PCIT Vs Amcon Construction (Bombay High Court)
The appeal was filed by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2011–12. The ITAT had partly allowed the assessee’s appeal and restricted the disallowance on alleged bogus purchases to 10%, as against the 25% sustained by the Commissioner of Income Tax (Appeals) [CIT(A)].
The Revenue raised questions regarding the correctness of the ITAT’s decision, particularly arguing that the assessee had failed to produce primary evidence such as delivery challans, weigh slips, and octroi receipts, and that the entire purchases should have been disallowed rather than restricting the addition to 10%. The Revenue also relied on a Supreme Court decision to argue that full additions should be made where purchases are found to be bogus.
The assessee contended that the issues raised were already covered by prior decisions of the same High Court, including cases where similar additions had been restricted to a percentage of the purchases rather than the entire amount.
Upon examining the record, the Court found that the issues raised were squarely covered by earlier decisions. It noted that where purchases are not entirely rejected and corresponding sales are accepted, it is appropriate to tax only the profit element embedded in such purchases rather than disallowing the entire expenditure. The Court relied on precedent holding that restricting additions to a reasonable percentage, such as 10%, is justified in such circumstances.
