Principal Commissioner Of Incometax, Central-1, Kolkata v. Kartick Bose

ITAT/115/2021IA No.GA/2/2021 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE PRINCIPAL COMMISSIONER OF INCOMETAX, CENTRAL-1, KOLKATA -Versus- KARTICK BOSE Appearance:Mr. Soumen Bhattachryya, Adv....for the appellant. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM The Hon’ble JUSTICE BIVAS PATTANAYAK The Court : This appeal filed by the revenue underSection 260A of the Income Tax Act, 1961 (the ‘Act’ for brevity)is directed against the order dated 22[nd] January, 2020 passed bythe Income Tax Appellate Tribunal, Kolkata, “A” Bench, Kolkata inITA No.1027/Kol/2018 for the assessment years 2013-14. The revenue has raised the following substantialquestions of law for consideration: i)Whether the Learned Tribunal committed substantialerror in law in holding that the “purchases” other than“other expenses”, were not disallowed by A.O. inoriginal assessment and assessee had also not produced necessary evidence of purchases before Commissioner in263 proceedings and thus wrongly placing reliance oncases of Malabar Industrial Co. Ltd. 243 ITR 83 & MaxIndia 295 ITR 282.ii)Whether the Learned Tribunal committed substantialerror in law in holding that a view has already beentaken by Assessing Officer on ‘Other Expenses’ by making5% disallowance thus re-calculating Gross Profit,whereas commissioner’s finding, in 263 revisionaryorder, is related to ‘unexplained Bogus purchases’, wasfor disallowance @25%, following Gujarat High Courtdecision in case of Vijay Proteins Ltd. Vs. CIT, (2015)58 taxmann.com 44. We have heard Mr. Soumen Bhattacharyya, learned standingcounsel for the appellant/revenue. Though notice has been servedon the respondent/assessee, none appears for the respondent. The assessee filed the return of income for theassessment year under consideration, (A.Y.- 2013-14) on 30[th]September, 2013. The case was selected for scrutiny and noticeunder Section 143(2) of the Income Tax Act was issued on 30[th]September, 2014. The assessee filed a revised return on 30[th] March,2015 and, thereafter notice under Section 142(1) of the Act wasissued and the case was discussed and the assessing officercompleted the assessment under Section 143(3) by order dated 24[th]March, 2016. The assessing officer after conducting an enquiryheld that the assessee has shown very low net profit against large gross receipts in its profit and loss account. The assessee wasgranted opportunity to produce details and documents which weresubmitted and the same was examined by the assessing officer.However, since the assessee could not produce any evidencerelating to various purchases and expenses claimed in the profitand loss account of all two companies and the assessee also agreedto an estimated disallowance of a part of the expenses, theassessing officer completed the assessment by fixing thedisallowance at 5% of Rs.84,90,060/-. After the assessment wascompleted, the Principal Commissioner of Income Tax (Central)-I,Kolkata (PCIT) exercised his power under Section 263 of the Act onthe ground that the disallowance of other expenses estimated at 5%as done by the assessing officer was incorrect. A notice wasissued to the assessee for which the assessee responded andsubmitted that during the course of assessment proceedings, theassessee produced all the relevant documents before the assessingofficer relating to its purchase and expenditure and the proposalof the PCIT to fix the disallowance at 25% on purchase, that too,on ad hoc basis without any evidence cannot be done and requestedfor dropping the proceedings. Certain decisions of the tribunalwere also relied on by the assessee. The PCIT did not agree withthe assessee and proceeded to confirm the proposal made in theshow cause notice and directed the assessing officer to makenecessary enquiries and verification of the purchases to find out its genuineness and make appropriate disallowance keeping in mindthe decision of the High Court of Gujarat in Vijay Proteins Ltd.Vs. CIT, reported in (2015) 58 taxmann.com 44. its genuineness and make appropriate disallowance keeping in mindthe decision of the High Court of Gujarat in Vijay Proteins Ltd.Vs. CIT, reported in (2015) 58 taxmann.com 44. The assessee preferred appeal before the tribunal. Thetribunal, in our view, rightly took note of the decision of theHon’ble Supreme Court in Malabar Industrial Co. Ltd. Vs.Commissioner of Income Tax, reported in (2000) 243 ITR 83 (SC) andCommissioner of Income Tax Vs. Max India, reported in (2007) 295ITR 282 (SC) and proceeded to examine the facts of the case. Thetribunal noted that there was no dispute with regard to theassessee’s sale and purchase figures between the group concernswhich has been accepted by the assessing officer who proceeded todisallow an estimated 5% of the inflated amount. Considering thefactual position the tribunal held that the twin conditionsrequired to be satisfied for invoking Section 263 of the Act wasabsent and, therefore, the assumption of jurisdiction by the PCITwas held to be bad in law. We note that the PCIT while invokinghis power under Section 263 of the Act has proceeded based onconjecture and there is no finding recorded that the books ofaccounts of the assessee were rejected. Furthermore, the specificissue raised by the assessee that the documents and details werefurnished before the assessing officer was not found to beincorrect. Therefore, we are of the view that the tribunal havingtaken note of the factual position had rightly interfered with the order passed by the PCIT. The learned standing counsel for theappellant placed reliance on the decision of the High Court ofGujarat at Ahmedabad in N.K. Industries Ltd. Vs. Dy. CIT in TaxAppeal No.240 of 2003 etc. dated 20[th] June, 2016. This decision isreferred to since the decision in Vijay Proteins Ltd. has beenrelied upon in the said case.We find that the decision in Vijay Proteins Ltd. isdistinguishable on facts since in the said case it wasconclusively found that the entire purchases were shown to bebased on fictitious invoices and have been debited in tradingaccount and the entire transaction was held to be bogus.Furthermore, it was pointed out that the tribunal had come to acategorical conclusion that the amount of Rs.2,95,93,288/-representing alleged purchase from bogus suppliers and, therefore,it was held that the tribunal could not have restricted thedisallowance only to Rs.73,23,32/-. Thus, there was a factualadjudication in the said case and the order passed by the tribunalwas faulted for rejecting the disallowance. The decision isdistinguishable on facts and cannot in any manner advance the caseof the appellant before us.For the above reasons, we find that there is no questionof law much less substantial question of law arises forconsideration in this appeal. Accordingly, the appeal (ITAT/115/2021) fails and is dismissed. Consequently, the connected application for stay (IANo.GA/2/2021) also stands dismissed. (T.S. SIVAGNANAM, J.) (BIVAS PATTANAYAK, J.) A.SadhukhanAR(CR)