The Income Tax Appeal was dismissed. The court held that the Tribunal correctly restricted the addition under Section 68 and deleted the enhancement of Gross Profit by the CIT(A) due to lack of evidence to discard book results.
The Income Tax Appeal filed by the Revenue was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
31 ITXA 413 OF 2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.413 OF 2017
Principal Commissioner of Income Tax,
Central – 4
…
Appellant
versus
M/s. Paramshakti Distributors Pvt. Ltd. …Respondent
Mr. Shyam Walve, for Appellant.
CORAM: AKIL KURESHI &
S.J. KATHAWALLA, JJ.
DATE : 15th JULY, 2019
P.C.:
1. The Revenue has filed this Appeal to challenge the Judgment of the Income
Tax Appellate Tribunal (“the Tribunal” for short). The following questions are
presented for our consideration :
(i)Whether on the facts and in the circumstances of the case and in law,
the Hon'ble ITAT was justified in reducing the addition from Rs.23.16 Lakhs to
Rs.2,21,600/- under Section 68 of the Income Tax Act in respect of the purchases
made from M/s. Chevron Metal Products Pvt. Ltd., in spite of the fact that the
Director of the said Company had admitted that the transactions were merely
accommodation entries ?
(ii)Whether on the facts and in the circumstances of the case and in law,
the Hon'ble ITAT was justified in deleting the enhancement of GP made by the Ld.
SSP 1/3
31 ITXA 413 OF 2017.doc
CIT(A) from 2.59% to 6.00% of the turnover of Rs.151 crores, thereby giving undue
relief of Rs.4.92 Crores to the assessee ?
2.The first question pertains to restricting the addition of Rs.23.16 Lakhs to
Rs.2,21,600/- by the Tribunal. The Assessing Officer had made the said addition on
the ground that the assessee's purchases were found to be bogus. The entire purchase
amount was therefore, added to the assessee's income. The Tribunal, however,
restricted to the said sum of Rs.2,21,600/-. The Tribunal recorded that the Assessing
Officer has not rejected either the purchases or the sales made out of the said
purchases. The Tribunal therefore, was of the opinion that the addition should be
restricted to 10% of the total purchases. The Revenue strongly disputes this
proposition.
3.Without elaboration, what the Tribunal by the impugned Judgment held is
that the Department had not rejected the instance of the purchases since the sales out
of purchase of such raw material was accounted for and accepted. With above
position, the Tribunal applied the principle of taxing the profit embedded in such
purchases covered by the bogus bills, instead of disallowing the entire expenditure.
We do not find any error in the view of the Tribunal. No question of law arises.
4.The second issue pertains to addition at the hands of the Assessee made by
the CIT (Appeals). It appears that the Assessee had disclosed profit at GP rate 2.59%.
The Assessing Officer had not tinkered with this disclosure. However, in Appeal, the
SSP 2/3
31 ITXA 413 OF 2017.doc
Commissioner (Appeals) after putting the Assessee to notice, enhanced the profit @ 6%
GP. The Tribunal by the impugned Judgment deleted such addition and allowed the
Assessee's Appeal. The Tribunal noted that there was no material to discard the
Assessee's book results. No incriminating material or evidence of the Assessee's
transactions outside the books have been brought on record. It was under these
circumstance, the Tribunal deleted the addition made by the CIT (Appeals). We do
not find any error in the view of the Tribunal. There was no evidence on record to
disturb the Assessee's book results. No question of law arises. The Income Tax
Appeal is dismissed.
( S.J.KATHAWALLA, J. )( AKIL KURESHI, J. )
SSP
2 issues framed by the court
Whether the ITAT was justified in restricting the addition under Section 68 to 10% of purchases when transactions were admitted as accommodation entries.
Whether the ITAT was justified in deleting the enhancement of Gross Profit by the CIT(A) from 2.59% to 6.00% of turnover.
1 provisions across 1 enactments
Principal Commissioner of Income Tax, Central – 4
M/s. Paramshakti Distributors Pvt. Ltd.
AKIL KURESHI
S.J. KATHAWALLA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court