No Substantial Question of Law in Profit Estimation on Bogus Purchases: Bombay HC

PCIT-27 Vs Rajendra M. Pawar (Bombay High Court)

Bombay High Court holds no substantial question of law arises on estimation of profit in bogus/ unproved purchases

The Bombay High Court, in a recent decision has held that the estimation of profit percentage in bogus/ unproved purchases by the Assessing Officer which was subsequently reduced by the Income Tax Appellate Tribunal does not result in a substantial question of law. Accordingly, the appeal filed by the Income Tax Department was dismissed in favor of the Respondent Assessee.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. This Appeal is filed by the appellant- revenue for assessment year 2009-10, challenging the order of the Tribunal dated 16 November 2018.

2. The substantial questions of law proposed by the appellant – revenue reads as under:

“(I). Whether, on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal is justified in deleting the addition to the tune of Rs.16,02,351/- as profit on account of bogus purchases without appreciating that the Assessee has failed to discharge his onus of establishing the genuineness of the purchases?

(II). Whether, on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal is justified in restricting the addition on account of bogus purchases to only 5% of such bogus purchases as against 12.5% added by the AO, which was sustained by CIT(A)?”

3. In this case, the assessing officer made an addition of 12.5% of unproved purchases on the ground that the profits have been suppressed. The said order of the assessing officer was confirmed by the Commissioner of Income-Tax (Appeals). On an appeal by the assessee-respondent before the Tribunal, the Tribunal has reduced the addition to the extent of 5% of the purchases.

4. In our view, the issue raised in this appeal relates to estimation of the profit and, therefore, no substantial question of law can be said to arise from the Tribunal’s order. No perversity is also shown in the Tribunal’s order in respect to the impugned order.

5. In view of above, the appeal of the Revenue is dismissed.