PCIT-14 Vs Batliboi Environmental Engineering Ltd. (Bombay High Court)
The Bombay High Court dismissed the Revenue’s appeal concerning Assessment Year 2011-12 and held that neither of the two questions of law raised by the Revenue survived for consideration. On the issue of bogus purchases, the Court noted that the sales had been accepted by the Department and, following Pr.Commissioner of Income Tax v. M/s.Mohommad Haji Adam & Co. and Pr.Commissioner of Income Tax v. Pramshakti Distributors Pvt.Ltd., held that where sales are accepted, the entire amount of alleged bogus purchases need not be added to the assessee’s income. The Tribunal had upheld the Commissioner (Appeals)’s direction to disallow 12.5% of the bogus purchases and add the same as income. On the second issue, concerning Rs.1,52,29,070/- added under Section 41(1) on account of cessation of liability, the Revenue contended that liabilities outstanding for more than three years, including some transactions eight to nine years old, were barred by limitation. The Court, relying upon Commissioner of Income Tax v. G.K.Patel, Commissioner of Income Tax v. Jain Exports Pvt.Ltd., Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, CIT v. Sugauli Sugar Works (P) Ltd., Kohinoor Mills v. C.I.T. and CIT v. Indian Rayon and Industries Ltd., held that merely because a liability is barred by limitation, it does not cease to be a debt. The Revenue’s appeal was accordingly dismissed.
