PRIMEX METAL, MUMBAI V. ITO,19(2)(5), MUMBAI

ITA 1478/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4387 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Keywords: Bogus purchase

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC-I BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 1478/MUM/2019 (ASSESSMENT YEAR 2009-10 ) I.T.A. NO. 1479/MUM/2019 (ASSESSMENT YEAR 2010-11 ) PRIMEX METAL 100/102, NARAYAN BUILDING, 4 TH FLOOR OFFICE NO. 26 ARDESHIR DADY STREET MUMBAI-400 004. PAN : AACFP3058P VS . ITO-19(2)(5) MATRU MANDIR 2 ND FLOOR TARDEO MUMBAI-400 007. (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI KAILASH GAIKWAD DATE OF HEARING 14.10.2020 DATE OF PRONOUNCEMENT 19.10.2020 O R D E R THESE ARE APPEALS BY THE ASSESSEE WHEREIN THE ASSE SSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) [IN SHORT LEARNED CIT(A)] HAS ERRED IN SUSTAINING THE ADDITION FOR BO GUS PURCHASE OF RS. 4,16,009/- FOR A.Y. 2010-11 AND RS. 11,08,288/- FOR A.Y. 2009-10 DONE BY ASSESSING OFFICER @ 12.5%. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO THE BU SINESS OF TRADING IN FERROUS AND NON-FERROUS METALS. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS, THE ASSESSING OFFICER MADE 12.5% AD DITION OF THE BOGUS PURCHASE. THOUGH THE ASSESSING OFFICER OBSERVED THA T ASSESSEE HAS NOT SHOWN CORRESPONDING SALES OUT OF BOGUS PURCHASES, HE CHOS E TO DISALLOW ONLY 12.5%. THE ASSESSING OFFICER DID NOT MAKE ANY INDEPENDENT INQUIRY OF HIS OWN. HE DID NOT ISSUE NOTICES TO ALLEGED BOGUS SUPPLIERS. 2 3. UPON ASSESSEE'S APPEAL LEARNED CIT-A CONFIRMED T HE ADDITION. 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. I FIND THAT THE ADDITION HAS BEEN DONE SOLELY ON THE BASIS OF SALES TAX INFORMATION. NO INDEPENDENT INQUIRY HAS BEEN DONE BY THE ASSESSING OFFICER. 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 PUR CHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT AC TUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTI ONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETIT ION NO 2860, ORDER DT. 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGU S WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT CASE INDI CATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON -PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. 5. I NOTE THAT IT HAS BEEN SUBMISSION OF THE ASSESS EE BEFORE THE AUTHORITIES BELOW THAT ASSESSEE HAS ALREADY SHOWN SUFFICIENT GR OSS PROFIT. IN MY CONSIDERED OPINION IT WILL BE DOUBLE PREJUDICE TO T HE ASSESSEE IF THE GROSS PROFIT ALREADY DECLARED AND OFFERED TO TAX IS NOT REDUCED FROM THE 12.5% DISALLOWANCE DONE BY THE AUTHORITIES BELOW. HENCE, I DIRECT THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO 12.5% THE GROSS PROFIT ALREADY SHOWN IN THIS REGARD. 6. IN THE RESULT, THESE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RUL ES ON 19.10.2020. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 19/10/2020 3 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