Pr. Commissioner Of Income Tax - 2 … v. Bharat Copy Centre Pvt. Ltd. …

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL (IT) NO. 2127 OF 2018 WITH INCOME TAX APPEAL (IT) NO. 2128 OF 2018 WITH INCOME TAX APPEAL (IT) NO. 2234 OF 2018 Pr. Commissioner of Income Tax - 2… AppellantVersusBharat Copy Centre Pvt. Ltd.… Respondent Mr. Suresh Kumar for Appellant.None present for Respondent. P.C. : CORAMK. R. SHRIRAM &DR. N. K. GOKHALE, JJ.DATED:6[th] September 2023 1.Mr. Suresh Kumar states that Respondent has been served.Respondent, however, is absent. 2.The Appeal filed is under Section 260A of the Income Tax Act, 1961 (“the Act”). The following two questions of law areproposed in the Appeal : i.Whether on the facts and circumstances of thecase and in law, the ITAT has erred in partly allowing theappeal of the revenue against the order of Ld. CIT(A) byrestricting the disallowance to 12.5% of unprovenpurchases without considering the position of lawestablished by Hon’ble Apex Court in the case of N. K.Protiens Ltd. that 100% disallowance on boguspurchases is upheld ? ii. Whether on the facts and circumstances of thecase and in law, the ITAT was right in restricting theaddition made by the A.O. to the extent of 12.5% ofunproven purchases, without considering the fact thatpurchases remain unproven and even for the A.Y.’s, theITAT has upheld disallowance on unproven purchases ? 3.Assessee, as stated in the statement of facts, is engaged inthe business of undertaking labour works in offset printing andphoto copying. Consequent to the information received from theSales Tax Department that certain parties are engaged in thebusiness of providing accommodation bills without actuallysupplying the materials and upon noticing that the assessee haspurchased goods from some of such parties in the three yearsunder consideration, the Assessing Officer (“AO”) reopened theassessments of those three years. Assessee filed its return ofincome on 14[th] October 2010 declaring total income of Rs.65,25,600/-. AO completed the assessment on 29[th] November2013 by determining the total income at Rs. 1,49,27,100/- aftermaking certain additions/disallowances. AO disallowed the entireamount of purchases made from the suspicious dealers in all thethree years by treating them as ‘bogus purchases’. For AssessmentYear 2010-2011 it was Rs. 84,01,498/-. Assessee impugned theassessment order dated 29[th] November 2013 before theCommissioner of Income Tax (Appeals) (“CIT(A)”). The CIT(A) partly allowed the Appeal vide an order dated 18[th] November2015. This was challenged by the Revenue before the Income TaxAppellate Tribunal (“ITAT”). The ITAT vide its order dated 22[nd]September 2017 partly allowed the Appeal of Revenue. ThisAppeal has been filed challenging the legality and validity of theimpugned order passed by the ITAT to the extent it was against theRevenue. 4.AO had noticed that the assessee did not have evidence fortransportation of materials, receipt and consumption of materials.Assessee could produce only bills and payment details. Assesseecould not obtain confirmation letters from the suppliers to provethe genuineness of the purchases, nor could it produce thoseparties before AO. AO therefore concluded that assessee has failedto discharge the responsibility to prove the genuineness ofpurchases. 5.Admittedly, in this case the assessee had purchased goodslike paper, flex roll, ink, toner, card board and various othermaterials required for printing, publishing and photo copying. Thefact that assessee had used those goods has not been disputed.The ITAT agreed with the findings of CIT(A) that AO having reliedon the details provided by the Sales Tax Department but neitherPage 3 of 5 5.Admittedly, in this case the assessee had purchased goodslike paper, flex roll, ink, toner, card board and various othermaterials required for printing, publishing and photo copying. Thefact that assessee had used those goods has not been disputed.The ITAT agreed with the findings of CIT(A) that AO having reliedon the details provided by the Sales Tax Department but neitherPage 3 of 5 AO, nor the Sales Tax Department took a stand that the suppliersdo not exist. Therefore, the ITAT came to a conclusion on factsthat there is a possibility that assessee might have saved VAT andalso obtained some discount on purchase price and in this kind ofsituation, the principle of taxing the profit embedded in suchpurchases covered by the bogus bills, should only be disallowedinstead of disallowing entire expenditure. The CIT(A) also tookthis view but adopted the net profit rate for sustaining theaddition. The ITAT modified the order of CIT(A) to adopt the grossprofit level, but retain the addition to the extent of 12.50% of thevalue of alleged bogus purchases. 6.The common impugned order of ITAT is for Assessment Years2009-2010, 2010-2011 and 2011-2012. 7.There are innumerable judgments of this Court and otherHigh Courts where the Courts have held that the ITAT was correctin restricting the addition limited to the extent of bringing thegross profit rate on purchases and not the entire amount paid. 8.Since both the authorities, i.e., the CIT(A) and the ITAT haveheld that it is not the entire sales consideration which is to bebrought to tax, but only the profit attributable on the total salesPage 4 of 5 Digitally signedGITALAXMIby GITALAXMIKRISHNAKRISHNAKOTAWADEKARKOTAWADEKARDate:2023.09.0817:19:18 +0545 consideration which alone can be subject to income-tax, the viewtaken by the authorities, in our view, is a reasonable and possibleview. Therefore, Appeals dismissed. (DR. N. K. GOKHALE, J.)(K. R. SHRIRAM, J.)