COMMISSIONER OF INCOME TAX GANDHINAGAR vs. DEEP COTTON INDUSTRIES
What did the High Court hold?
The High Court decided on the procedural aspect of the appeals first. It held that Tax Appeals No. 606/2018, 611/2018, and 618/2018 were wrongly filed by the Revenue. These appeals arose from ITAT orders that dismissed the assessees' appeals, wherein the assessees were seeking a reduction in disallowance from 25% to 5%. Since the Revenue was not aggrieved by the dismissal of the assessees' appeals (which upheld the 25% disallowance), these three appeals were dismissed on the ground that the Revenue had no locus standi to file them. This decision was without prejudice to the Revenue's rights in other appeals. For the remaining appeals (Tax Appeals No. 607/2018, 608/2018, 609/2018, 610/2018, 619/2018, and 620/2018), where the Revenue is aggrieved by the ITAT's confirmation of the 25% disallowance, the Court admitted these appeals to consider the proposed question of law regarding the correctness of restricting the addition to 25% of bogus purchases.
What were the facts?
The Revenue has filed multiple Tax Appeals before the High Court of Gujarat at Ahmedabad, challenging orders passed by the Income Tax Appellate Tribunal (ITAT). The appeals pertain to various assessment years (AYs) from 2007-08 to 2009-10, involving assessees like Aashadeep Industries, Deep Cotton Industries, and Prakash Industries. The core issue in all appeals revolves around the disallowance of 'bogus purchases'. The Commissioner of Income Tax (Appeals) [CIT(A)] and the ITAT had restricted this disallowance to 25% of the total bogus purchases. The Revenue contends that 100% of the bogus purchases should have been disallowed. However, three specific appeals (Tax Appeals No. 606/2018, 611/2018, and 618/2018) were filed by the Revenue against ITAT orders that dismissed the assessees' appeals, where the assessees were seeking a further reduction in the disallowance to 5%.
What were the issues?
1. (Mixed Law and Fact) Whether the Appellate Tribunal has erred in law and on facts of the case in restricting the addition to 25% of the value of alleged purchases after categorically finding it to be bogus? This question arises in the context of the Revenue's appeals where the CIT(A) and ITAT had confirmed a 25% disallowance of bogus purchases, while the Revenue argued for a 100% disallowance. The assessees, in some of these cases, had appealed to the ITAT seeking a reduction to 5%. Revenue's Contention: The Revenue argued that since the purchases were found to be bogus, 100% of their value ought to have been disallowed. They are aggrieved by the ITAT's confirmation of the CIT(A)'s decision to restrict the disallowance to 25%. Assessee's Contention (where applicable): In appeals where the assessees had preferred appeals to the ITAT, their contention was that the disallowance should have been restricted to 5% of the bogus purchases, not 25%. The ITAT had dismissed these appeals, confirming the 25% disallowance.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
COMMON ORAL ORDER (PER : HONOURABLE MR.JUSTICE M.R. SHAH)
judgment and order passed by the learned Income Tax Appellate Tribunal (“ITAT”) in Income Tax Appeal No.1693/2014 for A.Y. 2007-08 by which the learned ITAT has dismissed the said appeal preferred by the assesee – M/s.Aashadeep Industries and has confirmed the order passed by the learned Commissioner of Income Tax (Appeals) [“CIT(A)”], restricting disallowance to 25% of the bogus purchases, the Revenue has preferred Tax Appeal No.606/2018 with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT” in Income Tax Appeal No.2040/2014 for A.Y. 2007-08 by which the learned ITAT has dismissed the said appeal preferred by the Revenue and has confirmed the order passed by the learned CIT(A), restricting disallowance to 25% of the bogus purchases, the Revenue has preferred Tax Appeal No.607/2018, with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.793/2013 for A.Y. 2008-09 by which the learned ITAT has allowed the said appeal preferred by the assesee – M/s.Aashadeep Industries and has confirmed the order passed by the learned CIT(A), and has restricted the disallowance to 25% of the bogus purchases, the Revenue has preferred Tax Appeal No.608/2018 with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.794/2013 for A.Y. 2009-10 by which the learned ITAT has partly allowed the said appeal preferred by the assesee – M/s.Aashadeep Industries and has restricted the disallowance to 25% of the bogus purchases, the Revenue has preferred Tax Appeal No.609/2018 with the following proposed question of law:
