PCIT v. Shree Ganesh Developers

Case snapshot

Sections / provisions: 69C; 133(6)

Questions before the Court / Tribunal

• See the source-driven case record below.

Material facts and background

Versus Shree Ganesh Developers 301, Krishna Kunj, V.L. Mehta Road, Vile Parle (West), Mumbai – 400 049. ...Respondent ______________________________________________________ Ms. Gokhale for the Petitioner. Mr. Ajay R. Singh a/w Mr. Akshay Pawar for the Respondent.

assessment year 2010-11 was admitted on 29 January 2025 on the following substantial question of law:"(i) Whether the Tribunal after accepting that this a case of bogus purchases, could have proceeded to determine profit rate without confirming the disallowance of purchases, without considering the provisions of Section 69C of the Income Tax Act, 1961 and without considering the decision of the Gujarat High Court in the case of N.K. Industries Ltd. Vs. Deputy Commissioner of Income Tax, (2016) 72 taxmann.com 289 since the Special Leave Petition against the said decision was dismissed by the Hon'ble Supreme

Court in case of N. K. Proteins Ltd. Vs. Deputy Commissioner of Income Tax, on 16 January 2017, (2017) 84 taxmann.com 195 (SC) ? (ii) On the facts and circumstances of the case and in law, the ITAT has erred in restricting the disallowance to profit margin on unproven purchases without considering the position of law established by the Hon'ble Apex Court in the case of N.K. Proteins Ltd, that 100% disallowances on bogus purchases is upheld ?"

Estate. The assessee filed its return of income declaring income of Rs. 61,05,420/-. The said return was selected for scrutiny assessment.

143(3) of the Income-tax Act, 1961 (‘the Act’) was passed assessing income at Rs.15,41,95,860/-. In the assessment order, Rs.14,30,90,442/- was added on account of alleged bogus

Rs.50,00,000/- was also added under Section 68 of the Act. The said order was challenged by filing an appeal to the Commissioner of Income Tax (Appeals) [CIT (A)].

bogus purchases deleted the additions with regard to all the suppliers except M/s Neptune Trading Co. and Hari Om Traders. With respect to these two parties, the additions made by the Assessing Officer (AO) was confirmed to the extent of only 12.5% of the purchases made from these parties.

Appellant / assessee submissions

Ms. Gokhale, learned counsel for the appellant-revenue

We have heard the learned counsel for the appellant-

Revenue / respondent submissions

Mr. Ajay Singh, learned counsel for the respondent-

Court / Tribunal analysis and reasoning

133(6) of the Act and, therefore, the Officer could not verify whether there were any cash withdrawals from the bank accounts of these parties for coming to the conclusion as to whether the purchases should be treated as having explained.

suppliers appearing on the portal of the Sales Tax Department as non-genuine, but in the income tax proceedings, the genuineness of the purchases has been proved, and the AO also verified the same. The revenue has not been able to show that these findings are perverse. Therefore, insofar as the purchases from various suppliers except M/s Neptune Trading Co. and Hari Om Traders are concerned, we do not find any reason for interfering with the orders passed by the CIT (A) and the Tribunal who have recorded concurrent findings of fact with respect of genuineness of the purchases and as a result, the appellant-revenue’s appeal to that extent is required to be dismissed. 17.

Om Traders are concerned, these parties did not produce the bank statements to the AO in the remand proceedings. Therefore, the AO could not examine whether there were any cash

counsel for the respondent-assessee that with respect to the suppliers other than M/s Neptune Trading Co. and Hari Om Traders, the concurrent findings by both the Appellate Authorities clearly show that the purchases have been proved, the additions made by the AO with respect to these parties cannot be sustained. However, the crucial factor for arriving at these purchases as genuine has been the examination of the bank statements of the suppliers by which the Officer has given a finding that there has been no cash withdrawal after the deposit of the cheque issued by the respondent-assessee. This crucial factor is missing when purchasing from M/s Neptune Trading Co. and Hari Om Traders. Therefore to that extent by applying the submissions of the respondent-assessee with respect to other suppliers on the factual findings, the purchases from M/s Neptune Trading Co. and Hari Om Traders could not be verified and, therefore, these findings of facts have to be held against the respondent-assessee.

transactions with these two parties could not be proved and, therefore, the logical conclusion that both the Appellate Authorities ought to have adopted was to confirm the total additions of purchases from these two parties. The issue before both the Appellate Authorities was whether the purchases made from these two parties has passed the test of proving the genuineness. By accepting the additions of 12.5% of the purchases from these two parties, the respondentassessee has accepted that these transactions of purchases are unproved and consequently, there was no justification, therefore, to restrict the addition to 12.5% only.

arising out of revisional proceedings under Section 263 but in the revisional order, the Commissioner had given a definite finding that the entire purchases should have been added. Therefore, the counsel for the respondent-assessee was not justified in distinguishing this judgment on the ground that it deals with the proceedings under Section 263 and not Section 143(3) of the Act. 22.

Ltd. (supra) was not brought to the notice of the Court. Even the fact situation in the present case is different and, therefore, this decision is not applicable. (ii)

these facts that the Co-ordinate Bench rejected the contention of the revenue that the purchases were bogus and, therefore, the provisions of Section 69C of the Act were not attracted. In the instant case before us, M/s Neptune Trading Co. and Hari Om Traders did not furnish the bank statements and, therefore, parameters on the basis of which the other suppliers were proved to be genuine could not be satisfied in these two cases and, therefore, this factual finding distinguishes the judgment in the case of Vaman International Pvt. Ltd. (supra). Even in this judgment, the decision in the case of Shoreline

Coatings Pvt. Ltd. (supra) is also distinguishable since in that case, the additions were made by invoking Explanation to Section 37 of the Act. Secondly, the provision of Section 69C of the Act was not for consideration before the Court. Thirdly, the decision in the case Shoreline Hotel (P.) Ltd. (supra) was not brought to the notice of the Court and the only issue canvassed before the High Court was what should be the rate of profit. In the present case, these facts do not exist and, therefore, this decision in case of JK Surface Coatings Pvt. Ltd.

Operative decision and relief

The appeal is disposed of in the above terms. No order

Authorities and precedents appearing in the judgment

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This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on the statutory and factual issues recorded above. The operative result is classified as Disposed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Income Tax. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

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