Bombay High Court
Pr. Commissioner Of Income Tax 8 vs Suraj Infrastructures Pvt. Ltd on 6 September, 2023
Bench: K.R. Shriram, Dr. Neela Gokhale
2023:BHC-OS:9680-DB 3-ositxa-2162-2018.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL (IT) NO. 2162 OF 2018
Pr. Commissioner of Income Tax - 8 ... Appellant
Versus
Suraj Infrastructures Pvt. Ltd. ... Respondent
Mr. Suresh Kumar for Appellant.
None present for Respondent.
CORAM K. R. SHRIRAM &
DR. N. K. GOKHALE, JJ.
DATED: 6th September 2023
P.C. :
1. Mr. Suresh Kumar states that Respondent has been served.
Respondent, however, is absent.
2. This is an Appeal under Section 260A of the Income Tax Act,
1961 ("the Act") filed by the Revenue impugning an order dated
25th September 2017 passed by the Income Tax Appellant Tribunal
("ITAT").
3. Respondent-assessee had filed return of income for the
Assessment Year 2009-2010 declaring 'nil' income. Subsequently
an order under Section 143(1) of the Act dated 25th March 2011
was passed accepting the income returned by assessee. A further
order under Section 143(3) read with Section 147 of the Act was
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passed on 27th March 2015 assessing income at Rs. 20,00,050/-.
Assessing Officer ("AO") had made an addition of Rs.
1,97,35,311/- on account of bogus purchases and added the same
to the total income. Assessee impugned the order before the
Commissioner of Income Tax (Appeals) ("CIT(A)"), who allowed
the Appeal on the ground that the addition was made only because
the name of party appears in the list of Sales Tax Department and
the party was not produced before AO. The Revenue challenged
the order of CIT(A) passed on 14 th December 2016 before the ITAT.
The ITAT partly allowed the Appeal of Revenue vide the impugned
order holding that AO made addition towards gross profit on
alleged bogus purchases.
4. The following substantial questions of law are proposed :
i. Whether on the facts and circumstances of the
case and in law the Hon'ble ITAT is justified in
estimating the profit element embedded in the amount
represented by bogus purchases recorded in the books of
account at 12.5% of the total bogus purchases without
appreciating that any expenditure not found to be
incurred at all, least of all that the same is also not laid
out or expended wholly and exclusively for the purposes
of business is not admissible in terms of the provisions of
Section 37 of the Act ?
ii. Whether prejudice to ground no. 1 above, whether
on the facts and in the circumstances of the case and in
law, the Hon'ble ITAT is justified in taking only 12.5% of
the total amount of bogus purchases as income and thus
allowing 87.5% of such total amount of purchases as
expenditure in contravention of the provisions of Section
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37 of the Act ?
iii. Whether on the facts and in the circumstances of
the case and in law, the Hon'ble ITAT is justified in
allowing the relief to the assessee ignoring the judgment
of Hon'ble Apex Court in the case of N. K. Proteins
Limited and Shewtamber limited on this issue wherein,
the SLP filed by the assessee have been dismissed by
Hon'ble Apex Court ?
iv. Whether on the facts and circumstances of the
case and in law, the Hon'ble ITAT was justified in
directing the AO to restrict disallowance out of
bogus/unproved purchases to 12.5% of such purchases
without appreciating the fact that the assessee could not
establish the genuineness of the transaction by
producing 8 parties from whom purchases were stated to
have been made and an independent enquiry conducted
by the A.O. also revealed that these parties were non-
existent and have been declared as Hawala Dealers by
VAT department as they were found to be engaged in
providing bogus bills without actual supply of goods and
mere submission of copies of invoices, ledger account,
bank statement etc. does not prove the genuineness of
the transaction ?
v. Whether on the facts and in circumstances of the
case and in law, Hon'ble ITAT justified in directing the
Assessing Officer to disallow 12.5% of the bogus
purchases rather than whole of such bogus purchases
without appreciating that allowance of such expenditure
implies allowance of purchases made in cash from the
'grey' market, thereby rendering the provisions of section
40A(3) of Income Tax Act, 1961 totally redundant,
which could not have been the intention of the statute ?
5. All questions relate to the issue of bogus purchases.
6. AO had made addition towards gross profit on alleged bogus
purchases based on the information received from the
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Investigation Wing which stated that assessee was one of the
beneficiaries of bogus purchase bills obtained through hawala
operators. AO was of the opinion that though assessee furnished
certain documents to justify purchases, it failed to produce the
parties in person.
7. It is assessee's case that just because the party did not appear
in person before AO, the genuineness of purchases can not be
doubted when all details are furnished to justify the purchases. It
is also assessee's case that it had declared the gross profit of
30.12% which was higher than the gross profit declared in similar
line of business and AO was not justified in estimating the gross
profit @ 60.24%, which was arbitrary.
8. The ITAT in its impugned order had relied upon the
judgment of Gujarat High Court in the case of Commissioner of
Income Tax v. Vijay Proteins Ltd. 1 and also in the case of
Commissioner of Income Tax v. Smith P. Sheth2 and held that no
uniform yardstick can be applied for estimating gross profit on
bogus purchases which is depending upon the facts of different
cases. The ITAT held that the Co-ordinate Bench in number of
cases has taken a consistent view and directed AO to estimate
1. 58 taxmann.com 44 (Guj.).
2. 2013(356) ITR 451 (Guj.).
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gross profit of 12.5% on alleged bogus purchases and therefore, in
the case at hand also directed AO to estimate gross profit at 12.5%
on the bogus purchases.
9. Even on merits, the ITAT found that the approach of AO for
re-opening the assessment was not correct.
10. We find that the view taken by the ITAT is a reasonable and
possible view and hence, no substantial question of law arises for
our consideration.
11. Appeal dismissed.
(DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.)
Digitally signed
by GITALAXMI
GITALAXMI KRISHNA
KRISHNA KOTAWADEKAR
KOTAWADEKAR Date:
2023.09.08
19:34:35 +0545
Gitalaxmi
