Case Note & Summary
The present appeal was filed by the Pr. Commissioner of Income Tax-19 under Section 260A of the Income Tax Act, 1961 against the order dated 03rd May, 2017 passed by the Income Tax Appellate Tribunal, Bench 'E', Mumbai (ITAT) in Income Tax Appeal No.4549/Mum/2015 for the assessment year 2009-10. The Revenue proposed two questions of law: (1) whether the ITAT's order was perverse in not considering the Supreme Court's decision in N K Proteins Ltd. dated 16.01.2017, which was on the similar issue of bogus purchases and was the law of the land when the ITAT pronounced its order on 03.05.2017; and (2) whether the ITAT erred in ignoring the decision in N K Proteins by the Ahmedabad High Court, affirmed by the Supreme Court, wherein it was held that once suppliers are held bogus, it is not correct to tax only 25% of the bogus claims. The respondent-assessee, S V Jiwani, opposed the appeal. The court noted that the ITAT had recorded a finding that the purchases were not bogus but were from non-genuine parties, and therefore only the profit element embedded in such purchases could be taxed. The ITAT estimated the profit element at 25% of the alleged bogus purchases. The court held that the ITAT's finding was a finding of fact and not perverse. The court distinguished the case of N K Proteins Ltd., stating that in that case the purchases were held to be bogus, whereas in the present case the purchases were not bogus but from non-genuine parties. The court concluded that no substantial question of law arose and dismissed the appeal.
Headnote
A) Income Tax - Bogus Purchases - Estimation of Profit - Section 260A Income Tax Act, 1961 - The court considered whether the ITAT's order was perverse for not following the Supreme Court's decision in N K Proteins Ltd. and whether the ITAT erred in confirming only 25% disallowance of bogus purchases. The court held that the ITAT's finding that purchases were not bogus but from non-genuine parties was a finding of fact, and the estimation of profit element at 25% was reasonable. The appeal was dismissed as no substantial question of law arose. (Paras 1-7)
Issue of Consideration
Whether the ITAT's order was perverse in not considering the Supreme Court decision in N K Proteins Ltd. and whether the ITAT erred in upholding only 25% disallowance of bogus purchases.
Final Decision
The appeal is dismissed. No substantial question of law arises.
Law Points
- Bogus purchases
- estimation of profit
- Section 260A Income Tax Act
- 1961
- perversity
- substantial question of law
Case Details
2022 LawText (BOM) (10) 38
Income Tax Appeal No. 552 of 2018 with Cross Objection No. 16 of 2018
Dhiraj Singh Thakur, Valmiki Sa Menezes
Mr. Ashok Kotangle a/w Mr. P. A. Narayanan, Mr. Ajay V. Anand & Ms. Raveen Kaur for the Appellant in ITXA/552/2018 & for Respondent in CROL/16/2018; Mr. Rahul J. Hakani for the Appellant (Cross objector) in CROL/16/2018 & for Respondent in ITXA/552/2018
Pr. Commissioner of Income Tax-19
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Nature of Litigation
Income Tax Appeal under Section 260A of the Income Tax Act, 1961 against the order of ITAT.
Remedy Sought
The Revenue sought to set aside the ITAT order and restore the Assessing Officer's order disallowing the entire bogus purchases.
Filing Reason
The Revenue contended that the ITAT's order was perverse for not considering the Supreme Court decision in N K Proteins Ltd. and for confirming only 25% disallowance of bogus purchases.
Previous Decisions
The ITAT had confirmed the CIT(A)'s order estimating profit element at 25% of alleged bogus purchases.
Issues
Whether the ITAT's order was perverse in not considering the Supreme Court decision in N K Proteins Ltd.
Whether the ITAT erred in confirming only 25% disallowance of bogus purchases.
Submissions/Arguments
The Revenue argued that the ITAT ignored the Supreme Court decision in N K Proteins Ltd. which held that once suppliers are bogus, the entire claim should be disallowed.
The respondent-assessee argued that the ITAT's finding that purchases were not bogus but from non-genuine parties was a finding of fact and the estimation of profit at 25% was reasonable.
Ratio Decidendi
When the ITAT records a finding of fact that purchases are not bogus but from non-genuine parties, the estimation of profit element at 25% is reasonable and does not give rise to a substantial question of law. The decision in N K Proteins Ltd. is distinguishable as it dealt with bogus purchases.
Judgment Excerpts
The present appeal has been preferred under Section 260A of the Income Tax Act, 1961 against the order dated 03rd May, 2017 passed by the Income Tax Appellate Tribunal, Bench 'E', Mumbai (ITAT), in Income Tax Appeal No.4549/Mum/2015, relevant to the assessment year 2009-10.
The following questions of law have been proposed for our consideration: ...
Procedural History
The Assessing Officer disallowed the entire bogus purchases. The CIT(A) estimated the profit element at 25%. The ITAT confirmed the CIT(A)'s order. The Revenue filed an appeal under Section 260A before the High Court.
Acts & Sections
- Income Tax Act, 1961: 260A
