TaxTMI 
TaxTMI 
TaxTMI 
2026 (2) TMI 152
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.... the concerned A.Y. 2021-22 declaring total income of Rs. 82,84,260/-. Subsequently, the assessee filed revised return on 8th March, 2022 declaring total income of Rs. 82,84,260/- and the said return of income was processed by the CPC, Bangaluru, wherein notice u/s 143(2) of the Act dated 28.06.2022 was issued and thereafter notice u/s 142(1) of the Act dated 5th August, 2022 and 4th October, 2022 were issued but no reply was filed. However, the reply was filed for additional queries raised vide letter dated 20.10.2022 and subsequent to that notice u/s 142(1) of the Act dated 08.11.2022 was issued to which part reply was filed. Final show cause notice was issued on 12.12.2022 but no reply was received. However, the assessee company filed reply on 26.10.2022 to the notice dated 05.08.2022 giving details of turnover, gross profit and net profit for A.Y. 2020-21 and 2021-22 and 2019-20. 3. During the course of assessment proceedings, the assessee company was asked to provide details of purchases made by it during the year under consideration. It is noted that the assessee company has not furnished any document/details regarding genuineness and creditworthiness of the substantial pu....
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.... Party Name Party PAN Purchase as per information available (Rs.) 1. ROHIT COKPR9125K 4,14,603/- 2. BHOLA NATH PRASAD BHVPP9120P 85000 3. UPENDRA PRASAD CHRPP9977M 13,78,619/- 4. CHANDAN KUMAR BDOPK3127N 399186/- 5. AJAY GUPTA BUHPG1569G 156995/- Total 24,34,403/- 6. Accordingly, the show cause notice was issued as to why purchases made by the assessee from above mentioned 18 entities / persons should not be treated as bogus purchase and 12.5 % of said purchases of Rs. 1,41,30,437/- which comes to 17,66,305/- should not be disallowed and added to the total income. The assessee did not file any reply to the show cause notice dated 12.12.2022. Hence, it was concluded by the AO that Assessee Company has failed to establish the genuineness and creditworthiness of substantial purchases from alleged suppliers who were either non-filers or have filed non-business ITR. Accordingly, a sum of Rs. 48,65,671/- was disallowed and added back to the total income of the assessee and final computation of the taxable income is shown as under: - S. No. Description Amount (in Rs. ) 1. Income....
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.... (India) Ltd. (2025) 172 taxmann.com 283 (Bombay) and Hon'ble Supreme Court in N.K.Proteins Ltd. vs. DCIT (2017) 84 taxman.com 195 (SC)). Therefore, the Ld. PCIT was of the opinion that following the above two judgments of the Hon'ble Bombay High Court and Hon'ble Supreme Court where issued has been decided in favour of the Revenue, the entire bogus purchases made by the assessee are disallowable expenses and therefore, 100% of such bogus purchases should be added to taxable income of the assessee and further any addition made on account of bogus purchases will fall within the scope of Section 69C of the Act. Ld. PCIT, therefore, concluded that the assessment order u/s 143(3) r.w.s. 144B of the Act for A.Y. 2021- 22 is held to be erroneous, in so far as it is prejudicial to the interest of Revenue and accordingly, the AO was directed to pass a order u/s 263 r.w.s. 143(3) of the Act along with Section 144B of the Act by taking necessary remedial action on various issues involved and as directed by the Ld. PCIT. 10. Aggrieved by the impugned order, the assessee is in appeal before us and has raised following grounds of appeal: "1. On the fact and circumstances of the case....
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....e Act because the identical issue of addition on account of bogus purchases is subject matter of appeal pending before the Ld. CIT(A). 13. Secondly, it is argued that the Ld. PCIT has wrongly concluded that the assessment order has been passed and relief has been granted by the AO without inquiry into the claim and further that the order has not been passed in accordance with the decision of Hon'ble Bombay High Court in Kanak Impex (India) Ltd. (supra) and Hon'ble Supreme Court in N.K.Proteins Ltd. (supra). It is argued that the necessary statutory notices u/s 142(1) and 143(2) of the Act were issued along with show cause notice dated 12.12.2022 to which detail submission were made by the assessee. The Ld. AO has also issued notice u/s 133(6) of the Act to the various entities from whom the alleged bogus purchases were made and after due deliberation and consideration of all the submissions, the assessment order was passed wherein the reply of the assessee was not considered and instead of granting relief, disallowance of expenditure spent on purchases was made and as such clause b of explanation 2 to Section 263 of the Act does not get attracted. 14. Ld. Sr. DR on the other ....
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....in hand are totaling distinguishable from the facts and circumstances of the Kanak Impex (India) Ltd. and it will become more lucid by extracting the relevant portion of Palmon Impex Pvt. Ltd. vs. ITO-7(3)(1), Mumbai Tribunal, in ITA No. 2561/MUM/2025 order dated 28.07.2025 in which one of us i.e. (judicial member) was a party and the relevant portion from para 16 onwards is extracted below as under: - "16. On the basis of above table, Ld. AR argued that the case of Kanak Impex (India) Ltd. (supra) does not apply in the assessee's case because the said case was on the issue of bogus purchase with important implications u/s 69C of the Act and the assessee therein did not attend reassessment proceedings or explain the source of fund and even at appellate level, there was no explanation or rebuttal to allegations of bogus purchase and at the time of assessment, the AO invoked the provision of section 69C of the Act and made 100% addition of bogus purchase of Rs. 20.06. crores. Ld. AR further submitted that the various Tribunal including Jurisdictional Tribunal have distinguished the ratio of Kanak Impex (India) Ltd. (supra). Therefore, we proceed to discuss each case one by o....
