here is the judgment reqd by you
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 561 of 2010
COMMISSIONER OF INCOME TAX-I - Appellant(s)
DOLAT PROTEINS - Opponent(s)
MRS MAUNA M BHATT for Appellant
MR RK PATEL for Opponent
CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI
HONOURABLE MS JUSTICE SONIA GOKANI 13th December 2011
ORAL ORDER (Per : HONOURABLE MR.JUSTICE AKIL KURESHI)
Leave to amend.
Considering the issues involved, this Tax Appeal is taken up for final disposal at the admission stage. For the purpose of this Appeal, we frame the following questions, as substantial questions of law :
[A] “Whether the Appellate Tribunal is right in law and on facts in restricting the addition to Rs. 3,60,000/= as against the addition made by the Assessing Officer of Rs. 31,39,511/= on account of bogus purchase ?”
“Whether the Appellate Tribunal is right in law and on facts in not appreciating that the Assessing Officer has disallowed 25% of bogus purchase after applying the ratio of decision of this Hon'ble Court in the case of Sanjay Oilcake Industries, reported in 316 ITR 274 ?”
It appears that certain purchases of oil made by the respondent-assessee were not believed by the Assessing Officer. After giving his detailed reasonings, the Assessing Officer in the order of assessment, disallowed 25% of such expenditure and add a sum of Rs. 30,85,578/= in the income of the assessee.
Assessee carried the issue in appeal. CIT [A] did hold that the assessee had failed to establish the expenditure for such purchases, and that therefore, atleast part of such expenditure was required to be allowed. The CIT [A], however, reduced the disallowances to only Rs. 3.60 lacs. In other words, against addition of Rs. 30.85 lacs made by the Assessing Officer on this head, the CIT [A] restricted the addition to Rs. 3.60 lacs. While doing so, the CIT [A] took into account the figures of total turnover, net profit and other interest and salary paid by the assessee to the partners to come to the conclusion that such addition of Rs. 3.60 lacs would be justified to cover inflation in the purchase price of the oil. This was primarily on the basis that the CIT [A] did not disbelieve the purchases made by the assessee, but was of the view that the price thereof was inflated.
Revenue carried the issue in appeal before the Tribunal. The Tribunal, by the impugned judgment, quoting extensively the decision of this Court in case of Sanjay Oilcake Industries v. Commissioner of Income Tax, reported in [(2009) 316 ITR 274 (Guj)] upheld the decision of the CIT [A].
Counsel for the Revenue submitted that in case of Sanjay Oilcake Industries [Supra], this Court had confirmed the addition of 25% of the purchases claimed to have been made by the assessee. In the present case, the addition confirmed by the CIT [A] comes to around 3%. He, therefore, submitted that the Tribunal wrongly applied the ratio of this Court in case of Sanjay Oilcake Industries.
On the other hand, counsel for the respondent-assessee submitted that the assessee is not a manufacturing unit, which was the case in Sanjay Oilcake Industries. In the present case, the assessee being a trader, 25 per cent addition on purchases would not be justified. He submitted that the Tribunal did not examine various materials placed by the assessee in the form of paper-book.
Having thus heard learned counsel for the parties and having perused the orders on record, we are of the view that the Tribunal wrongly applied the decision in case of Sanjay Oilcake Industries [Supra] to confirm the decision of the CIT [A]. It is not in dispute that in the case of Sanjay Oilcake Industries, this Court has confirmed the addition of 25% of the purchases declared by the assessee. In the present case, admittedly, the addition restricted by the CIT [A] come to barely 3% of the purchases. If the Tribunal was of the opinion that being the trader, lesser addition was justified, such aspect was not discussed in the Tribunal's order. Even the CIT [A] has not gone on this footing and restricted the addition by comparing the net profit of the assessee and other figures such as interest payment and salary to the partners. It may be, as is suggested by the counsel for the assessee that the percentage of addition to be made in such cases, if the assessee happens to be a trader and not a manufacturing, may be different. However, neither the CIT [A] nor the Tribunal has examined the issue from this angle. In particular, the Tribunal's order which rests on the decision of this Court in case of Sanjay Oilcake Industries [Supra], cannot sustain.
In the result, the order of the Tribunal dated 26th June 2009 is set-aside. Proceedings are remanded to the Tribunal for fresh consideration, after hearing both the sides. Tax Appeal is disposed of.