Pr. Commissioner Of Income Tax - 8 … v. Suraj Infrastructures Pvt. Ltd. …

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL (IT) NO. 2162 OF 2018 Pr. Commissioner of Income Tax - 8… AppellantVersusSuraj Infrastructures Pvt. Ltd.… Respondent Mr. Suresh Kumar for Appellant.None present for Respondent. 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 dated25[th] September 2017 passed by the Income Tax Appellant Tribunal(“ITAT”). 3.Respondent-assessee had filed return of income for theAssessment Year 2009-2010 declaring ‘nil’ income. Subsequentlyan order under Section 143(1) of the Act dated 25[th] March 2011was passed accepting the income returned by assessee. A furtherorder under Section 143(3) read with Section 147 of the Act was passed on 27[th] 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 sameto the total income. Assessee impugned the order before theCommissioner of Income Tax (Appeals) (“CIT(A)”), who allowedthe Appeal on the ground that the addition was made only becausethe name of party appears in the list of Sales Tax Department andthe party was not produced before AO. The Revenue challengedthe order of CIT(A) passed on 14[th] December 2016 before the ITAT.The ITAT partly allowed the Appeal of Revenue vide the impugnedorder holding that AO made addition towards gross profit onalleged bogus purchases. 4.The following substantial questions of law are proposed : i.Whether on the facts and circumstances of thecase and in law the Hon’ble ITAT is justified inestimating the profit element embedded in the amountrepresented by bogus purchases recorded in the books ofaccount at 12.5% of the total bogus purchases withoutappreciating that any expenditure not found to beincurred at all, least of all that the same is also not laidout or expended wholly and exclusively for the purposesof business is not admissible in terms of the provisions ofSection 37 of the Act ? ii. Whether prejudice to ground no. 1 above, whetheron the facts and in the circumstances of the case and inlaw, the Hon’ble ITAT is justified in taking only 12.5% ofthe total amount of bogus purchases as income and thusallowing 87.5% of such total amount of purchases asexpenditure in contravention of the provisions of Section 37 of the Act ? iii. Whether on the facts and in the circumstances ofthe case and in law, the Hon’ble ITAT is justified inallowing the relief to the assessee ignoring the judgmentof Hon’ble Apex Court in the case of N. K. ProteinsLimited and Shewtamber limited on this issue wherein,the SLP filed by the assessee have been dismissed byHon’ble Apex Court ? iv.Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was justified indirecting the AO to restrict disallowance out ofbogus/unproved purchases to 12.5% of such purchaseswithout appreciating the fact that the assessee could notestablish the genuineness of the transaction byproducing 8 parties from whom purchases were stated tohave been made and an independent enquiry conductedby the A.O. also revealed that these parties were non-existent and have been declared as Hawala Dealers byVAT department as they were found to be engaged inproviding bogus bills without actual supply of goods andmere submission of copies of invoices, ledger account,bank statement etc. does not prove the genuineness ofthe transaction ? iv.Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was justified indirecting the AO to restrict disallowance out ofbogus/unproved purchases to 12.5% of such purchaseswithout appreciating the fact that the assessee could notestablish the genuineness of the transaction byproducing 8 parties from whom purchases were stated tohave been made and an independent enquiry conductedby the A.O. also revealed that these parties were non-existent and have been declared as Hawala Dealers byVAT department as they were found to be engaged inproviding bogus bills without actual supply of goods andmere submission of copies of invoices, ledger account,bank statement etc. does not prove the genuineness ofthe transaction ? v.Whether on the facts and in circumstances of thecase and in law, Hon’ble ITAT justified in directing theAssessing Officer to disallow 12.5% of the boguspurchases rather than whole of such bogus purchaseswithout appreciating that allowance of such expenditureimplies allowance of purchases made in cash from the‘grey’ market, thereby rendering the provisions of section40A(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 Investigation Wing which stated that assessee was one of thebeneficiaries of bogus purchase bills obtained through hawalaoperators. AO was of the opinion that though assessee furnishedcertain documents to justify purchases, it failed to produce theparties in person. 7.It is assessee’s case that just because the party did not appearin person before AO, the genuineness of purchases can not bedoubted when all details are furnished to justify the purchases. Itis also assessee’s case that it had declared the gross profit of30.12% which was higher than the gross profit declared in similarline of business and AO was not justified in estimating the grossprofit @ 60.24%, which was arbitrary. 8.The ITAT in its impugned order had relied upon thejudgment of Gujarat High Court in the case of Commissioner ofIncome Tax v. Vijay Proteins Ltd.[1] and also in the case ofCommissioner of Income Tax v. Smith P. Sheth[2 ]and held that nouniform yardstick can be applied for estimating gross profit onbogus purchases which is depending upon the facts of differentcases. The ITAT held that the Co-ordinate Bench in number ofcases has taken a consistent view and directed AO to estimate 1. 58 taxmann.com 44 (Guj.). 2. 2013(356) ITR 451 (Guj.). Digitally signedGITALAXMIKRISHNAby GITALAXMIKRISHNAKOTAWADEKARKOTAWADEKARDate:2023.09.0819:34:35 +0545 gross profit of 12.5% on alleged bogus purchases and therefore, inthe 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 forre-opening the assessment was not correct. 10.We find that the view taken by the ITAT is a reasonable andpossible view and hence, no substantial question of law arises forour consideration. 11.Appeal dismissed. (DR. N. K. GOKHALE, J.) (K. R. SHRIRAM, J.)