ITO, 32(1)(5), MUMBAI V. FOURINT CHEMICAL INDUSTRIES, MUMBAI

ITA 1034/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3585 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Bogus purchase

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 1034/MUM/2019 (ASSESSMENT YEAR 2010-11 ) ITO-32(1)(5) ROOM NO. 203 2 ND FLOOR C-11, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E) MUMBAI - 400 051. VS . M/ S. FOURINT CHEMICAL INDUSTRIES D- 303, KREMLINE, JAIRAJ NAGAR, BORIVALI WEST MUMBAI-400 092. PAN : AAAFF7389R (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI BRAJENDRA KUMAR DATE OF HEARING 27 . 10 . 20 20 DATE OF PRONOUNCEMENT 27.10.2020 O R D E R THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENU E IS AGGRIEVED THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SH ORT LEARNED CIT(A)] HAS REDUCED THE ADDITION FOR BOGUS PURCHASE OF RS. 2,49 ,783/- DONE @ 100% BY ASSESSING OFFICER BY SUSTAINING ONLY 12.5% AND THUS RESTRICTING THE DISALLOWANCE TO RS. 31,223/-. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO MANUFA CTURING OF CHEMICAL. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM S ALES TAX DEPARTMENT THAT ASSESSEE HAS MADE RS. 2,49,783/- PURCHASES FROM BOGUS DEALERS. THE ASSESSING OFFICER MADE 100% ADDITION OF THE BOGUS P URCHASES. 3. UPON THE ASSESSEES APPEAL LEARNED CIT(A) HAS NO TED THAT THE SALES HAVE NOT BEEN DOUBTED. ACCORDINGLY, PLACING RELIANCE UPO N SEVERAL CASE LAWS AND UPON THE FACTS OF THE CASE HE SUSTAINED 12.5% DISAL LOWANCE OUT OF THE BOGUS PURCHASES, BY CONCLUDING AS UNDER :- M/S. FOURINT CHEMICAL INDUSTRIES 2 FROM THE FACTS AVAILABLE ON RECORDS, IT IS OBSERVED THAT IN THE PRESENT CASE ALSO THE LD. AO HAS NEITHER DISBELIEVED THE PURCHASES TO THE EXTENT OF IMPUGNED SUM OF RS. 2,49,783/-, NOR THE CORRESPONDIN G SALES MADE. THE LD. AO HAS HELD THAT THE IMPUGNED PURCHASES WERE NOT MADE FROM ABOVE REFERRED DEALERS/PARTIES BUT FROM SOMEWHERE ELSE/OPE N MARKET. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THA T OF FACTS ADJUDICATED BY THE HON'BLE GUJARAT HIGH COURT AND HON'BLE ITAT IN ABOVE REFERRED CASES. HENCE, RESPECTFULLY FOLLOWING THE SAME IT IS HELD THA T 12.5% OF IMPUGNED BOGUS PURCHASES WILL BE SUFFICIENT TO COVER THE PROFI T ELEMENT ON SUCH BOGUS PURCHASES. IN VIEW OF ABOVE DISCUSSION THE ADDITION ON ACCOUNT OF BOGUS PURCHASES IS RESTRICTED TO 12.5%. HENCE THE ADDITION OF RS. 31,223/-[BEING 12.5% OF RS. 2,49,783/- IS UPHELD AND THE BALANCE A DDITION OF RS.2,18,560/- (RS. 2,49,783 - RS. 31,223) IS DELETE D. ACCORDINGLY, THE GROUND NO. L RAISED IN APPEAL IS PARTLY ALLOWED. 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. I FIND THAT IN THIS CASE THE SALES AND OTHER WORKING ARE NOT DOUBT ED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSIT ION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN TH E CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18 .6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT AL LOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBT ED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE THAT ASSESSEE HAS MADE PU RCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GI VES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN MY CONSIDERED OPINION ON THE F ACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PU RCHASES DONE BY THE LEARNED CIT-A MEETS THE END OF JUSTICE. ACCORDINGLY I UPHOLD THE ORDER OF LEARNED CIT-A. 5. THE DECISION OF N.K. PROTEINS LTD. (250 ITR 22) RELIED BY THE REVENUE WAS A DISMISSAL OF SLP BY THE HON'BLE SUPREME COURT AND HAS ALREADY BEEN EXPLAINED AND DISTINGUISHED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M. HAZI ADAM & CO. (ITA NO. 1004 OF 2006 DATED 11.2.20 19). M/S. FOURINT CHEMICAL INDUSTRIES 3 6. IN THE RESULT THIS APPEAL FILED BY THE REVENUE S TANDS DISMISSED. 7. BEFORE PARTING I MAY ADD THAT IF THE ASSESSEE HA S FILED A CROSS APPEAL OR CROSS OBJECTION AND THE SAME HAS REMAINED UNHEARD, EITHER PARTY MAY APPLY FOR RECALL OF THIS ORDER SO THAT THE APPEALS CAN BE HEARD TOGETHER. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S BY PLACING THE RESULT ON NOTICE BOARD ON 27.10.2020. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 27/10/2020 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI