Agarwal Industrial Corporations Limited Vs Union of India (Bombay High Court)
Bombay High Court held that order of Tribunal directed the designated authority to calculate the tax amount applying the ratio of Mohommad Haji Adam & Co case. Designated authority had only to calculate the disputed tax by giving effect to the orders of the Tribunal. Order of Tribunal was not directing fresh examination on any issue.
Facts- The Reassessment proceedings were initiated against the petitioner and the income was reassessed after making an addition of 100% of alleged bogus purchases under section 68 of the Act.
An appeal came to be preferred before the Commissioner of Income Tax (Appeals) [‘CIT(A)], who restricted the addition to 25% of the amount of purchases made. This order, however, was challenged by both the petitioner as also the revenue before the Income Tax Appellate Tribunal, Pune.
The Tribunal partly allowed the appeal of the petitioner and remanded the matter to the to the file of the Assessing Officer. The Tribunal it set aside the impugned orders and remitted the matter to the file of Assessing Officers for applying the ratio laid down by this Court in the judgment of Mohommad Haji Adam & Co.
The petitioner filed declaration in Form-I under Direct Tax Vivad se Vishwas Act with Rules, 2020 framed thereunder in respect of 25% addition of alleged bogus purchase. The petitioner had declared an amount of Rs.22,04,500/- as disputed tax based upon the orders passed by CIT(A).
Respondent No.4 is stated to have issued certificate in Form-3 under the Act, wherein the demand on account of disputed tax was refected on Rs.91,18,533/-, as against the amount payable indicated by the petitioner in Form-1 at Rs.22,04,500/-. Rectification Application was filed by the petitioner claiming that the demand raised in Form No.3 was erroneous and unjustified and that the orders of the ITAT had been ignored for purposes of calculating the tax liability.
Conclusion- In the present case, as can be seen from the facts narrated hereinabove, the Tribunal had already passed the order and, therefore, disputed tax had to be calculated in terms of section 2(1)(j)(B) of the Act of 2020. Designated authority had only to calculate the disputed tax by giving effect to the orders of the Tribunal. FAQ No.7 would, in our opinion, be applicable if it was a case of remand by an appellate authority to the Assessing Officer, where a reasonable opportunity of being heard was not given by the Assessing Officer to the assessee or the Appellate Authority wanted the Assessing Officer to carry out a fresh examination of the issue with a specific direction.
In the present case, the order of the Tribunal is certainly not the one where the Assessing Officer had been directed to carry out a fresh examination on any issue rather the Tribunal had clinched the issue by holding that the addition could only be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases.
The Tribunal remitted the matter to the file of Assessing Officer for applying the ratio laid down by this Court in the case of Mohommad Haji Adam & Co. The reason why the Tribunal did not specify the amount based upon the afore-stated principle was that specific details were not readily available from various ARs/DRs for facilitating the calculation of such rates.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Return of income was fled by the petitioner declaring a total income of Rs.93,92,140/-. Subsequently, the assessment was completed under section 143(3) of the Income Tax Act, 1961 (‘the Act’). Reassessment proceedings were initiated against the petitioner and the income was reassessed at Rs.3,56,74,514/-after making an addition of 100% of alleged bogus purchases under section 68 of the Ac
2. An appeal came to be preferred before the Commissioner of Income Tax (Appeals) [‘CIT(A)], who, vide order dated 21st March 2018, restricted the addition to 25% of the amount of purchases made.
This order, however, was challenged by both the petitioner as also the revenue before the Income Tax Appellate Tribunal, Pune.
3. The Tribunal, vide its order dated 26th September 2019, partly allowed the appeal of the petitioner and remanded the matter to the to the file of the Assessing Officer. The Tribunal relied upon a judgment of this Court in the case of Pr. CIT Vs. Mohommad Haji Adam & Co. 1, wherein, it was held that no ad-hoc addition for bogus purchases should be made and that the addition be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. The Tribunal held that since specific details were not readily available for facilitating the calculation of gross profit rates of genuine and hawala purchases, it set aside the impugned orders and remitted the matter to the file of Assessing Officers for applying the ratio laid down by this Court in the judgment of Mohommad Haji Adam & Co. (Supra).
4. An appeal came to be preferred by the revenue against the order of the Tribunal under section 260A of the Act on 3rd March 2021.
5. The petitioner filed declaration in Form-1 under Direct Tax Vivad se Vishwas Act with Rules, 2020 (‘Act of 2020’) framed thereunder in respect of 25% addition of alleged bogus purc The petitioner had declared an amount of Rs.22,04,500/- as disputed tax based upon the orders passed by learned Commissioner of Income Tax (Appeals) [for short ‘CIT(Appeals)’].
6. Respondent No.4 is stated to have issued certificate in Form-3 under the Act, wherein the demand on account of disputed tax was refected on Rs.91,18,533/-, as against the amount payable indicated by the petitioner in Form-1 at Rs.22,04,500/-. Rectification Application was filed by the petitioner claiming that the demand raised in Form No.3 was erroneous and unjustified and that the orders of the ITAT had been ignored for purposes of calculating the tax liability.
7. The rectification application of the petitioner was rejected vide order dated 1st September 2021. With a view to justify the figure of disputed tax in Form-3. Reliance was placed upon the question No.7 of the FAQ of Circular No.09/2020, dated 22nd April 2020, issued by the Central Board of Direct Taxes (CBDT). For purposes of reference, question No.7, and the answer thereto are reproduced hereunder :
