COMMISSIOER OF INCOME TAX, GANDHINAGAR vs. JAYANTILAL P THAKKAR

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TAXAP/496/2018HC GujaratGJHC24028590201809 May 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the ITAT's order. The Tribunal, while acknowledging that the assessee had shown bogus purchases, did not permit the addition of the entire amount. Instead, it restricted the addition to 25% of the value of these purchases. The reasoning was based on the principle that only the profit element embedded in the bogus purchases, and not the entire purchase value, should be subjected to tax. The Tribunal relied on the judgment in Sanjay Oil Cake Industries Vs. CIT (2009) 316 ITR 274 (Guj). The High Court found no error in this approach and therefore dismissed the Revenue's appeals.

What were the facts?

The Revenue is in appeal against the order of the Income Tax Appellate Tribunal (ITAT) dated December 22, 2017. The appeals arise from a common background, with facts being drawn from Tax Appeal No. 495 of 2018. The core of the dispute concerns the ITAT's decision to restrict an addition to 25% of the value of alleged bogus purchases, rather than the entire amount. The ITAT, while upholding that the assessee had shown bogus purchases, applied the principle that only the profit element embedded in such purchases should be taxed. The ITAT relied on the Gujarat High Court's judgment in the case of Sanjay Oil Cake Industries Vs. CIT.

What were the issues?

1. 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? (Question of law and fact, concerning the quantum of addition for bogus purchases). Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that since the purchases were found to be bogus, the entire amount should have been added back to the assessee's income. The ITAT erred by restricting the addition to 25% of the value of these bogus purchases. The Revenue likely contended that the finding of 'bogus purchases' implies the entire expenditure was not incurred for business purposes and thus the full amount should be disallowed. The ITAT's reliance on the principle of taxing only the profit element was questioned.

AI-generated summary — verify with the full judgment below

C/TAXAP/495/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 495 of 2018 With R/TAX APPEAL NO. 496 of 2018 With R/TAX APPEAL NO. 497 of 2018 With R/TAX APPEAL NO. 498 of 2018 With R/TAX APPEAL NO. 499 of 2018 With R/TAX APPEAL NO. 500 of 2018 ========================================================== COMMISSIOER OF INCOME TAX, GANDHINAGAR Versus JAYANTILAL P THAKKAR ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 09/05/2018

COMMON ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These Tax Appeals arise out of common background, we may record facts from Tax Appeal No.495 of 2018. 2. Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 22.12.2017 raising following questions for our consideration: “Whether the Appellate Tribunal has erred in law and on facts of the case in restricting Page 1 of 2

C/TAXAP/495/2018 ORDER the addition to 25% of the value of alleged purchases after categorically finding it to be bogus ? 3. Perusal of the impugned judgment of the Tribunal would show that even while upholding that the assessee had shown bogus purchases, the Tribunal did not permit addition of the entire amount, restricted it to 25% thereof on the principle that not the total purchases but the profit element embedded therein could be subject to tax. The Tribunal in the process, relied on the judgment in case of Sanjay Oil Cake Industries. Vs. CIT reported in (2009) 316 ITR 274 (Guj). 4. No question of law arises. Tax Appeals are dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 2 of 2

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