Case Note & Summary
The case involves six Income Tax Appeals filed by Refrigerated Distributors Pvt Ltd (now known as Partytime Ice Pvt Ltd) against the Deputy Commissioner of Income Tax and Assistant Commissioner of Income Tax, pertaining to assessment years 2007-08 to 2012-13. The Assessing Officer, after detailed analysis, concluded that the assessee had made bogus purchases, rejected its books of account, and added 25% of the bogus purchases to income. The Commissioner of Income Tax (Appeals) confirmed the addition. The Income Tax Appellate Tribunal (ITAT) upheld the finding of bogus purchases but reduced the addition to 10%. The revenue's appeals against the reduction were dismissed by the High Court as involving only an estimation issue. The assessee appealed, arguing that the rejection of books was improper and that the purchases were not bogus. The High Court, under Section 260A of the Income Tax Act, 1961, examined whether any substantial question of law arose. It noted that the concurrent findings of fact by three authorities were based on material evidence, including the assessee's failure to produce purchase invoices, delivery challans, or Octroi records, and frivolous explanations. The Court held that re-appreciation of evidence is not within the scope of such appeals, and no perversity was established. The decisions in CIT v. Nikunj Eximp Enterprises Pvt Ltd and PCIT v. Vaman International P Ltd were distinguished as turning on their own facts. The Court dismissed all appeals, finding no substantial question of law.
Headnote
A) Income Tax - Bogus Purchases - Section 260A, Income Tax Act, 1961 - Substantial Question of Law - The assessee challenged the addition of 10% of gross profit margin on unproved purchases, contending that the rejection of books of account and finding of bogus purchases were improper. The High Court held that the concurrent findings of fact recorded by the Assessing Officer, Commissioner of Income Tax (Appeals), and ITAT were based on material evidence and involved no perversity, and therefore no substantial question of law arose under Section 260A. (Paras 4-10)
B) Income Tax - Perversity - Section 260A, Income Tax Act, 1961 - Scope of Appeal - The Court held that to make out a case of perversity, the appellant must establish that the finding is based on no evidence, relevant evidence has been excluded, irrelevant evidence considered, or the view is palpably absurd. Mere inadequate evidence is insufficient. (Para 11)
C) Income Tax - Bogus Purchases - Evidence - The assessee failed to produce purchase invoices, delivery challans, or Octroi Check Naka records, and gave frivolous explanations. The authorities considered a host of factors cumulatively, including non-appearance of suppliers and stereotyped affidavits, to conclude that purchases were bogus. The Court found no perversity in such concurrent findings. (Paras 13-16)
Issue of Consideration
Whether the Income Tax Appellate Tribunal erred in confirming the addition to the extent of 10% of the Gross Profit margin in respect of unproved purchases for Assessment Year 2009-10, and whether any substantial question of law arises from the concurrent findings of fact.
Final Decision
All the Income Tax Appeals are dismissed without any order as to costs.
Law Points
- Appeal under Section 260A of Income Tax Act
- 1961
- can be entertained only if it involves a substantial question of law
- Re-appreciation of evidence is not within the scope of such Appeals
- Findings of fact concurrently recorded by three authorities are immune from interference unless perversity is made out
- Perversity requires finding based on no evidence
- exclusion of relevant evidence
- or consideration of irrelevant evidence
- or view palpably absurd
- Estimation of addition percentage does not give rise to substantial question of law
Case Details
2025 LawText (BOM) (3) 52
Income Tax Appeal No.2089 of 2019 with Income Tax Appeal No.2101 of 2019, Income Tax Appeal No.2111 of 2019, Income Tax Appeal No.2778 of 2019, Income Tax Appeal No.3053 of 2019, and Income Tax Appeal (L) No.2791 of 2015
M.S. Sonak, Jitendra Jain
Rajeev Waglay (for Appellant), Akhileshwar Sharma (for Respondent)
Refrigerated Distributors Pvt Ltd (now known as Partytime Ice Pvt Ltd)
The Dy. Commissioner of Income Tax 2(3)(1) / The Assistant Commissioner of Income Tax
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Nature of Litigation
Income Tax Appeals under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal confirming addition of 10% of gross profit margin on unproved purchases.
Remedy Sought
The appellant assessee sought to set aside the addition of 10% of gross profit margin on unproved purchases and to hold that the purchases were not bogus.
Filing Reason
The assessee was aggrieved by the ITAT's order confirming the finding of bogus purchases and the addition of 10% of gross profit margin.
Previous Decisions
The Assessing Officer added 25% of bogus purchases; the Commissioner of Income Tax (Appeals) confirmed the addition; the ITAT reduced the addition to 10% but upheld the finding of bogus purchases.
Issues
Whether the ITAT erred in confirming the addition of 10% of gross profit margin in respect of unproved purchases for A.Y. 2009-10.
Whether any substantial question of law arises from the concurrent findings of fact recorded by the three authorities.
Submissions/Arguments
The appellant argued that the rejection of books of account was improper and that the purchases were not bogus merely because invoices and delivery challans were not produced or suppliers did not appear.
The appellant relied on CIT v. Nikunj Eximp Enterprises Pvt Ltd and PCIT v. Vaman International P Ltd to support that non-appearance of suppliers alone cannot lead to a finding of bogus purchases.
The appellant contended that the concurrent findings were perverse and invited the court to reappraise evidence.
Ratio Decidendi
An appeal under Section 260A of the Income Tax Act, 1961 can be entertained only if it involves a substantial question of law. Concurrent findings of fact recorded by the Assessing Officer, Commissioner of Income Tax (Appeals), and ITAT are immune from interference unless perversity is made out. Perversity requires that the finding is based on no evidence, relevant evidence is excluded, irrelevant evidence is considered, or the view is palpably absurd. Estimation of the percentage of addition does not give rise to a substantial question of law.
Judgment Excerpts
An Appeal under Section 260A of the Income Tax Act can be entertained only if it involves a substantial question of law. Re-appreciation of evidence is not within the scope of such Appeals.
Findings of fact, mainly when concurrently recorded by the assessing officer, Commissioner of Income Tax (Appeals), and the ITAT, are mostly immune from interference unless a case of perversity is made out.
To make out a case of perversity, the Appellant must establish that the finding is based on no evidence whatsoever and not merely inadequate evidence.
The decisions in Nikunj Enterprises (supra) and Vaman International (supra) turn on their own peculiar facts.
Procedural History
The Assessing Officer added 25% of bogus purchases after rejecting books of account. The Commissioner of Income Tax (Appeals) confirmed the addition. The ITAT reduced the addition to 10% but upheld the finding of bogus purchases. The revenue's appeals against the reduction were dismissed by the High Court. The assessee then filed the present appeals under Section 260A of the Income Tax Act, 1961.
Acts & Sections
- Income Tax Act, 1961: 260A, 263
