PCIT 1 Vs Surya Impex (Gujarat High Court)
The Gujarat High Court considered an appeal filed by the Revenue challenging the Income Tax Appellate Tribunal (ITAT), Surat order dated 28.03.2022 relating to Assessment Year 2009-10. The appeal arose from reassessment proceedings in which additions had been made on account of alleged bogus purchases.
Background of the Case
The assessee filed its return of income on 29.09.2009, declaring a total income of Rs.1,17,752, and the original assessment under scrutiny was completed on 28.12.2010, determining total income at Rs.2,16,900. Subsequently, based on information received from the Investigation Wing, Mumbai, the assessment was reopened under Section 147. During reassessment under Sections 143(3) and 147, the Assessing Officer (AO) made an addition of Rs.8,10,56,469 on account of alleged bogus purchases.
Assessing Officer’s Findings
The AO alleged that the assessee had received accommodation entries from entities controlled by the Bhanwarlal Jain Group, particularly M/s. Rose Gems (P) Ltd., through bogus purchase transactions amounting to approximately Rs.8.10 crore. Treating the purchases as fictitious, the AO disallowed 100% of the alleged bogus purchases and added the entire amount to the assessee’s income.
Order of the CIT(A)
The assessee challenged the reassessment before the Commissioner of Income Tax (Appeals). The CIT(A) did not sustain the entire addition but restricted the disallowance to 12.5% of the disputed purchases, amounting to Rs.1,01,32,060, relying on judicial precedents.
