PCIT Vs Hitesh Mody (HUF) (Bombay High Court)
The Bombay High Court considered the Revenue’s appeal challenging the order dated 24.05.2017 of the Income Tax Appellate Tribunal (ITAT), which had allowed the assessee’s appeal in part and dismissed the Revenue’s appeal. The Revenue proposed substantial questions of law relating to the Tribunal’s affirmation of the Commissioner of Income Tax (Appeals) [CIT(A)] restricting the addition on alleged bogus purchases to 8% under Section 69C of the Income-tax Act, 1961.
The assessee was engaged in the business of trading chemicals. During assessment for Assessment Year 2011-12, the Assessing Officer concluded that the assessee had made bogus purchases amounting to ₹1.35 crore and treated the entire amount as unexplained expenditure under Section 69C of the Act.
The assessee appealed before the CIT(A). Relying upon Commissioner of Income Tax v. Simit P. Sheth, the CIT(A) held that the entire purchases could not be disallowed and that only the profit element embedded in such purchases could be brought to tax. Accordingly, the CIT(A) restricted the addition to 8% of the total purchases. Both the assessee and the Revenue challenged this order before the ITAT. The Tribunal dismissed both appeals and affirmed the findings of the CIT(A).
