Case Note & Summary
The petitioner, Agarwal Industrial Corporations Limited, filed a return of income declaring total income of Rs.93,92,140/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961. Subsequently, reassessment proceedings were initiated, and the income was reassessed at Rs.3,56,74,514/- after making an addition of 100% of alleged bogus purchases under Section 68 of the Act. The petitioner appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who, vide order dated 21st March 2018, restricted the addition to 25% of the amount of purchases made. Both the petitioner and the revenue challenged this order before the Income Tax Appellate Tribunal, Pune. The Tribunal, vide its order dated 26th September 2019, partly allowed the appeal of the petitioner and remanded the matter to the file of the Assessing Officer. The Tribunal relied upon a judgment of this Court in Pr. CIT Vs. Mohommad Haji Adam & Co. The High Court, in the present writ petition, considered whether the addition of 100% of alleged bogus purchases under Section 68 was justified. The Court held that without proper inquiry into the genuineness of the purchases, the addition was unsustainable. The Court upheld the Tribunal's order of remand, directing the Assessing Officer to conduct a proper inquiry and pass a fresh assessment order. The writ petition was disposed of accordingly.
Headnote
A) Income Tax - Bogus Purchases - Section 68 of the Income Tax Act, 1961 - Addition of 100% of alleged bogus purchases - The Assessing Officer made an addition of 100% of alleged bogus purchases under Section 68 without proper inquiry. The CIT(A) restricted the addition to 25%. The Tribunal remanded the matter to the Assessing Officer for fresh assessment. The High Court upheld the Tribunal's order, holding that the addition was unsustainable without proper inquiry into the genuineness of the purchases. (Paras 1-4) B) Income Tax - Reassessment - Section 147 of the Income Tax Act, 1961 - Reassessment proceedings initiated against the petitioner - The High Court held that the reassessment was validly initiated but the addition made was excessive without proper inquiry. (Para 1) C) Income Tax - Remand - Powers of Tribunal - The Tribunal has the power to remand the matter to the Assessing Officer for fresh assessment when the inquiry is incomplete. The High Court upheld the remand order. (Para 3-4)
Issue of Consideration
Whether the addition of 100% of alleged bogus purchases under Section 68 of the Income Tax Act, 1961, was justified without proper inquiry into the genuineness of the purchases.
Final Decision
The High Court upheld the Tribunal's order of remand and disposed of the writ petition, directing the Assessing Officer to conduct a proper inquiry and pass a fresh assessment order.
Law Points
- Section 68 of the Income Tax Act
- 1961
- Bogus purchases
- Reassessment
- Remand
- Natural justice
