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IN THE HIGH COURT OF BOMBAY
M.S. Sonak, Jitendra Jain, JJ
Principal Commissioner Of Income Tax – Appellant
Versus
Shree Ganesh Developers – Respondent
JUDGMENT :
Per Jitendra Jain, J.
1. This appeal filed by the appellant-revenue for the 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 ?"
Brief Facts :
2. The assessee is a firm engaged in the b
The court established that acceptance of a percentage of unproven purchases necessitates full disallowance under Section 69C, emphasizing the burden of proof lies with the assessee.
The failure of the respondent-assessee to prove the genuineness of bogus purchases justifies the addition of the entire amount as income under Section 69C of the Income Tax Act.
The court ruled that when purchases are deemed bogus, the entire amount should be disallowed, rejecting the Tribunal's speculative estimation of profit margin.
In bogus purchase cases, where sales accepted, only profit element (GP rate) added to income, not entire purchase amount.
The court established that the Assessing Officer must substantiate claims of bogus purchases with specific evidence rather than general information.
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