PCIT Vs Center Point Gems Pvt. Ltd. (Gujarat High Court)
The Gujarat High Court heard a batch of tax appeals filed by the Revenue under Section 260A of the Income-tax Act, 1961 for Assessment Year 2012-13, challenging a common order of the Income Tax Appellate Tribunal, Surat Bench. The common issue in all appeals was whether the Tribunal erred in not estimating profitability at 6% on sales booked from alleged bogus parties despite sustaining an addition at 6% of alleged bogus purchases from the same parties.
The respondent companies had originally filed returns of income, and assessments were completed under Section 143(3). Following investigations by the DDIT, Investigation Unit-2, Surat in the case of Shri Afroz Mohammed Hassan Fatta and Group, together with investigations by the Customs Department and Enforcement Directorate concerning foreign remittances against fake import documents, notices under Section 148 were issued for reopening the completed assessments. Thereafter, reassessment orders under Sections 143(3) read with 147 were passed, treating purchases made from certain entities connected with the group as bogus and making additions under Section 69 as unexplained investments.
The Commissioner of Income Tax (Appeals) partly allowed the assessees’ appeals. The Commissioner found that purchases from certain entities were not bogus as no such purchases were debited in the books, while purchases from Metro International and Franklin International amounting to ₹13,64,90,501 were treated as non-genuine. Referring to the Task Group Report for the Diamond Sector, which reported net profit ranges for diamond manufacturing and trading, the Commissioner concluded that sustaining the profit element at 2% of the alleged bogus purchases would meet the ends of justice and accordingly restricted the addition. Similar findings were recorded in the connected appeals by restricting additions to 2% of the alleged bogus purchases.
