2023 (3) TMI 105 - HC - Income Tax

Stay of demand - petitioner had asked for stay of demand and waiver of 20% of the demand - addition of bogus purchases - HELD THAT - Even if the additions made by the AO on account of purchases are accepted then surely there is a case for examining as to what is the gross profit rate to be attributed to the petitioner based on the past record. If the said gross profit rate is accepted then the amount that may have to be deposited by the petitioner pending the disposal of his appeal could be adjusted. However for the moment we are not expressing any firm views in the matter. CIT will consider these aspects of the matter without being burdened by the observations made hereinabove. We make it clear that till such time the application is disposed of by the CIT no coercive measures will be taken against the petitioner. CIT will dispose of the application within two weeks of receipt of a copy of the judgement. In the event that the order passed by the CIT is adverse to the interests of the petitioner the petitioner will have liberty to take recourse to an appropriate remedy albeit as per law. The order if any passed adverse to the interests of the petitioner will not be given effect to for a further period of two weeks to enable the petitioner to take recourse to an appropriate remedy.

Summary

Issues:
Challenge to order under Section 220(6) of the Income Tax Act, 1961 for AY 2020-2021.

Analysis:
The writ petition challenges an order passed by the Assessing Officer (AO) under Section 220(6) of the Income Tax Act, 1961 for Assessment Year (AY) 2020-2021. The petitioner sought a stay of demand amounting to Rs.7,43,46,066/- and waiver of 20% of the demand. The AO scaled down the demand to 20% pending appeal with the CIT(A), requiring the petitioner to deposit Rs.1,48,69,213/- by a specified date. The demand arose from an assessment order dated 24.09.2022, where substantial purchases were questioned, leading to an increase in assessed income to Rs.7,46,03,080/- from the declared Rs.47,63,940/-. The AO disallowed purchases amounting to Rs.6,98,39,136/- under Section 69C as unexplained, based on alleged purchases from bogus entities and non-filers of tax returns.

The petitioner contended that the assessed income was inflated due to a high-pitched assessment and the gross profit rate applied (12.5%) was not consistent with historical figures. The petitioner argued that the historical gross profit rate of 1.06% should be considered. The court suggested the CIT to examine these aspects during the pending application, emphasizing the need to determine the correct gross profit rate for the petitioner. The court refrained from expressing a definitive opinion but directed the CIT to consider these factors without being influenced by previous observations.

The petitioner relied on various judgments to support their case. The court ordered that no coercive measures should be taken against the petitioner until the CIT disposes of the application within two weeks of receiving a copy of the judgment. If the CIT's decision is adverse, the petitioner has the liberty to seek appropriate legal remedies. Any adverse order will not be enforced for an additional two weeks to allow the petitioner to pursue further legal recourse. The writ petition was disposed of accordingly, with parties instructed to act based on the digitally signed copy of the order.