by : Shri Sanjay Punglia, ld.CIT-DR सुनवाई कȧ तारȣख /Date of Hearing : 12/06/2025 घोषणा कȧ तारȣख /Date of Pronouncement : 22/08/2025 ORDER Per, Dr. Arjun Lal Saini, Accountant Member: By way of this appeal, the assessee has challenged the correctness of the order dated 08.01.2025, passed by the Learned Principal Commissioner of Income-tax (in short “Ld PCIT”), under section 263 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2021-22. 2. Although, in this appeal, the Assessee, has raised multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Assessee and we find that solitary grievance of the assessee Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 2 is that the order passed by the Ld. Principal Commissioner of Income Tax, under section 263 of the Income Tax Act, dated 08.01.2025 is bad in law as well as on facts and is required to be quashed as the same is passed without satisfying the twin conditions as prescribed under the law. 3. The relevant material facts, as culled out from the material on record, are as follows. The return of income for the Assessment Year (AY) 2021-22, was filed by the assessee, on 30/10/2021, declaring a total income of Rs. 4,64,250/-. The assessee`s case was selected for Scrutiny under the Computer-Assisted Scrutiny Selection (CASS) for the reason \"Assessee has made substantial purchases from suppliers who are either non-Filer(s) or have filed non-business ITR (ITR 1,2) or reflected a substantially lower turnover in ITR\". Subsequently, the assessment was completed under section 143(3) of the Income-tax Act, 1961 (for short 'the Act1) vide, order dated 18/12/2022, accepting the returned income. 4. Later on, Learned Principal Commissioner of Income-tax (in short “Ld PCIT”), has exercised his jurisdiction under section 263 of the Income-tax Act, 1961. On perusal of the assessment records, it was observed by learned PCIT that while finalizing the assessment proceedings, the Assessing Officer (AO) failed to verify or examine various aspects of the taxability of income, therefore, it renders the order erroneous and prejudicial to the interests of the revenue. The learned PCIT noticed that assessee`s case was selected for scrutiny under CASS primarily for verifying substantial purchases from suppliers who were either Non-Filers, had filed non-business ITRs, or had shown substantially low turnover. Examination of GST data on the GST portal revealed that purchases were made from the entities who were not filed their return of income for the year under consideration. The ld. PCIT also noticed that these entities appeared to be bogus and were likely Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 3 used to accommodate unaccounted money. Thus, purchases from these entities should have been disallowed and treated as unexplained expenditure under section 69C read with section 115BBE of the Act. The AO failed to conduct any verification or inquiry to ascertain the genuineness of these transactions, despite it being the primary reason for scrutiny selection. 5.Therefore, ld. Pr. CIT, issued show -cause notice to the assessee on 04.12.2024 to the assessee to explain the transaction. The said show cause notice is reproduced by the ld. Pr. CIT, on page no.2 to 6 of the revision order, under section 263 of the Act. 6. In response to the notice of the ld. Pr. CIT, the assessee submitted its written submissions along with documentary evidences, which are reproduced by the ld. Pr. CIT in the revision order. The assessee submitted before the learned PCIT that revision proceeding are mere change of opinion and without bringing anything new on the record. During the assessment proceedings, the assessee submitted the following documents and evidences, Viz: Purchase Bills along with Transportation details, Transaction duly reported in GSTR-1 and GSTR-3B of the supplier,Transaction duly reported in GSTR-2A of the recipient, Purchases duly reported in Audited Accounts, Payment has been made to supplier through Banking Channel. The assessee also submitted that genuine purchases cannot be disallowed merely based on allegations of the suppliers being bogus. 7.However, ld. Pr. CIT rejected the above submissions of the assessee and observed that in case of some of the suppliers, the GST registrations were cancelled therefore, this leads to conclusion that the genuineness of transactions with supplier is not proved. The ld. PCIT held that the assessment order passed Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 4 by the Assessing Officer u/s 143(3) read with section 144B of the Act, dated 18/12/2022, in the case of the above mentioned assessee for the A.Y. 2021-22, is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263 of the Act. Therefore, ld. PCIT directed the assessing officer to conduct detailed verification of the purchases from the entities flagged as suspicious entities. 