SHRI CHANDAN DHINGADMAL JAIN, MUMBAI V. INCOME TAX OFFICER WARD-19(1)(3), MUMBAI

ITA 1308/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 1308/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 1307 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) SHRI CHANDAN DHINGADMAL JAIN MEHTA LODHA & CO, CAS 105, SAKAR - I, ASHRAM ROAD AHMEDABAD - 380009. PAN : ACRPJ2592B V S . ITO WARD 19(1)(3) MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI PRAKASH D. SHAH DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 10 .7 . 201 9 DATE OF PRONOUNCEMENT 11.9 . 201 9 O R D E R THESE ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% D ISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, P ERTAINING TO ASSESSMENT YEAR 2010 - 11 & 2011 - 12. EARLIER THE APPEALS WERE DISPOSED OF BY THE ITAT EX - PARTE. SUBSEQUENTLY, THEY WERE RECALLED. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS AND NON - FERROUS METAL. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT O F INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 6,94,843 IN A.Y. SHRI CHANDAN DHINGADMAL JAIN 2 2010 - 11 AND RS. 6,66,755 IN A.Y. 2011 - 12 . UPON ASSESSEES APPEAL ID CIT A CONFIR MED THE SAME . 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENC E HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOUR ABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY . 6. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF EXCHEQUER. THAT THE ITAT IN ASSESSEES OWN CASE VIDE ORDER DATED 12.2.2019 FOR A.Y. 2009 - 10 HAS HELD THAT DISALLOWANCE SHO ULD BE RESTRICTED TO 5% OF THE BOGUS PURCHASES. RELEVANT PARAGRAPH OF THE ITAT READS AS UNDER : - 5. I HAVE CONSIDERED THE ISSUE AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM THE FACTS OF THE CASE A ND ARGUMENT OF BOTH THE SIDES THAT THE CIT(A) HAS CONFIRMED THE PROFIT RATE AT THE RATE OF 12.5%, WHICH ACCORDING TO ME IS ON HIGHER SIDE GOING BY THE NATURE OF BUSINESS OF THE ASSESSEE I.E. FERROUS AND NON - FERROUS. I AM IN FULL AGREEMENT WITH THE CONTENTI ONS RAISED BY THE ASSESSEE BEFORE CIT(A) AND ACCORDING TO ME A PROFIT RATE OF 12.5% IS ON HIGHER SIDE AS ASSESSEE HAS ALSO PAID THE VAT ELEMENT ON THESE BOGUS PURCHASES, A FURTHER DEDUCTION 4 ITAS NO.3818/MUM/2018 IN ESTIMATION OF PROFIT TO THE EXTENT OF 7 .5% CAN BE ALLOWED. HENCE, I DIRECT THE AO TO RECOMPUTE THE SHRI CHANDAN DHINGADMAL JAIN 3 INCOME AFTER APPLYING PROFIT RATE AT THE RATE OF 5% AND COMPUTE THE INCOME ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . 7. I RESPECTFULLY FOLLOW THE ABOVE PRECEDENT AND DIRECT THAT THE DISALLOWANCE IN THIS CASE SHOULD ALSO BE RESTRICTED TO 5% OF BOGUS PURCHASES. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE. 8. IN THE RESULT, APPEALS BY THE ASSESSEE ARE PARTY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 11 .9 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 11 / 9 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESP ONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI