High Court at Calcutta · Judgments and reasoned final orders
Principal Commissioner of Income Tax, Central-2, Kolkata v. M/s A P Fashion Private Limited
ITAT/188/2025 (IA No: GA/2/2025) ·
Quashing of revisionary order under Section 263 directing disallowance of entire purchases of Rs. 84,41,255/- of sarees from M/s Afterlink Vinimay Pvt. Ltd. where sales and gross profits were accepted by the Assessing Officer after inquiry during reassessment.
1. FACTS OF THE CASE
The assessee, a wholesale trader in sarees, purchased goods worth Rs. 84,41,255/- from M/s Afterlink Vinimay Pvt. Ltd. In reassessment proceedings under Section 147/143(3), the AO examined the purchase bills, stock register, banking payments, and corresponding sales. The PCIT invoked Section 263 to set aside the reassessment order as erroneous and prejudicial to the interests of the Revenue. The ITAT quashed the Section 263 order on 18.11.2024.
2. DISCUSSION BY THE COURT
The Division Bench held that the AO had conducted specific inquiries into the purchases of Rs. 84,41,255/- during reassessment and taken a plausible view. Crucially, where the corresponding sales out of the purchased stock and the resulting book profits were accepted by the Department, there could be no sales without purchases, and disallowing the entire purchase consideration would result in taxing gross receipts rather than real income. Consequently, the twin conditions under Section 263 were not satisfied.
3. JUDICIAL DECISION
Finding no substantial question of law in the Revenue's appeal, the High Court dismissed the appeal and the connected stay application.
4. OUTCOME
Assessee - Revenue appeal dismissed; ITAT order quashing Section 263 revision upheld.
5. AKHB REVIEW POINT
Where the AO verifies purchase invoices, quantitative stock movement, and banking payments during reassessment and accepts the corresponding sales, the PCIT cannot invoke Section 263 to disallow 100% of the purchase cost.
Source and verification
4-page official High Court at Calcutta judgment PDF (20260311_WBCHCO0035432025.pdf, 59,529 bytes).
Original PDF: 4 pages · SHA-256: cfd2a3d3de8a7c0c4317002750aef71056e6e7feadf3bc6f587c2830ebc4c0e0
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies Sections 143(3), 147, 260A, and 263 of the Income-tax Act, 1961. Income-tax Act, 2025 equivalence is not verified.
Full 4-page primary judgment PDF text read and verified page-by-page. Reaffirms that where sales are accepted, entire purchases cannot be disallowed through Section 263 revision.
AI disclosure and professional disclaimer
AI-assisted source review. Independent human approval is not represented.
General research only. Read the complete judgment and verify applicable law and subsequent treatment before reliance.