8. Aggrieved by the order of the ld. Pr. CIT, the assessee is in appeal before us. 9. Shri Sagar Shah, the ld. Counsel for the assessee, argued that during the assessment proceedings, the AO has issued notices to nine parties, from whom the assessee purchased the goods and the parties have replied to the assessing officer (AO). The respective confirmations from all the suppliers were filed before the assessing officer, which is placed at Paper Book Page No.21 to 65 of the assessee`s paper book. Therefore, the ld. Counsel for the assessee submitted that during the assessment proceedings, all the parties have replied to the assessing officer (AO). However, the AO has not brought these evidences in the assessment order. The ld. Counsel further submitted that during the assessment proceedings, the AO has issued notice to the assessee, under section 142(1) of the Act, which is mentioned by the AO in the assessment order itself. The AO has also issued notices under section 133(6) of the Act, during the assessment proceedings, and in response to these notices, the respective parties have submitted the reply, which is mentioned in the paper book. However, the AO did not bring these facts in the assessment order. Most of the purchases were made from the two parties and the ld. Counsel submitted that in respect of these two parties, the assessee submitted the following details and evidences during the assessment proceedings: Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 5 i) Documents related to party named : Sangeetaben Lalitbhai Sadaria  Confirmation of account  Copy of Sample bills issued by the party  Bank statements reflecting the payments  Summary of GST Form-2A reflecting the credit of purchase ii) Documents related to party named : Md.Sahejad Metaji  Confirmation of account  Copy of Sample bills issued by the party  Bank statements reflecting the payments iii) GST return filing of aforesaid parties. 10.Therefore, these above evidences were on the file of the AO, and the AO having examined these evidences and documents, allowed the claim of the assessee. Therefore, the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. 11. On the other hand, the ld.DR for the revenue, submitted that, no-doubt during the assessment proceedings, the assessee submitted the details and evidences before the assessing officer. However, the AO simply kept these documents and evidences, in the file and did not conduct any further inquiry.The ld.DR submitted that purchases were made by the assessee from suspicious parties, and in case of some of the parties ( suppliers), the GST numbers were cancelled. Therefore, assessing officer has not conducted in-depth inquiry in respect of the submissions made by the assessee. Therefore, the assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue. 12. We have heard both the parties and perused the material available on record. We note that the revision proceedings u/s 263 of the Act, were initiated by the learned PCIT, on merely the ground that purchaser parties have not filed their ITR and had filed ITR showing lower turnover and some of the parties GST number were cancelled. However, we find that the contention raised by the ld Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 6 PCIT is not correct, as the all Suppliers filed GSTR for financial year (F.Y.) 2020-21. The assessing officer, during the assessment proceedings also issued notices to these suppliers under section 133(6) of the Act, and in response to these notices, these parties submitted their respective reply and confirmations.During the year under consideration, the business accounts of the assessee were duly audited by an independent auditor, and the audit report along with the audited financial statements were filed along with the return of income. Further the copy of same were duly submitted by the assessee to the Ld. AO during the course of assessment proceedings. Thus whole business transactions were duly recorded by the assessee in his books of accounts. During the assessment proceedings, the assessee received a notice under section 142(1) of the Income Tax Act, 1961, asking for various details and documents. The assessee submitted all the required information and evidence in response to these notices. The second show cause notice was issued by the assessing officer regarding the genuineness of certain purchases and the assessee gave a detailed reply along with supporting documents. We note that the assessee submitted the documents in support of the transactions carried out by the assessee and considering the submission and genuineness of the transactions carried out by the assessee, the assessing officer passed the order dated 18.12.2022, accepting the explanation given by the assessee and no adverse interference was drawn by the assessing officer. 13. We note that during the assessment proceedings, the invoices along with other evidence, as like e-way bill, Lorry receipt in respect of receipt of goods (purchase) in which transaction was above Rs. 10 Lakhs were submitted by the assessee. The assessee had duly submitted copies of bills from Meet Metal and Minesh Metal (the parties under consideration) in response to the notice issued under section 142(1) dated 18.11.2022. During the assessment proceedings, the Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 7 confirmation of purchasing parties for the FY 2020-21, were submitted. The assessee had duly submitted contra confirmations of Meet Metal and Minesh Metal (the parties under consideration) in response to the notice issued under section 142(1) dated 05.12.2022. These contra confirmations were also submitted by the assessee before the Bench. 