2017 (6) TMI 1337 - HC - Income Tax

Estimation of income - bogus purchases - assessee making unaccounted production out of its shown purchases and selling them through their sister concerns and showing bogus purchases in hand of that sister concern - HELD THAT - Assessee, who is in the business of manufacturing polymer, was found to be making undisclosed sales. For the assessment year 2007-08, therefore, the Assessing Officer added a sum of ₹ 1.13 crores to the total income of the assessee by way of suppressed sale which was treated as unaccounted for undisclosed income of the assessee. In the appeal, the CIT(A) reduced the addition on the premise that not the entire unaccounted sale but only the profit element embedded in such sale can be brought to tax in the hands of the assessee. This issue was confirmed by the Tribunal relying on the judgement of this Court in case of Commissioner of Income Tax vs. President Industries 1999 (4) TMI 8 - GUJARAT HIGH COURT We are in broadly agreement with the view of the Tribunal. No question of law arises

Summary

Issues:
1. Clubbing net profit declared by Swastic Polymers with assessee's income due to proven bogus purchases.
2. Whether the Appellate Tribunal's decision was justified and not perverse in assessing undisclosed sales and profits of the assessee.

Analysis:
1. The appeals before the High Court arose from a common background, with Tax Appeal No. 351 of 2017 being filed by the Revenue challenging the Income Tax Appellate Tribunal's judgment dated 17.10.2016. The main questions for consideration were whether the Tribunal was justified in clubbing the net profit declared by Swastic Polymers with the income of the assessee, and whether the Tribunal failed to appreciate that the assessee was engaging in unaccounted production and showing bogus purchases through its sister concerns.

2. The respondent-assessee, involved in polymer manufacturing, was found to be engaged in undisclosed sales. The Assessing Officer added &8377;1.13 crores to the total income of the assessee for the assessment year 2007-08 as suppressed sales treated as undisclosed income. The CIT(A) reduced the addition, stating that only the profit element from the unaccounted sales should be taxed. The Tribunal upheld this decision, citing the precedent set by the Gujarat High Court in the case of Commissioner of Income Tax vs. President Industries.

3. The High Court expressed its agreement with the Tribunal's view, noting that the entire issue had been thoroughly examined based on the available material on record.

4. Ultimately, the High Court found that no question of law arose from the case and dismissed the tax appeals, upholding the Tribunal's decision regarding the treatment of the undisclosed sales and profits of the assessee.