Bombay High Court
PR. COMMISSIONER OF INCOME TAX-2, THANEversusARVIND DWARKADAS PUROHIT PROP. Ms. SOHAM ENTERPRISES
- Decided
- Disposal
- DISPOSED OFF
Holding
The Court held that the CBDT circular modifications are not retrospective and, since the appeal was instituted before the effective date, the mandatory limits applicable at that time govern, leading to disposal of the appeal.
Summary
The appellant, Pr. Commissioner of Income Tax-2, Thane, appealed under Section 260-A of the Income Tax Act, 1961 against an ITAT order that allowed certain purchase expenses despite allegations that the vendor was non‑existent. The revenue argued that the expenses, amounting to Rs.10,21,276, should be disallowed because the assessee could not prove the genuineness of the purchases and the onus to justify such expenses lies on the assessee. The appellant also relied on a CBDT letter dated 20 August 2018, claiming that the exceptions therein should apply retrospectively to the appeal. The Court held that the modifications introduced by the CBDT letter are not retrospective and therefore the mandatory monetary limits applicable at the time of filing govern the appeal. Applying precedent from Commissioner of Income Tax v. V.M. Salgaonkar and Brothers and related cases, the Court concluded that the appeal, filed before 20 August 2018, falls below the prescribed limit and must be disposed of without deciding the substantive legal questions. Consequently, the appeal was disposed, leaving the formulated questions of law open for future consideration.
Issues considered
- Whether the ITAT erred in law by not appreciating that the assessee could not establish the genuineness of purchases from a non‑existent vendor as per information from the Maharashtra Sales Tax Department.
- Whether the ITAT erred in law by not appreciating that the onus to justify the claim of expenses lies on the assessee, which was not discharged in relation to purchases from the non‑existent vendor.
- Whether the ITAT was justified in not disallowing entirely purchases that are unverifiable/non‑genuine, in view of the Gujarat High Court decision in Tax Appeal No.242 of 2003 (N.K. Proteins Ltd).
Legislation cited
- Income Tax Act, 1961 — s. 260-A
Subjects
- Income Tax
- Section 260-A
- CBDT circular
- non‑existent vendor
- disallowance of expenses
- retrospective effect
- mandatory monetary limits
- burden of proof
Judgment
11-ITXA-2354-2019.DOC
Digitally signed
by PALLAVI
MAHENDRA
PALLAVI WARGAONKAR
MAHENDRA
WARGAONKAR Date:
2026.06.30
10:37:20
+0530 Chitra Sonawane.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL(IT) NO. 2354 OF 2019
Pr. Commissioner Of Income Tax-2, Thane …Appellant.
Versus
Arvind Dwarkadas Purohit Prop. Ms. Soham …Respondent
Enterprises
Mr. Akhileshwar Sharma, for the Appellant.
CORAM: SUMAN SHYAM &
ADVAIT M. SETHNA, JJ.
DATED: 25th JUNE 2026.
PC:-
1. This Appeal is filed under Section 260-A of the Income Tax
Act, 1961 ('IT Act' for short). It assails the Judgment and Order of
the Income Tax Appellate Tribunal ('ITAT' for short) dated 2nd
August 2018 ('Impugned Order' for short).
2. The Appeal is preferred on the following formulated
substantial questions of law :-
(i) Whether on the facts and circumstances of the
case, the ITAT has erred in law by not appreciating
the fact that the assessee could not establish the
genuineness of the purchases from the non-existent
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11-ITXA-2354-2019.DOC
vendor as per information received from Law
Enforcement agency of State of Government of
MAharasthra i.e. Sales Tax Department and
established by the Assessing Officers.
(ii) Whether on the facts and circumstances of the
case, the Hon'ble ITAT has erred in law by not
appreciating the fact that the onus to justify the
claim of expenses is on the assessee and the same
has failed to discharge it in relation to the purchases
made from the non-existent vendor ?
(iii) Whether on the facts and circumstances of the
case, the Hon'ble ITAT was justified in not
appreciating the law correctly that once the
purchases are unverifiable/non genuine/bogus, the
same should have been disallowed in entirety,
particularly in view of the ratio of the decision of
the Hon'ble Gujarat High Court in Tax Appeal
No.242 of 2003 dated 20.6.2016 in the case of N.K.
Proteins Ltd against which the SLP was dismissed
by the Hon'ble Apex Court.
3. Mr. Sharma, learned Counsel for the Appellant/Revenue has
contended that though the tax effect in the said Appeal is valued at
Rs.10,21,276/-, it would fall within the exceptions stipulated in the
letter issued by the Central Board of Direct Tax ('CBDT' for short)
dated 20th August 2018 vide which, the earlier Circular dated 11th
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11-ITXA-2354-2019.DOC
July 2018 was modified.
4. On perusal of the letter dated 20th August 2018, it appears
that the modification introduced therein to the CBDT Circular
dated 11th July 2018 shall come into effect on the date of issuance
of the same. In view thereof, no retrospective effect can be given to
the exceptions stipulated in letter dated 20th August 2018. This
means that insofar as the mandatory limits are concerned, they
would equally apply to pending appeals. However, when it comes
to applying exceptions, the same would be applicable from 20th
August 2018 and not earlier.
5. Similar issue arose before the Co-ordinate Bench of this
Court in Commissioner of Income Tax Vs. V.M. Salgaonkar and
Brothers (P.) Ltd.1. On analysing Circulars i.e. 5 of 2024 and 9 of
2024 issued by CBDT, the Co-ordinate Bench held that the
enhanced monetary limits would apply to pending Appeals but
when it comes to exceptions specifically introduced, such
exceptions cannot be construed retrospectively. The above decision
has been followed by the Coordinate Bench of this Court in Pr.
1 (2024)169 taxmann.com 597 (Bombay)
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11-ITXA-2354-2019.DOC
Commissioner of Income Tax v. IPL Loan Trust 2 and in Principal
Commissioner of Income tax v. Axis AD Print Media (I) Ltd.3
6. Applying the principles (supra) to the letter dated 20th
August 2018 and Circular dated 11th July 2018, involved in the
present Appeals, we are satisfied that the Appeals were instituted
before 20th August 2018 and would have to be disposed of as the
tax effect involved in these Appeals is below mandatory prescribed
limit.
7. For the above reasons, we dispose of the Appeal, leaving the
question of law open to be appropriately decided as and when the
occasion so arises.
(ADVAIT M. SETHNA, J.) (SUMAN SHYAM, J.)
2 [2025] 171 taxmann.com 725 (Bombay).
3 [2025]172 taxmann.com 114 (Bombay).
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