Question 1

What are the key legal issues in Quartet Thermal Engg. Pvt. Ltd. vs. Asst. CIT-8(1)(2)?

Accepted Answer

1. Invalidity of proceedings initiated under section 147 of the act. 2. Invalidity of the order passed under section 143(3) r.w.s. 147 of the act.

Question 2

What are the facts of Quartet Thermal Engg. Pvt. Ltd. vs. Asst. CIT-8(1)(2)?

Accepted Answer

Quartet Thermal Engg. Pvt. Ltd. is a manufacturer of industrial furnace and its controlling systems. The assessee filed a return of income on 29.09.2009 declaring total income at Rs.11,68,751/-. Information received from the Director General of Income-tax (Investigation), Mumbai indicated that the assessee had obtained bogus purchase bills amounting to Rs.31,43,752/- from 8 parties. The Assessing Officer issued a notice under section 148 of the Income-tax Act, 1961, and added the amount of Rs.31,42,752/- as bogus purchases. The Commissioner of Income-tax (Appeals) upheld the disallowance. The assessee appealed against the order, arguing that the proceedings were invalid and the addition was erroneous. The Tribunal found that the purchases were recorded in the stock register and consumed in the manufacturing process, but the assessee could not prove the genuineness of the purchases. The Tribunal held that only the profit element embedded in the value of such tainted purchases should be brought to tax. Since the assessee's profit percentage was more than the accepted 12.5%, no further addition was required.

Quartet Thermal Engg. Pvt. Ltd. vs. Asst. CIT-8(1)(2)

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