Section 263 revision invalid where AO conducted adequate enquiry into purchases and applied mind; PCIT cannot substitute view merely deeming enquiry inadequate without specific error.

आदेश/ORDER

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the order of the Principal Commissioner of Income Tax, Chennai-3 (in short "PCIT") passed u/s. 263 of the Income Tax Act, 1961 (in short "the Act") dated 12.03.2025 for Assessment Year (AY) 2021-22. The assessee raised the following grounds of appeal:

“1. The order of the learned Assessing Officer Is Contrary to law and Facts and Circumstance of the case.

2. The Ld AO failed to appreciate the evidence submitted in course of assessment proceedings and assessed certain purchase as not genuine and assessed as unexplained expenditure.

3. The LD AO without considering the evidence in support of the expenditure submitted, failed to see the merit of the same sighting time limit while passing the assessment order.

4. Reason behind the disallowance of expenditure was non filing of ITR by suppliers, non response to the 133(6) notice and presumptions that supplies were not made, though e-way bill was submitted during the proceedings along with invoice copies, ledger account, bank statement.

5. After the advent of GST and online portal to claim ITC, when the outward supplies are duly recorded, supplier is bound to discharge the GST, otherwise appellant cannot claim ITC. Hence there is natural checks and balance in the system and independent department ie GST confirm, in the same Finance ministry. Hence bogus purchase as alleged by the Id AO comes with a cost, secondly when the appellant is duly discharging his statutory obligation, it is mere allegation that appellant resort to this without any iota of proof, solely relying on non response to 133(6) notice by some suppliers.

6. Ld PCIT-3, Chennai stated that notice u/s 133(6) was given to 14 parties and only 3 parties responded and Id FAO has concluded supplies from four parties amounting to Rs.9398061 is not genuine and treated the same as unexplained expenditure u/s 69C is erroneous and prejudicial to the interest of revenue.

7. Submission made before FAO was also submitted to PCIT-3, Chennai and like FAO, PCIT-3 was specific about response to notice u/s 133(6) of IT Act, 1961 and both were least bothered about the nature of transaction and genuineness of the transaction made. Both would have accepted ingenuine transaction if there was response for notice u/s 133(6)

8. With all the resources in hand, Ld AO failed to find defects in a single transaction made by the appellant for which documentary evidence was submitted.

9. Ld PCIT-3, Chennal too concluded that response to notice u/s 133(6) is a must and if not received transaction is ingenuine.

10. For these reasons and other reasons to be adduced at the time of hearing the applicants pray that the addition made by the AO be detected and Justice rendered.

In view of all these and other grounds, which may be adduced during the hearing of appeal, the appellant prays that the appeal may be allowed and justice rendered.”

2. The assessee is a partnership firm and engaged in the business of trading in cashews. The assessee filed the return of income for AY 2021-22 on 30.12.2022 declaring total income of Rs. 98,65,030/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The A.O made an addition of Rs.93,98,061/- towards purchases treating the same as unexplained expenditure u/s. 69C of the Act. Subsequently, the PCIT issued a show cause notice u/s. 263 of the Act for the reason that the A.O had not conducted full enquiry with regard to the purchases and made addition towards