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....position that assessee did not appear before the Ld.AO during the course of assessment proceedings and failed to prove the genuineness of the purchase. The said assessment was completed ex-parte u/s. 144 r.w.s 147 of the Act. Hon'ble Court also observed in para 17 about the nonappearance of assessee before the Ld.AO for which there is no justification. Again, it noted in para 29 that the assessee chose not to attend the reassessment proceedings even though the notices were sent by post, email and affixture. Accordingly, in para 13, Hon'ble Court concluded that assessee having not joined the reassessment proceedings, the contention raised by the assessee are to be rejected. Observation of the Hon'ble Court while rejecting the contention of the assessee are: "30. We fail to understand that the respondent-assessee having consciously and intentionally decided not to join the investigation, cannot now contend that the appellant-revenue should have given them all the details before making the addition. In our view, such a conduct of the respondent-assessee cannot be accepted. It was incumbent upon the respondent-assessee to have joined the re-assessment proceedings, discharge th....
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....t order itself vide para 7(xii) for making the payment through banking channel. 9. The Ld. Counsel also submitted four judgments qua identical issue, by the Hon'ble Jurisdictional High Court, including in the case of Principal Commissioner of Income Tax-2 Vs Refrigerated Distribute Private Limited (ITA No. 1840/2018) decided on 05.03.2005, wherein the Assessing Officer estimated the gross profit @25%, which was confirmed by the then Ld. CIT(A). However, subsequently reduced by the tribunal to 10% and therefore, the Hon'ble High Court, by considering the peculiar fact that the issue involved relates to only estimation of profit; ultimately opined/decided that no substantial question of law can be said to have arisen in the instant case. 10. Thus this Court is in concurrence with the contention raised by Mr. Dhaval and the claim made by the Assessee that this case is factually dissimilar to the case dealt with by the Hon'ble High Court Principal Commissioner Of Income Tax-5 Vs. Kanak Impex (India) Ltd. in ITA No. 791/2021 decided on 03.03.2025. Hence the addition the addition @ 100% of the bogus purchases made by the AO and as claimed by the Ld. DR, cannot be restor....
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.... has been recorded by the CIT(A) in the appellate order. Therefore in our considered view, the decision of the Hon'ble High Court in the case of Kanak Impex (India) Ltd (supra) is not applicable to assessee's case." vi) Rajesh Shivji Shah vs. ITO (ITA No. 525/Mum/2025) dated 29.04.2025 (Mumbai Tribunal) 11. Since the facts of the present case are identical with the facts in the case of Ashok Kumar Rungta (supra), therefore I am of the view that disallowance of purchases in the present case cannot be sustained when the VAT authorities itself have accepted the transactions. Although revenue has relied upon the decision of Hon'ble Bombay High Court in the case of PCIT Vs. Kanak Impex (Ind) Ltd Vs. ITA No. 791 of 2021, but the facts contained in the said decisions are different from the facts of the present case as in the case of PCIT Vs. Kanak Impex (Ind) Ltd (supra), the assessee had not cooperated and has not submitted the entire records and the books of accounts in the said case were also rejected. Whereas as per the facts of the present case the assessee had made full compliance before the AO by submitting all the relevant documents and the books of accou....
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....t is reproduced below:- "61. Reliance placed by the learned counsel for the assessee to the dismissal of the appeal in limine by the Delhi High Court or the Supreme Court seems to be not sustainable. A perusal of the order passed by the Delhi High Court and the hon'ble Supreme Court shows that the appeal has been dismissed without recording a finding with regard to argument advanced or dispute raised. It is settled law that a judgment shall be binding only in case the dispute is identical based on the same set of facts. The judgment should be considered in reference to the context keeping in view the facts and circumstances of each case. It is not borne out from the judgment of the Delhi High Court that the question cropped up for adjudication in this court was raised and adjudicated by the Delhi High Court. 62. The expression, "judgment" has been defined in section 2(9) of the Code of Civil Procedure. The judgment means the statement given by a judge on the grounds of a decree or order. Meaning thereby the court has to state the ground on which it bases its decision. It must be intelligible and must have a meaning. It has a distinction from a word, order as t....
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....f it has some distinguishing features. 67. In Bhavnagar University v. Palitana Sugar Mill P. Ltd., AIR 2003 SC 511, the hon'ble Supreme Court held that a decision is an authority for which it is decided and not what can logically be deduced therefrom. A little difference in facts or additional facts may make a lot of difference in the precedential value of a decision. 68. The aforesaid principle of law has been followed in other cases reported in Delhi Administration v. Manohar Lal, AIR 2002 SC 3088, Union of India v. Chajju Ram, AIR 2003 SC 2339 and Ashwani Kumar Singh v. U. P. Public Service Commission, AIR 2003 SC 2661. 69. In view of the above, keeping in view the finding and the material discussed by the assessing authority and the submission made by the parties, the judgment of the Delhi High Court does not have binding precedent being not a reasoned order deciding the issue in question. It also lacks persuasive effect being not deciding the issue involved." 19. Thus, it can be culled out from the findings of Hon'ble High Court as extracted above that the judgment should be considered in reference to the context, keeping in view the fac....
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....cted is found to be without sound legal basis and not tenable. 20. We find force in the argument of the Ld. AR on behalf of the assessee that the plausible view in the factual matrix of the case having been taken by the AO cannot be substituted by the Ld. PCIT by assuming Jurisdiction u/s 263 of the Act. Our view is supported by the Hon'ble Apex Court pronouncements in Malabar Industrial Co. Ltd. vs. CIT [2000] 109 taxman 66 (SC) where it was held as under: "9. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a p....