value of alleged purchases for A.Y.r 2009-10 after categorically finding it to be bogus in its composite order for A.Y.r. 2007-08 to 2009-10?” judgment and order passed by the learned ITAT in Income Tax Appeal No.948/2012 for A.Y. 2008-09 by which the learned ITAT has dismissed the said appeal preferred by the Revenue and has confirmed the order passed by CIT(A), restricting disallowance to 25% of the total bogus purchases, the Revenue has preferred Tax Appeal No.610/2018 with the following proposed question of law:
value of alleged purchases amounting to Rs.52,37,419/- after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.1460/2012 for A.Y. 2008-09 by which the learned ITAT has dismissed the said appeal preferred by the assesee – M/s.Deep Cotton Industries and has confirmed the disallowance restricting to 25% of the total bogus purchases, the Revenue has preferred Tax Appeal No.611/2018 with the following proposed question of law:
value of alleged purchases amounting to Rs.52,37,419/- after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.1694/2014 for A.Y. 2007-08 by which the learned ITAT has dismissed the said appeal preferred by the assesee – M/s.Prakash Industries and has confirmed the order passed by the CIT(A) restricting disallowance to 25% of the total bogus purchases, the Revenue has preferred Tax Appeal No.618/2018 with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.2039/2014 for A.Y. 2007-08 by which the learned ITAT has dismissed the said appeal preferred by the Revenue and has confirmed the order passed by the CIT(A) restricting disallowance to 25% of the total bogus purchases, the Revenue has preferred Tax Appeal No.619/2018 with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?”
judgment and order passed by the learned ITAT in Income Tax Appeal No.791/2013 for A.Y. 2008-09, by which the learned ITAT has allowed the said appeal preferred by the assesee – M/s.Prakash Industries and has confirmed the order passed by the learned CIT(A), and has restricted the disallowance to 25% of the bogus purchases, the Revenue has preferred Tax Appeal No.620/2018 with the following proposed question of law:
value of alleged purchases after categorically finding it to be bogus?” At the outset, it is required to be noted that the Revenue has wrongly preferred/ filed Tax Appeals No.606/2018, 611/2018 and 618/2018 as these appeals arise out of the judgment and order passed by the learned Tribunal dismissing the assessees' appeals. It is also required to be noted that in all these appeals, the learned CIT(A), in the case of respective assessees for respective Assessment Years, has restricted the disallowance to 25% of the total bogus purchases. However, according to the assessees, it should have been 5% of the total bogus purchases and therefore, the assessees had preferrd appeals before the learned Tribunal and the learned Tribunal has confirmed the respective orders passed by the CIT(A) restricting disallowance to 25% of the total bogus purchases. It is true that according to the Revenue, 100% of the total bogus purchases ought to have been disallowed. However, the same is the subject-matter of the other appeals preferred by the Revenue which shall be dealt with hereinafter. As these three appeals arise out of the impugned judgment and order passed by the learned Tribunal dismissing the assessees’ appeals, the Revenue cannot be said to be aggrieved by the said decision dismissing the assessees’ appeals. Therefore, the present three appeals, being Tax Appeals No.606/2018, 611/2018 and 618/2018 stand dismissed on the ground that the Revenue cannot be said to be aggrieved by the said decision of the Tribunal. However, the same shall be without prejudice to the rights and contentions of the Revenue in other appeals in which it is the case on behalf of the Revenue that in fact, there shall be disallowance of 100% of the total bogus purchases. Now so far as remaining appeals, i.e. Tax Appeals No.607/2018, 608/2018, 609/2018, 610/2018, 619/2018 and 620/2018 are concerned, Mrs.Mauna Bhatt, learned counsel has appeared on behalf of the Revenue in the remaining Tax Appeals in which it is the case on behalf of the Revenue that the learned CIT(A) as well as the learned Tribunal ought to have allowed disallowance of 100% of the total bogus purchases. Having heard Mrs.Mauna Bhatt, learned counsel appearing on behalf of the Revenue, Tax Appeals No.607/2018, 608/2018, 609/2018, 610/2018, 619/2018 and 620/2018 are admitted to consider the following question of law:- value of alleged purchases after categorically finding it to be bogus?” (M.R. SHAH, J) (A.Y. KOGJE, J) sunil
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