PCIT v. JK Surface Coatings Pvt. Ltd.

Case snapshot

Sections / provisions: 143(3)

Questions before the Court / Tribunal

• S. 143(3) : Assessment-Bogus purchases-Estimation of profit at 10% of total alleged bogus purchases is held to be justified-No substantial question of law. [S. 37(1), 40A(3), 260A] The Assessing Officer disallowed the entire purchases as bogus purchases. On appeal the Commissioner of Income-tax (Appeals) estimated the estimated the profit at 15%. On appeal the Tribunal reduced the estimated the profit at 10%. On appeal by the revenue, dismissing the appeal the Court held that estimation of net profit being question of fact, the order of Tribunal is affirmed. No substantial question of law. (ITA No. 1850 of 2017 dt. 28-10-2021). (AY. 2009-10) (Arising from ITA No. 6848/M/2014, dt. 18/11/2016) Coarm : Honourabe Mr. Justice K.R. Shriram, Honourable Mr. Justice Amit B.
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

1 917-ITXA 1850-17.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1850 OF 2017 The Pr. Commissioner of Income Tax-15, Mumbai ] … Appellant Versus JK Surface Coatings Pvt. Ltd. ] … Respondent Mr. Akhileshwar Sharma for Appellant. None for Respondent.

P. C. :- 1. Appellant is impugning an Order pronounced on 18/11/2015 by Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) while disposing of Appeal filed by Respondent and cross-Appeal filed by Appellant and is proposing the following substantial questions of law : " A. Whether on the facts and in circumstances of the case and in law, the Hon'ble ITAT erred in not relying on the information received from the Investigation Wing, Mumbai and Sales Tax Department, Govt. of Maharashtra that purchases shown by the assessee are from the bogus bill providers. B. Whether on the facts and in circumstances of the case and in law, the Hon'ble ITAT erred in directing the Assessing Officer to estimate profit at 10% of the total alleged bogus purchases and not appreciating the fact URS 1 of 4 UMESH RAMESH SHINDE by UMESH RAMESH SHINDE Date: 2021.10.29 18:07:51 +0530

2 917-ITXA 1850-17.odt that the Hon'ble Supreme Court on similar issue in the case of NK Proteins Ltd in SLP-CC No(s) 769 of 2017 dated 16.01.2017 directed to make addition of the entire bogus purchases. C. Whether on the facts and in circumstances of the case and in law, the Hon'ble ITAT failed to appreciate during the assessment proceedings, the assessee failed to substantiate the genuineness of purchases made, though the onus lies on the assessee to prove the same. In the absence of unexplained sources of the cash payments, the AO ascertained that the assessee had made cash purchases from undisclosed parties and arranged the bills from parties, who were hawala operators." 2.

3 917-ITXA 1850-17.odt the AO and therefore, in the absence of purchases, it was not possible for assessee to carry out the work of this magnitude and purchase of mater ial in cash from open market cannot be ruled out. This is a finding o f fact and therefore there cannot be an offence as provided in the Explan ation to Section 37. 3. Mr. Sharma also submits that under Section 40A(3) if the assessee incurs any expenditure in respect of which a payment or aggregate of payment made to a person in a day by cash exceeds a particular amount, no deduction shall be allowed in respect of such expenditure. Mr. Sharma states that at the relevant time, i.e., AY 200910, the limit was Rs.20,000/-. We find that this argument has not been even raised or considered by the AO or CIT or the ITAT . 4. Having considered the memo of Appeal and the Orders passed by AO / CIT(A) and the Order of ITAT , the only issue that comes up for consideration is with respect to the extent of ad-hoc disallowance to be sustained with respect to bogus purchases. The AO has observed 100% of the purchase value to be added to the income of Assessee, the CIT(A) has said it should be 15% and ITAT has said it should be 10%. First of all, this would be an issue which requires evidence to be l ed to determine what would be the actual profit margin in the business th at URS 3 of 4

4 917-ITXA 1850-17.odt Assessee was carrying on and the matter of calculations by the concerned authority . According to the Tribunal, in all such similar cases, it is ranged between 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchase when material consumption factor do not show abnormal deviation. 5. Whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal has concluded that t he assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax. 6. Therefore, in our view, this would not raise any substantial questions of law.

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

Moreover, considering the order of CI T(A) as well as the ITAT , Revenue does not appear to have argued these provisions and made submissions before the CIT(A) and ITAT . Moreover, the ITAT in its order, has observed that the work contract receipt was not d oubted by URS 2 of 4

Court / Tribunal analysis and reasoning

The concise order integrates its reasoning with the operative directions. The complete packaged record controls.

Operative decision and relief

The operative relief must be read from the final paragraphs of the complete packaged judgment.

Ratio and legal principle

The narrow proposition associated with PCIT v. JK Surface Coatings Pvt. Ltd. concerns s. 143(3) : assessment-bogus purchases-estimation of profit at 10% of total alleged bogus purchases is held to be justified-no substantial question of law. [s. 37(1), 40a(3), 260a] the assessing officer disallowed the entire purchases as bogus purchases. on appeal the commissioner of income-tax (appeals) estimated the estimated the profit at 15%. on appeal the tribunal reduced the estimated the profit at 10%. on appeal by the revenue, dismissing the appeal the court held that estimation of net profit being question of fact, the order of tribunal is affirmed. no substantial question of law. (ita no. 1850 of 2017 dt. 28-10-2021). (ay. 2009-10) (arising from ita no. 6848/m/2014, dt. 18/11/2016) coarm : honourabe mr. justice k.r. shriram, honourable mr. justice amit b. The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in INCOME TAX APPEAL NO.1850 OF 2017.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Dismissed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 143(3) : Assessment-Bogus purchases-Estimation of profit at 10% of total alleged bogus purchases is held to be justified-No substantial question of law. [S. 37(1), 40A(3), 260A] The Assessing Officer disallowed the entire purchases as bogus purchases. On appeal the Commissioner of Income-tax (Appeals) estimated the estimated the profit at 15%. On appeal the Tribunal reduced the estimated the profit at 10%. On appeal by the revenue, dismissing the appeal the Court held that estimation of net profit being question of fact, the order of Tribunal is affirmed. No substantial question of law. (ITA No. 1850 of 2017 dt. 28-10-2021). (AY. 2009-10) (Arising from ITA No. 6848/M/2014, dt. 18/11/2016) Coarm : Honourabe Mr. Justice K.R. Shriram, Honourable Mr. Justice Amit B. Its practical value lies in the way the Bombay High Court connected the governing provisions—143(3)—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 143(3) and the decision date 2021-10-28; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is PCIT v. JK Surface Coatings Pvt. Ltd., the proceeding is INCOME TAX APPEAL NO.1850 OF 2017, and the decision is dated 2021-10-28. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as K. R. SHRIRAM & AMIT B. BORKAR , JJ.. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 143(3). The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Dismissed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 143(3) — apply the exact version considered in the judgment.

Case network

• Pr. CIT (Central)-1 v. Surendra L. Hiranandani — Bombay High Court · Dismissed
• Pr. CIT v. Persistent Systems Pvt. Ltd. — Bombay High Court · Dismissed
• Anil Ramchandran Pillai v. NFAC — Bombay High Court · Dismissed
• Sanjay Patel v. ACIT — Bombay High Court · Dismissed

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