ROLLON HARDWARE INDIA PVT. LTD., Mumbai V. D.C.I.T. CIR. - 7(3)(1), Mumbai

ITA 1621/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2775 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM / I.T.A. NO. 1621 /MUM/20 1 8 ( / ASSESSMENT YEAR: 200 9 - 10 ) ROLLON HARDWARE INDIA PVT . LTD . 403 , 4 TH FLOOR , MATRUCHHAYA , NARSHI NATHA STREET , MUMBAI - 400009 . / VS. DCIT - 7(3)(1) 51, RAJA IND. ESTATE, GR. FLOOR, P.K. ROAD, MULUND (W), MUMBAI - 400080. ./ ./ PAN/GIR NO. : AACCR6734P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 18 . 10 .201 8 /DATE OF PRONOUNCEMENT: 05 .1 1 .201 8 / O R D E R PER SHAMIM YAHYA, AM: THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.10,85,600/ - . UPON ASSESSEE APPEAL LD. CIT(A) CONFIRMED THE SAME. REVENUE BY : SHRI S.K. BEPARI (SR. AR ) ASSESSEE BY: SHRI VIMAL PUNMIYA ROLLON HARDWARE INDIA 2 3. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 4. IN SUPPORT OF HIS CASE LD. CO UNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. T.R. KAPADIA IN TAX APPEAL NO.691 OF 2017 . 5. 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. 6. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT IN ITS DECISION DATED. 04.05.2018 S.L.P. CIVIL DIARY NO.12670/2018. 7 . UP ON CAREFUL CONSIDERATION, I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DO UBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONAL BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860, ORDER DT. 18.06.2014. IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, IN THAT CAS E ALL THE SUPPLIERS WERE GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE ROLLON HARDWARE INDIA 3 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 OT HERS AT THE EXPENSES OF THE EXCHEQUER. IN SUCH SITUATION IN MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD LD. COUNSEL OF THE ASSESSE 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 ACCOU NT OF BOGUS PURCHASE. 8. UP ON CAREFUL CONSIDERATION, I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. ACCORDINGLY, I MODIFY THE ORDER OF LD. 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 DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS . NEEDLESS TO ADD THAT IF THE GROSS PROFIT RATE ALREADY DECLARED COVERS THE ABOVE RATE NO DISALLOWANCE IS REQUIRED. LD. COUNSEL OF THE ASSESSEE FAIRL Y ACCEPTED THIS PROPOSITION. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.11 . 201 8 . SD/ - ( SHAMIM YAHYA ) / ACCOUNTANT MEMBER ROLLON HARDWARE INDIA 4 MUMBAI; DATED : 05.11 . 2018 V IJAY / 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// / /(DY./ASSTT. REGI STRAR) , / ITAT, MUMBAI