PCIT Vs Anil Bajaria (Bombay High Court)
In Pr. Commissioner of Income Tax 17 Vs Anil Bajaria, the Bombay High Court dismissed the Revenue’s income-tax appeal after finding that it raised no substantial question of law. The dispute concerned a penalty imposed following an addition for alleged bogus purchases. The Assessing Officer had initially added 100% of the disputed purchases, but the Commissioner (Appeals) restricted the addition to 12.5%, and the ITAT upheld that restriction.
The Revenue’s appeal involved a tax effect of ₹83,358. Its counsel submitted that the matter fell within the exception in paragraph 10(e) of Circular No. 17/2020 dated 8 August 2019 because the addition was based on information from external sources. The High Court expressly declined to decide the applicability of that exception and proceeded to examine the appeal on merits.
The Revenue argued that the original 100% addition demonstrated sufficient grounds for penalty, and that appellate interference with the penalty was erroneous. However, the High Court placed weight on the undisputed fact that the Revenue had not challenged the Commissioner (Appeals)’s estimation of profits at 12.5% before the ITAT. Against that background, it found the interference with the penalty order justified.
The Court referred to Principal Commissioner of Income Tax v. Colo Colour (P) Ltd., (2025) 178 taxmann.com 458 (Bom), observing that this coordinate-bench decision supported the appellate view to some extent. The Revenue sought to distinguish that case because the Assessing Officer there had made an addition of 12.5%, whereas the present Assessing Officer had made a 100% addition. The Court rejected this as a reason to depart from the coordinate-bench decision, particularly when the final estimation at 12.5% was not challenged.
The High Court therefore held that no substantial question of law arose and dismissed the appeal without costs. The order addresses the penalty consequence of an unchallenged estimated addition; it does not independently decide whether every penalty on an estimated bogus-purchase addition is invalid.
Cases Discussed
- Principal Commissioner of Income Tax v. Colo Colour (P) Ltd., (2025) 178 taxmann.com 458 (Bom) — The only expressly cited judicial precedent; the Court declined to distinguish it merely because the AO had originally added 100% of purchases in this case.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Heard Mr. Suresh Kumar, learned counsel for the Appellant.
2. The tax effect in this Appeal is Rs.83,358/-. However, Mr. Suresh Kumar submits that this case falls within the exceptions carved out in paragraph 10(e) of Circular No.17/2020 dated 8 August 2019 since the addition is based on information received from external sources.
3. Without going into the merits of the contention about this Appeal falling within the exceptions, we have heard Mr. Suresh Kumar on merits.
4. Mr. Suresh Kumar urges the admission of this Appeal on the substantial questions of law set out in paragraph 4 of the Appeal Memo. He submits that this is a case where the Assessing Officer had made an addition to the extent of 100% of the bogus purchases. This was reduced by the Commissioner (Appeals) to 12.5% and such reduction was confirmed by the ITAT. He submitted that in such circumstances there was no error in imposing penalty upon the Assessee. The interference with the penalty order was contrary to law and in fact, borders on perversity.
5. We have, perused the record and examined the contention now raised. However, we are satisfied that this Appeal involves no substantial questions of law.
6. Admittedly, estimation of profits at 12.5% and the consequent addition on that basis made by the Commissioner (Appeals) was never challenged by the Revenue before the ITAT. In such circumstances, the imposition of penalty was correctly interfered with.
7. This Court’s decision in the case of Principal Commissioner of Income Tax vs. Colo Colour (P) Ltd.1 to a certain extent supports the view taken by the first Appellate Authority and the ITAT.
8. However, Mr. Suresh Kumar sought to distinguish the above decision by pointing out that in said case, the AO had made an addition of only 12.5% and in the present case, the AO had made an addition of 100%. Based on this distinction, we cannot refuse to follow the decision of the co-ordinate Bench. As noted above, even in this case, the reduction, or rather the estimation, of profits by 12.5% was never questioned by the Revenue before the ITAT.
9. Therefore, for all the above reasons, we are satisfied that this Appeal involves no substantial questions of law.
10. The Appeal is therefore dismissed without any order for costs.
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