Principal Commissioner of Income Tax-5, Kolkata v. Advance Engineering Corporation

1. FACTS OF THE CASE

Revenue challenged the Tribunal’s 12 December 2023 order in ITA257/Kol/2023 for AY2011–12. The 27 December 2018 reassessment treated purchases of Rs.18,41,476 and 2% commission of Rs.36,829 as unexplained expenditure under section69C; the first appellate authority affirmed it on 27 January 2023. Though the Tribunal accepted failure to establish genuine purchases, it restricted the addition to 8% in the interest of justice. The assessee did not appear despite service.

Source: PDF pp.1–3

2. DISCUSSION BY THE COURT

The Court found the Tribunal’s 8% discretion inconsistent with its accepted factual findings. The assessment and appellate records detailed entry operator Sanjiw Kumar Singh, witness statements and accommodation entries, with the assessee a beneficiary. Having accepted lack of genuine purchases, the Tribunal could not grant sympathetic relief by fixing gross profit at 8%.

Source: Reasons, PDF pp.2–3

3. JUDICIAL DECISION

Revenue’s appeal was allowed; the Tribunal order was set aside and the 27 December 2018 assessment, as affirmed by the appellate authority, restored. The substantial questions were answered for Revenue.

Source: Operative paragraph, PDF p.4

4. OUTCOME

Revenue-favourable substantive result: full assessed purchase and commission additions restored rather than an 8% gross-profit restriction. This is not a remand or an assessee-favourable estimate.

Source: PDF pp.2–4

5. Expert Comments

AKHB editorial analysis, distinct from the Court’s findings.

The factual finding controls the attempted estimate

The Court rejected 8% relief because the Tribunal had already accepted the failure to establish genuine purchases on this record. The decision is not a substitute universal profit percentage. A different case involving proved purchases with only a disputed supplier requires its own facts; sympathy could not reconcile the contradictory findings here.

Source: PDF p.2 · PDF p.3

Track the commission addition separately

The assessment contained both Rs.18,41,476 purchase expenditure and Rs.36,829 commission said to come from undisclosed sources. Restoration encompasses the assessment affirmed below. Reporting only the purchases or treating 2% commission as the Tribunal’s 8% profit measure would confuse distinct components.

Source: PDF p.2 · PDF p.4

Retain the year-specific appeal

This is ITAT266/2024 for AY2011–12. Its reasoned rejection of 8% relief later informs the AY2012–13 appeal, but does not merge those dockets or their amounts. Use the restored assessment and this year’s record when describing the operative liability.

Source: PDF p.1 · PDF p.4