BHANSALI FERROMET PVT. LTD., Mumbai V. I.T.O. - 5(1)(2), Mumbai

ITA 1628/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2777 (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. 1628 /MUM/20 1 8 ( / ASSESSMENT YEAR: 200 9 - 10 ) BHANSALI FERROMET 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 - 400007 . / VS. ITO 5(1)(2) AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AABCB 1688D ( / 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 ASSESSES WHEREIN THE ASSESSES IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. THE ASSESSIN G OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.3,01,386/ - . UPON ASSESSEE APPEAL L D CIT - A CONFIRMED THE SAME. REVENUE BY : SHRI S.K. BEPARI (SR. AR ) ASSESSEE BY: SHRI RAJ KUMAR SINGH BHANSALI FERROMET PVT. LTD. 2 3. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSE D THE RECORDS. 4. IN SUPPORT OF HIS CASE LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE PR. CIT VS. T.R KAPADIA IN TAX APPEAL NO 691 OF 2017. 5. IN THIS CASE THE HONBLE HIGH COURT HAS CONFIR MED 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 4/ 5/ 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 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 SUP PORTED FROM HONBLE JURISDICTIONAL 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 HONBLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN S ALES ARE RIOT DOUBTED. HOWEVER , IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE BHANSALI FERROMET PVT. LTD. 3 HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SA VINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN MV CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS (HE END OF JUSTICE HOWEVER, IN THIS REGARD 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 TAN SHOULD BE REDUCED FROM THE STANDA RD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT 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 DISALL OWANCE 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 . LD. COUNSEL OF THE ASSESSEE FAIRLY 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 BHANSALI FERROMET PVT. LTD. 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. REGISTRAR) , / ITAT, MUMBAI