Gujarat High Court
Principal Commissioner Of Income Tax vs Jagdish H Patel....Opponent(S) on 1 August, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/411/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 411 of 2017
With
TAX APPEAL NO. 413 of 2017
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PRINCIPAL COMMISSIONER OF INCOME TAX,
GANDHINAGAR....Appellant(s)
Versus
JAGDISH H PATEL....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 01/08/2017
COMMON ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 14.03.2016 raising following questions for our consideration:
"[A] Whether the Appellate Tribunal has erred in law and on facts in restricting the disallowances of bogus purchases to 8% of the total purchase ?
[B] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.5,63,925/ made on account of undisclosed income admitted during the course of survey ?
2. For the assessment year 200809 concerning this Page 1 of 5 HC-NIC Page 1 of 5 Created On Mon Aug 21 06:57:21 IST 2017 O/TAXAP/411/2017 ORDER very assessee, similar question came up for consideration in Tax Appeals Nos.410 and 412 of 2017, which appeals came to be dismissed as under:
"1. Tax Appeal No.410 of 2017 is filed by the Revenue to challenge the judgment of the Income Tax Appellate Tribunal dated 14.03.2016 raising following questions for our consideration:
"[A] Whether the Appellate Tribunal has erred in law and on facts in restricting the disallowances of bogus purchases to 8% of the total purchase ?
[B] Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.61,05,000/ made on account of undisclosed income admitted during the course of survey ?"
2. The respondent assessee is engaged in the business of refining and selling edible oils. A survey operation was carried out in case of the assessee on 20.06.2008. For the assessment year 200708, the return of the assessee was taken in scrutiny. Assessing Officer found that the assessee had made bogus purchases worth of Rs.5.66 crores (rounded off) from five different agencies. During the survey operation, in his statement, the proprietor of the assessee firm had also disclosed a sum of Rs.61.05 lakhs on account of bogus purchases. However, subsequently such statement was retracted through an affidavit dated 07.09.2011 and in the return filed, the assessee has not disclosed such sum. The Assessing Officer in the order of assessment, added both the amounts i.e. the bogus purchases of Rs.5.66 crores and declared amount of Rs.61.05 lakhs in the statement of the assessee. The assessee carried the matter in appeal. Commissioner (Appeals) Page 2 of 5 HC-NIC Page 2 of 5 Created On Mon Aug 21 06:57:21 IST 2017 O/TAXAP/411/2017 ORDER held that such purchases were bogus. Detailed discussion was made and reasons were cited for this. Before the Commissioner of Income Tax (Appeals), the assessee pointed out that as per the audited accounts for the year under consideration, assessee's opening stock was Rs.7.81 crores (rounded off) and sales plus closing stock was Rs.8.27 crores. As per such figures, the assessee's gross profit margin would be worked out at 7.51% of its turnover. If entire purchases of Rs.5.66 crores are to be treated as bogus, the gross profit margin would be worked out to 100.18%. In other words, the gross profit would be higher than the total turnover. The assessee also pointed out that in the business of crushing the oil seeds, sometimes purchases of the agricultural raw material is made directly from producers and agriculturists from whom purchase bills are not available. In short, the assessee argued that the entire lot of purchases cannot be treated as bogus.
3. The Commissioner (Appeals) while holding that the purchases were not backed by documents and bills and were therefore bogus, accepted the assessee's contention that the entire amount of purchases cannot be added back to the income of the assessee. Referring to the decision of this Court in case of Sanjay Oilcake Industries v. CIT reported in (2009) 316 ITR 274 (Guj), he restricted such additions to 25% of the bogus purchase amount.
4. With respect to the disclosure of Rs.61.05 lakhs made by the assessee in his statement recorded during the survey, the Commissioner of Income Tax (Appeals) held that the same was part of the addition already sustained by him and no separate addition would be justified.
5. Against the order of the Commissioner of Income Tax (Appeals), the Revenue as well as assessee both filed appeals before the Page 3 of 5 HC-NIC Page 3 of 5 Created On Mon Aug 21 06:57:21 IST 2017 O/TAXAP/411/2017 ORDER Tribunal. The Tribunal by the common impugned judgment, partially allowed the appeal of the assessee and rejected that of the Revenue. This judgment has therefore given rise to present two tax appeals at the hands of the department. In the impugned judgment, the Tribunal while sustaining the findings of the Commissioner of Income Tax (Appeals) recording bogus purchases, reduced the addition to 8% thereof from the standard of 25% adopted by the Commissioner of Income Tax (Appeals). The Tribunal confirmed the view of the Commissioner of Income Tax (Appeals) of not separately taxing the sum of Rs.61.05 lakhs as admitted by the assessee in the statement recording during survey.
6. Having heard learned counsel for the Revenue and having perused the documents on record, we see no reason to interfere. The Commissioner of Income Tax (Appeals) as well as Tribunal both have accepted the assessee's contention that adding the entire amount of bogus purchases would give a completely distorted figure and the gross profit would be higher than the total turnover. Such bogus purchases were for offsetting the purchases from producers and agriculturists directly who would not have the billing facility. Only question seriously paused before us was, was the Tribunal justified in adopting the gross profit rate of 8% as against 25% adopted by the Commissioner of Income Tax (Appeals)?
7. When additions are made on the basis of gross profit rates, a limited amount of estimation and gross work is always inbuilt. The assessee had pointed out that without the additions, the gross profit for the year under consideration was approximately 7%. The Tribunal therefore, did not commit any error in accepting the gross profit rate of 8% on the purchases which was otherwise found not genuine.
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O/TAXAP/411/2017 ORDER
8. No question of law arises. The
disclosure of Rs.61.05 lakhs made by the assessee in his statement pertained to the bogus purchases and was therefore rightly assessed by the Commissioner of Income Tax (Appeals) and the Tribunal. No question of law arises. Tax Appeals are dismissed."
3. Issues being identical, these appeals are also dismissed without recording separate reasons.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) ANKIT Page 5 of 5 HC-NIC Page 5 of 5 Created On Mon Aug 21 06:57:21 IST 2017