Bombay HC Dismissed Revenue Appeal as It Did Not Challenge CIT(A)’s Order

PCIT Vs Jain Dalichand Gosalia (Bombay High Court)

Summary: The Bombay High Court dismissed the Revenue’s appeal under Section 260A of the Income-tax Act, 1961, arising from an ITAT order for AY 2009-10 concerning an addition for alleged bogus purchases under Section 69C. The Assessing Officer had originally made an addition of Rs. 38,13,697 as unexplained expenditure. On appeal, the Commissioner (Appeals) restricted the addition to 12.5% of the alleged bogus purchases, reducing it to Rs. 11,03,894. The Revenue did not challenge this order. The assessee thereafter appealed before the ITAT, which further reduced the addition to 10%. Before the High Court, the Revenue sought enhancement of the addition. The Court noted the Revenue’s admission that it had not appealed against the Commissioner (Appeals)’s order and, following an earlier coordinate bench decision, held that the Revenue was precluded from questioning the percentage of addition fixed by the Tribunal. Finding no substantial question of law, the Court dismissed the appeal.

Core Issue: The principal issue before the Bombay High Court was whether the Revenue could seek enhancement of an addition for alleged bogus purchases in an appeal against the Tribunal’s order when it had not challenged the earlier order of the Commissioner (Appeals), which had already granted substantial relief to the assessee.

Facts: During assessment, the Assessing Officer treated certain purchases as bogus and made an addition of Rs.38,13,697 under section 69C of the Income-tax Act, being the entire alleged bogus purchases. In appeal, the Commissioner (Appeals) held that only the profit element embedded in such purchases could be taxed and restricted the addition to 12.5% of the disputed purchases, resulting in an addition of Rs.11,03,894. The Revenue accepted this order and did not file any appeal against the relief granted by the Commissioner (Appeals). The assessee alone challenged the order before the ITAT, which further reduced the addition to 10% of the alleged bogus purchases. Aggrieved by this further reduction, the Revenue filed an appeal before the Bombay High Court seeking restoration of a higher addition.

Findings of the High Court: The Court noted that the Revenue had consciously accepted the order of the Commissioner (Appeals) by not preferring any appeal against it. Having failed to challenge the order reducing the addition from 100% to 12.5%, the Revenue could not subsequently seek enhancement while challenging the Tribunal’s order, which merely reduced the estimation from 12.5% to 10%.

The Court relied upon its earlier decision in Pr. Commissioner of Income-tax v. Ravindra Bhaskar Deshmukh (2025), wherein it had held that once the Revenue accepts the order of the Commissioner (Appeals), it is precluded from disputing that relief in subsequent proceedings arising only from the assessee’s appeal before the Tribunal.

The Court observed that the Revenue’s grievance was effectively directed against the relief granted by the Commissioner (Appeals), not merely against the Tribunal’s order. Since no appeal had ever been filed against the Commissioner (Appeals)’s decision, the Revenue had forfeited its right to question the percentage of estimation adopted by the appellate authorities.

Accordingly, the Court held that no substantial question of law arose for consideration under section 260A. The Revenue could not indirectly seek enhancement through an appeal against the Tribunal after allowing the order of the Commissioner (Appeals) to attain finality.

Decision: The Bombay High Court dismissed the Revenue’s appeal, holding that where the Revenue does not challenge the order of the Commissioner (Appeals), it is precluded from seeking enhancement against the Tribunal’s subsequent order. Consequently, no substantial question of law arose for consideration under section 260A, and the Tribunal’s order estimating the addition at 10% of the alleged bogus purchases was allowed to stand.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Heard Mr. Arjun Gupta, learned counsel appearing for the Appellant.

2. This appeal has been preferred under Section 260A of the Income Tax Act, 1961, against the judgment and order dated 20^th December, 2018, passed by the learned Income Tax Appellate Tribunal (for short “I.T.A.T”), Mumbai in Appeal No.2555/ Mum/2018 (A.Y. 2009-10), whereby, the appeal preferred by the Assessee/Respondent was partly allowed. The crux of the mater is that, by the assessment order dated 20^th December, 2018, the Assessing Officer had made addition of Rs.38,13,697/- being unexplained expenditure under Section 69C of the Income Tax Act, on account of the bogus purchases.

3. The Assessee preferred appeal before the CIT(Appeals), which had passed order dated 8t^h February, 2018, directing the Assessing Officer to make addition of 12.5% of the bogus purchases and restricted the addition to Rs.11,03,894/-. The Revenue did not prefer any appeal against the order of the CIT(Appeals). However, the Assessee had assailed the order dated 8th February, 2018 before the learned I.T.A.T. The appeal was disposed of by order dated 20^th December, 2018, by further reducing the addition to 10% on account of the bogus purchase.

4. The Revenue is before this Court by filing the present appeal against the order dated 20^th December, 2018, seeking enhancement of the amount.

5. Mr. Arjun Gupta, learned counsel for the Appellant while addressing arguments has submitted in his usual fairness that Revenue did not prefer any appeal against the order of the CIT (Appeals). As such, in view of the order of the Co-ordinate Bench of this Court passed in the case of Principal Commissioner of Income-tax Vs. Ravindra Bhaskar Deshmukh, (2025) 180 taxmann.com 569, the issue raised in the appeal would be covered against the Revenue.

6. After perusing the observations made in the order of the Co­ordinate Bench in the case of Ravindra Bhaskar Deshmukh (supra), we are also of the opinion that since the Revenue has not preferred any appeal against the order of CIT (Appeals), hence, it will be precluded from raising any question regarding the validity of the percentage of addition fixed by the learned Tribunal at 10%. If that be so, in our opinion, there is no substantial question of law which would arise for consideration in this appeal.

7. The appeal is, therefore, dismissed.