PCIT Vs Ganesh Developers (Bombay High Court)
The Bombay High Court decided an appeal filed by the Revenue for Assessment Year 2010–11, raising questions on whether the Income Tax Appellate Tribunal (ITAT) was justified in restricting additions on alleged bogus purchases to a profit margin instead of confirming full disallowance, particularly in light of Section 69C of the Income-tax Act, 1961, and earlier judicial precedents.
The assessee, a real estate firm, filed a return declaring income of ₹61.05 lakh. Following scrutiny, the Assessing Officer (AO) passed an order under Section 143(3) assessing income at ₹15.41 crore, making an addition of ₹14.30 crore on account of alleged bogus purchases from several suppliers and an additional ₹50 lakh under Section 68. The assessee challenged the order before the Commissioner of Income Tax (Appeals) [CIT(A)].
The CIT(A) deleted the additions relating to all suppliers except two—M/s Neptune Trading Co. and Hari Om Traders. For these two parties, the CIT(A) sustained the addition only to the extent of 12.5% of the purchases. The Revenue appealed to the Tribunal, contesting both the deletion of additions and the restriction of disallowance to 12.5%. The assessee did not challenge the partial addition sustained by the CIT(A). The Tribunal upheld the CIT(A)’s order in full.
