PCIT Vs Drisha Impex Pvt. Ltd. (Bombay High Court)
Bombay High Court has ruled in favor of the Principal Commissioner of Income Tax (PCIT) against Drisha Impex Pvt. Ltd., setting aside an order by the Income Tax Appellate Tribunal (ITAT) and confirming the Assessing Officer’s (AO) decision to add back 100% of alleged bogus purchases to the assessee’s income for Assessment Years 2009-10 and 2010-11. The case originated from the reopening of the assessment based on information suggesting that purchases made by Drisha Impex were non-genuine. The AO disallowed ₹6,15,71,284, representing the peak of these questioned purchases, citing the assessee’s inability to produce audited books of accounts, confirm incidental expenses, or locate the suppliers. Summonses issued to the suppliers were returned undelivered, and the assessee admitted to the unavailability of supplier ledgers and the loss of a hard disk containing accounts.
Initially, the Commissioner (Appeal) granted substantial relief, confirming only 1% of the bogus purchases. However, the ITAT increased this disallowance to 3% of the peak purchase amount. The Revenue challenged this order before the Bombay High Court, arguing that once the Tribunal accepted the purchases as bogus, it should have upheld the 100% disallowance, particularly considering the provisions of Section 69C of the Income Tax Act and the Gujarat High Court’s precedent in N.K. Industries Ltd. Vs. Deputy Commissioner of Income Tax, which was upheld by the Supreme Court in N. K. Protiens Ltd. Vs. Deputy Commissioner of Income Tax. The Revenue contended that the ITAT erred in restricting the disallowance to a profit margin on unproven purchases after concluding they were indeed bogus.