14. We further note that all the purchasing parties are duly verified during the course of assessment proceedings and AO has also given the findings on the suppliers of the assessee stating that “Assessee has given confirmation details, ledger copy, copy of Acknowledgement of ITR, hence no adverse inference is taken” which shows that AO has correctly made all the inquires and verified the purchase transaction entirely. Therefore, the order passed by the ld. PCIT is bad in law as well as on facts, as the revisionary order passed, is merely based on the allegation that supplier parties of the assessee are not genuine, however, Ld. PCIT failed to bring any concreate evidence which suggest that purchases made by assessee, from the two parties namely, Meet Metal - BQDPM7462A and Minesh Metals - AFQPV9124D are not genuine which are the major parties. We find that Ld. PCIT has failed to consider that purchase transaction of the assessee was supported by the strong third-party evidence, such as, confirmation statement of supplier, bank payments, copies of purchase bills along with vehicle no. of truck used for transportation, Screen shot reflecting return filing frequency of the supplier and proof that transaction is reported and which proved that suppliers have filed their GSTR-1 and also paid tax in their GSTR-3B. Besides, the Ld. PCIT stated that supplier’s GSTRN has cancelled within short span, however, we note that as per the data available on the GST portal, stated by the assessee, that suppliers have filed all GST returns for the F.Y. 2020-21 relevant to assessment year 2021-22, and the same fact is placed on the record before the PCIT, which Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 8 shows that there is contradiction in the statement of the PCIT, as data available on the GST portal states that registration is valid for whole financial year and supplier has also filed GST returns afterwards. Therefore, the order of the assessing officer did not suffer from any lack of enquiry and non-application law and provisions of law. Therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue. 15. In the case of the assessee, there is no denying the fact, as detailed above and acknowledged in the assessment order u/s. 143(3) dated 28.03.2016, that in response to notices u/s. 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time and produced/ submitted necessary details/documents as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined by Assessing Officer. Therefore, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s. 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessment order passed by him could not be held to be erroneous and prejudicial to the interests of revenue. For that we rely on the decision of Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Del)] .Further, it was settled by Hon`ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC)] wherein it was held that if the A.O. adopts one of the possible courses available in the scheme of the I.T. Act which results in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s. 263 of the Act. In other words, the Ld. Pr. C.I.T. on the same Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 9 set of facts and evidences on record was of the opinion that the A.O. should have rejected the regrouping of debit and credit entries as explained above and he should have taken the stand which the Ld. Pr. C.I.T. hinted in the impugned order u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below : “The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law”. 16. We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon’ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon’ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT (supra) and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi- judicial functions vis-a-vis passing the assessment order u/s.143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 10 order cannot be subjected to revision proceedings. For that we rely on the decision of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt. Juthika Kar vs. ITO [I.T.A. No.1128/Kol/ 2009, dated 16.5.2012 ], wherein it has been held as under (relevant portion) :- “8……However, what is opinion formed as a result of these enquiries is something which is inexclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue.” 17.Based on the above discussion on assessee`s facts as well as on various precedents applicable to assessee’s facts, we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the Ld. A.O. and verified by him and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. Therefore, we quash the order of the ld. PCIT u/s 263 of the Act. 18. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 22/08/2025 Sd/- Sd/- (DINESH MOHAN SINHA) JUDICIAL MEMBER (DR.ARJUNLAL SAINI) ACCOUNTANT MEMBER राजकोट /Rajkot िदनांक/ Date: 22/08/2025 *vk आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to : Printed from counselvise.com Ketan Gori Vs. ITO ITA No.42 /RJT/2025 11  अपीलाथê/ The assessee  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ(अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, राजकोट/ DR, ITAT, RAJKOT  गाडªफाईल/ Guard File /True copy/ By order Assistant Registrar/Sr. PS/PS ITAT, Rajkot Printed from counselvise.com "