The main legal point established in the judgment is the court's emphasis on the need for the CIT to consider the gross profit rate based on past records and the directive to refrain from taking coercive measures against the petitioner until the application is disposed of by the CIT.

JUDGMENT

[Physical Hearing/Hybrid Hearing (as per request)]

Rajiv Shakdher, J. (Oral):

CM No.7264/2023

1. Allowed, subject to just exceptions.

W.P.(C) 1911/2023

2. Issue notice.

3. Mr Abhishek Maratha accepts notice on behalf of the respondents/revenue.

4. Mr Maratha says, that in view of the directions that we intend to pass, no counter-affidavit is required to be filed.

4.1. Therefore, with the consent of the learned counsel for the parties, the writ petition is taken up for hearing and final disposal, at this stage itself.

5. This writ petition is directed against the order dated 23.12.2022 passed by the Assessing Officer (AO) under Section 220(6) of the Income Tax Act, 1961 [in short "Act"] concerning Assessment Year (AY) 2020- 2021.

6. The impugned order was passed, based on applications dated 16.11.2022 and 05.12.2022 filed by the petitioner, to stay the demand amounting to Rs.7,43,46,066/-.

6.1. The petitioner had asked for stay of demand, and waiver of 20% of the demand. Via the impugned order, the AO has scaled down the demand, pending the adjudication of the appeal preferred by the petitioner with the Commissioner of Income Tax (Appeals) [in short "CIT(A)"] to 20% of the aforementioned demand.

7. Accordingly, against the demand amounting to Rs.7,43,46,066/-, the petitioner has been called upon to deposit, for the moment, Rs.1,48,69,213/-. This amount was required to be deposited by 15.01.2023.

8. The impugned order also contains certain other conditions, which are set out in paragraph 4 of the said order.

9. The record shows, that the petitioner has also filed an application with the Principal Commissioner/Commissioner of Income Tax (CIT) qua the impugned order dated 23.12.2022. This application appears to have been filed in and about 16.01.2023. [See Annexure P-11 appended on page 162 of the case file].

9.1. We are informed by the learned counsel for the petitioner, that this application is pending adjudication.

10. The record shows, that the demand made against the petitioner emanates from the assessment order dated 24.09.2022, passed under Section 143(3) read with Section 144B of the Act.

11. A perusal of the said order would show, that the petitioner had pegged his taxable income at Rs.47,63,940/-.

12. The AO, inter alia, has taken umbrage qua the substantial purchases amounting to Rs.72,27,16,420/- have been made, which as per the enquiries, pertain to proprietorship concerns, which either did not file returns or have filed returns which do not reflect the same position, as is reflected by the petitioner in his returns.

12.1. Based on this, the Assessing Officer (AO) has concluded, that at least purchases worth Rs.55,87,13,094/- were made from bogus entities and non- filers of income tax returns.

12.2. Accordingly, the AO has disallowed bogus purchases, albeit to meet the ends of justice, amounting to Rs.6,98,39,136/- [being 12.5% of Rs 55,87, 13,094/-].

12.3. The addition has been made, by taking recourse to Section 69C of the Act, on the ground that the said purchases are unexplained.

13. It is in these circumstances, that the assessed income has ballooned to Rs.7,46,03,080/- from the declared taxable income, amounting to Rs.47,63,940/-.

14. Learned counsel for the petitioner says, that apart from the fact that this is a case of a high-pitched assessment, the rate of gross profit applied i.e., 12.5% is not in sync with the historical gross profit which the petitioner has reported and was accepted by the respondents/revenue, in the earlier years.

14.1. For this purpose, our attention has been drawn to page 51 of the case file, wherein the gross profit rate is indicated as 1.06%.

15. We are of the view, that the CIT could consider the aforementioned aspects in the pending application.

15.1. In sum, 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 pa