PCIT Vs Jotindra Steels And Tubes Ltd. (Delhi High Court)
The Delhi High Court dismissed the Revenue’s appeal under Section 260A of the Income Tax Act, 1961, arising from the ITAT order dated 06 October 2022 for assessment year 2014-15. The assessee was engaged in manufacturing and trading of steel, tubes and pipes, along with erection and fabrication work. In the assessment framed under Section 153A read with Section 143(3), the Assessing Officer made various additions, including Rs. 14,09,31,491/- on account of alleged bogus purchases, holding that certain purchases were fictitious or bogus.
Read ITAT Judgment in this case: ITAT Delhi Restricts Bogus Purchase Addition to Profit Element Only
The assessee challenged the assessment before the CIT(A), which allowed the appeal by order dated 30 November 2016. The CIT(A) examined the purchases and recorded that the purchases were made through banking channels, proper VAT records were maintained, and Input Tax Credit had been claimed. The appellate authority also found that purchases from the four parties were supported by pre-authenticated purchase invoices or Form-XXI, properly dated and signed by the concerned Commercial Tax Department authority, and that the purchases were duly accounted for in the regular books of account.
The CIT(A) further observed, as an alternative suggestion, that even if the purchases were established to be bogus, only the gross profit relatable to the quantity purchased and sold could be considered as income rather than the entire purchase value. The ITAT treated this observation as a finding and added the percentage of profit to the assessee’s income. The Revenue approached the High Court seeking to revive the Assessing Officer’s treatment of the entire purchases, taking advantage of the tax imposed on the profit element.
The High Court held that the Tribunal had failed to dislodge the CIT(A)’s finding that the purchases were duly explained. Since that finding had not been reversed or set aside, the addition of the entire purchase amount could not be made. The Court further held that whether the purchases were bogus, duly explained or unexplained was a finding of fact based on appreciation of evidence, which fell outside the scope of its appellate jurisdiction under Section 260A. As the assessee had not filed an appeal, the Court also stated that it could not disturb the profit addition made by the Tribunal. The Revenue’s appeal consequently failed and all pending applications were disposed of.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The present appeal preferred under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) arises out of the order dated 06.10.2022 passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’), Delhi ‘D’ Bench, New Delhi, for Assessment Year (AY), whereby the appeal filed by the Revenue against the order dated 30.11.2016 passed by the Commissioner of Income Tax (Appeals) [hereinafter referred to as ‘CIT(A)’], was partly allowed.
2. The facts germane to the present purposes are that the respondent/assessee is engaged in the business of manufacturing and trading of Steel, Tubes and Pipes and Erection, Fabrication Work and has been filing its return of income. An assessment order under Section 153A read with Section 143(3) of the Act of 1961, was framed against the assessee on 30.03.2016, wherein various additions were made out of which the addition in question amounting to Rs.14,09,31,491/- on account of bogus purchases. While making addition, the Assessing Officer (hereinafter referred to as ‘AO’) recorded the finding that certain purchases made by the respondent/assessee were fictitious or bogus.
3. The respondent preferred an appeal under Section 246 of the Act of 1961, which came to be allowed by the CIT(A) vide order dated 30.11.2016. The CIT(A) in para Nos. 4.4.3 to 4.4.4 of said order elaborately discussed the issue, examined each purchase and recorded a finding that not only the purchases were made by way of banking channels but there was proper record of VAT and the assessees has claimed proper Input Tax Credit.
4. It was also found by the CIT(A) that the assessee had purchased trading goods from those four parties which were supported by pre-authenticated purchase invoices or Form-XXI properly dated and signed by the concerned authority of the Commercial Tax Department and that all purchases made by the assessee were duly accounted for in the regular books of account.
5. It was only as an alternative suggestion, that the appellate authority had observed that even if the purchases could have been proved to be bogus, only gross profit related to quantity purchase and sold could have been considered as income and not the entire value of the bogus purchases could have been added. Whereas, the Tribunal has taken it to be a finding by the appellate authority and has allowed the appeal filed by the Revenue and added the percentage of profit in the income of the assessee.
6. True it is, that the assessee is not in appeal. We, therefore, cannot disturb the addition of the profit made by the Tribunal. But so far as, the present appeal filed by the Revenue is concerned, wherein the Revenue has sought to resurrect the order of the AO taking advantage of the imposition of tax on the profit element of the differential amount is concerned, we are of the view that the Tribunal has failed to dislodge the finding recorded by the appellate authority that those purchases were duly explained. Unless, the findings recorded by the first appellate authority are reversed or set aside, the addition qua the entire purchases cannot be made. In any event, the fact as to whether the purchases were bogus or duly explained or not explained, is a finding of fact and is a result of appreciation of evidence, which is outside the scope of our appellate jurisdiction, conferred by Section 260A of the Act of 1961.
7. The appeal, therefore, fails.
8. All pending application(s) stand disposed of.
