THE PR COMMISSIONER OF INCOME TAX vs. M/S SPR SPIRITS PVT LTD

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ITA/96/2024HC KarnatakaKAHC01008114202401 October 2024Bench: S.G.PANDIT,C.M. POONACHA6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court disposed of the appeal with liberty granted to the Revenue to revive it if the matter falls within the exceptions of CBDT Circular No. 09/2024 and Circular No. 5/2024. The substantial questions of law were kept open to be adjudicated in an appropriate proceeding. The Court did not decide the merits of the case. The specific findings or reasoning of the Tribunal on the deletion of additions or the profit element are not detailed in this judgment as the appeal was disposed of on a procedural ground related to tax effect and circulars.

What were the facts?

The Revenue, comprising the Principal Commissioner of Income-tax and the Deputy Commissioner of Income-tax, has filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order dated 24.07.2023 passed by the Income Tax Appellate Tribunal, Bengaluru. The appeal pertains to Assessment Year 2010-11 and challenges the Tribunal's deletion of an addition of Rs. 27 Crores made by the Assessing Officer. The Assessing Officer had treated these purchases as bogus. The appeal was admitted by the High Court on 18.03.2024 to consider substantial questions of law. The assessee is M/s SPR Spirits Pvt. Ltd.

What were the issues?

The High Court was asked to decide three substantial questions of law: 1. Whether the Tribunal was correct in deleting the addition of Rs. 27 Crores for bogus purchases, disregarding evidence found during search and seizure proceedings that indicated the assessee controlled three concerns, maintained their bank statements and VAT returns, suggesting a tax evasion scheme. 2. Whether the Tribunal was correct in not considering the outcome of field verification inquiries conducted by the CIT(A) during remand proceedings, which reportedly revealed the non-existence of the three alleged bogus concerns at their stated addresses, thereby casting doubt on the transaction's genuineness. 3. Whether the Tribunal was correct in holding that only the profit element of 10% in the bogus purchases should be considered, ignoring incriminating material unearthed during the search, such as the assessee maintaining the books of accounts and filing VAT returns for the supplying entities, and possessing their cheque book leaves, which indicated the transactions were for booking bogus purchases to reduce tax. The Revenue argued that the Tribunal erred on these points. The assessee contended that the appeal should not be entertained due to the tax effect being less than Rs. 2 Crores, citing CBDT Circular No. 09/2024.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF OCTOBER, 2024 PRESENT THE HON'BLE MR JUSTICE S.G.PANDIT AND THE HON'BLE MR JUSTICE C.M. POONACHA INCOME TAX APPEAL NO. 96 OF 2024 BETWEEN:

1.

THE PR. COMMISSIONER OF INCOME-TAX 3RD FLOOR, C.R.BUILDING, QUEENS ROAD, BENGALURU - 560 001.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3) 3RD FLOOR, C R BUILDING, QUEENS ROAD, BENGALURU - 560 001. …APPELLANTS

(BY SRI. DILIP M., ADVOCATE ALONG WITH SRI. RAVIRAJ Y.V., ADVOCATE)

AND:

M/S SPR SPIRITS PVT. LTD., (FORMERLY KNOWN AS SPR GROUP HOLDINGS PVT. LTD.,) F 113, 2CD, CENTRAL CHAMBERS, 2ND FLOOR,

Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

2ND MAIN, GANDHINAGAR, BENGALURU - 560 009. PAN NO. AAECS 2377M

…RESPONDENT

(BY SRI. NARENDRA KUMAR J.JAIN, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 133/BANG/2023 DATED 24/07/2023 FOR ASSESSMENT YEAR 2010-2011 (ANNEXURE-A) AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BENGALURU, AND ETC.,

THIS APPEAL IS COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE C.M. POONACHA

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

ORAL JUDGMENT (PER: HON'BLE MR JUSTICE S.G.PANDIT)

Heard the learned counsel Sri.Dilip.M., along with Sri. Raviraj.Y.V., learned counsel for appellants/Revenue and learned counsel Sri. Narendra Kumar.J., for respondent/assessee.

2.

The Revenue is in appeal under Section 260-A of the Income Tax Act, 1961 (for short, ‘the Act’) questioning the correctness and legality of order dated 24.07.2023 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Bengaluru (for short, ‘Appellate Authority’) in ITA.No.133/Bang/2023 for the assessment year 2010-11.

3.

This Court, admitted the appeal on 18.03.2024 to consider the following substantial question of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in deleting the addition of Rs.27 Crores in respect of bogus purchases, without considering the fact of evidences found during search and seizure

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

proceedings at the business premises of the assessee company revealing that three concerns were completely controlled by the assessee as their bank account statements and VAT return were kept and maintained by the assessee, which clearly reflects a well crafted scheme of tax evasion being resorted by the assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in not considering the outcome of field verification inquiries conducted by the CIT(A) during the remand proceedings which clearly revealed the non- existence of the said 3 bogus concerns at the so called business addresses, thus crafting a serious doubts on the genuineness and authenticity of the transaction? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that only profit element embedded in the transaction of bogus purchases at rate of 10% be considered, discarding the material evidence and incriminating

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

material unearthed during search and overlooking all other surrounding circumstances like maintenance of books of accounts of supplying entities by the assessee and filing of their VAT returns, along with cheque book leafs of the 3 entities, which shows that the transactions were carried out to book bogus purchases and thereby reduce the incidence of tax?" 4. Learned counsel for the assessee submits that the tax effect in this appeal is less than Rs.2 Crores and therefore, the appeal should not be entertained at the instance of the revenue in view of the Circular No.09/2024 dated 17.09.2024 issued by the Central Board of Direct Taxes. It is also submitted that the aforesaid Circular binds the revenue.

5.

On the other hand, learned counsel for the revenue submits that he be granted liberty to revive the appeal in case the matter falls within the exceptions under the aforesaid Circular dated 17.09.2024 and Circular No.5/2024 dated 15.03.2024.

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NC: 2024:KHC:41176-DB ITA No. 96 of 2024

6.

In view of the aforesaid submissions, the appeal is disposed of with liberty as prayed for by the learned counsel for the revenue. However, the question of law is kept open to be adjudicated in an appropriate proceeding.

Sd/- (S.G.PANDIT) JUDGE

Sd/- (C.M. POONACHA) JUDGE

SMJ List No.: 2

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