Case Law Details
PCIT Vs Rishabhdev Tachnocable Ltd. (Bombay High Court)
In this case Tribunal noted that it was an admitted fact that the Assessing Officer did not object to the sales made by the assessee. Therefore, it was evident that they were corresponding purchases. Having noted the above, Tribunal examined the books of accounts of the assessee where from it was found that the assessee had made payments on account of the purchases through account payee cheques and the purchases were entered in its books of account. Thus, assessee was able to prove that the purchases were made only in the alternative way. If that be so, then Revenue was only required to estimate the profit at a particular rate. Referring to the figure of 2% arrived by the CIT(A), Tribunal observed that assessee’s gross profit varied from 5% to 8.77%. Since the purchases were made from the grey market, the corresponding profit element would be little higher. Therefore, Tribunal directed the Assessing Officer to make further addition of 3% on the bogus purchases and to estimate the income on such basis.
On thorough consideration of the matter, Hon’ble High Court do not find any error or infirmity in the view taken by the Tribunal. The lower appellate authorities had enhanced the quantum of purchases much beyond that of the Assessing Officer i.e., from Rs.24,18,06,385.00 to Rs.65,65,30,470.00 but having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue. We have also considered the two decisions relied upon by learned standing counsel and we find that facts of the present case are clearly distinguishable from the facts of those two cases to warrant application of the legal principles enunciated in the two cited decisions.
In Bholanath Polyfab Limited (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that 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 had 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.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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