Case Law Details
PCIT Vs JK Surface Coatings Pvt. Ltd. (Bombay High Court)
The only issue that comes up for consideration is with respect to the extent of ad-hoc disallowance to be sustained with respect to bogus purchases. The AO has observed 100% of the purchase value to be added to the income of Assessee, the CIT(A) has said it should be 15% and ITAT has said it should be 10%. First of all, this would be an issue which requires evidence to be led to determine what would be the actual profit margin in the business that Assessee was carrying on and the matter of calculations by the concerned authority. According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when material consumption factor do not show abnormal deviation.
Whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal has concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax. Therefore, in our view, this would not raise any substantial questions of law.
FULL TEXT OF THE JUDGMENT/ORDER of BOMBAY HIGH COURT
1. Appellant is impugning an Order pronounced on 18/11/2015 by Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) while disposing of Appeal filed by Respondent and cross-Appeal filed by Appellant and is proposing the following substantial questions of law :
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