IMI ALLOYS PRIVATE LIMITED, MUMBAI V. DCIT 5(1)(1), MUMBAI

ITA 1604/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8507 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Bogus purchase
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM ITA NO S . 1604 & 1605 /MUM/ 2018 (ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 ) IMI ALLOYS PVT. LTD. C/O. D. C. BOTHRA & CO. LLP (CA) (FORMERLY KNOWN AS D. C. BOTHRA & CO.) 297, TARDEO ROAD, WILLE MANSION, 1 ST FLOOR, OPP. BANK OF INDIA, NANA CHOWK, MUMBAI - 400 007 VS. DY. CIT - 5(1)(1) AAYKAR BHAVAN, 5 TH FLOOR, M. K. ROAD, MUMBAI - 400 007 PAN/GIR NO. ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI RAJKUMAR SINGH RESPONDENT BY : SHRI S. K. BEPARI DATE OF HEARING : 17.10.2018 DATE OF PRONOUNCEMENT : 01.01 . 2019 O R D E R PER SHAMIM YAHYA, A. M.: TH ESE ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 10, MUMBAI ( LD.CIT(A) FOR SHORT) DATED 09.10.2017 HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE. 2. THE ASSESSING OFFICER (A.O. FOR SHORT) IN THIS CASE HAS MADE 12.5% A DDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.4,96,373/ - & RS.7,29,414/ - FOR THE TWO YEARS RESPECTIVELY. 3. U PON THE ASSESSEE S APPEAL , THE LD. CIT(A) CONFIRMED THE SAME. 4. AGAINST THE ABOVE ORDER , THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IN SUPPORT OF HIS CASE , THE LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF HONBLE GUJARAT 2 ITA NOS. 1604 & 1605/MUM/2018 HIGH COURT IN THE CASE OF PR CIT VS T R KAPADIA ( IN TAX APPEAL NO 691 OF 2017 ). IN THIS CASE , THE HONBLE HIGH COURT HAS CONFIRMED THE DELETION OF DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASE , AS NECESSARY DOCUMENTARY EVIDENCE FOR THE PURCHASE WERE ON RECORD . THE S PECIAL L EAVE P ETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY THE HO NBLE SUPREME COURT IN ITS DECISION DATED 0 4 .05. 2018 SLP CIVIL DIARY NO 12670/2018 . 6. U PON CAREFUL CONSIDERATION , I FIND THAT THE ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE 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, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE B EIN G NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860 .ORDER DT 18.6.2014). IN THIS CASE , THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO THE GOVERNMENT AGENCY. 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 THE EXCHEQUER. IN SUCH SITUATION , IN MY CONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 12.5% DISALLOW ANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER , IN THIS REGARD THE LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED , THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 3 ITA NOS. 1604 & 1605/MUM/2018 7. UP ON CAREFUL CONSIDERATION , I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSE SSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY , I MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARE D BY THE ASSESSEE ON THESE TRANSACTIONS. THE LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION, 8. IN THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 1 . 0 1 . 2 0 1 9 S D / - (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI ; DATED : 0 1 . 0 1 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI