SHRI MANGILAL P. CHANDAN, Mumbai V. I.T.O. - 19(2)(3), Mumbai

ITA 1632/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2779 (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 S . 1632 TO 1634 /MUM/20 1 8 ( / ASSESSMENT YEAR S : 200 9 - 10, 2010 - 11 & 2011 - 12 ) SHRI . MANGILAL P . CHANDAN M / S . MICRON METAL INDUSTRIES OFFIC E NO . 92 / 97 , GR . FLOO R , 92 / 94 , ENGINEER BLDING , ARDESHIR DADY STREET , C . P . TANK , MUMBAI - 400004 . / VS. ITO - 19(2)(3) MATRU MANDIR, MUMBAI. . ./ ./ PAN/GIR NO. : AAKPC5704B ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 18 . 10 .201 8 /DATE OF PRONOUNCEMENT: 05.11 .201 8 / O R D E R PER SHAMIM YAHYA, AM: THESE ARE AN APPEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 9% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON AC COUNT OF BOGUS PURCHASE AMOUNTING TO RS.7,09,925/ - (A.Y.2009 - 10), 5,92,219/ - (A.Y. 2010 - 11) & 8,81,193/ - (A.Y.2011 - 12) . UPON ASSESSEE APPEAL LD CI T - A CONFIRMED THE DISALLOWANCE @ 9%. REVENUE BY : SHRI S.K. BEPARI (SR. AR ) ASSESSEE BY: SHRI P.M. GANG MANGILAL P. CHANDAN 2 3. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEAR D BOTH THE COUNSEL AND PERUSED THE RECORDS. 4. IN SUPPORT OF HIS CASE LEARNED COUNSEL OF THE ASSESSES HAS PLACED RELIANCE UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR. CIT VS. TR KAPADIA IN TAX APPEAL NO 691 OF 2017. 5. IN THIS CASE TH E 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 SUPRE ME COURT IN ITS DECISION DATED 04.05.2018 SLP 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 HE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PUR CHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE 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 HONOURABLE 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. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE MANGILAL P. CHANDAN 3 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 THE12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD LEARNED COUNSEL OF THE ASSESSES HAS PRAYED THAT WHEN ONLY THE PROF ITS 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. 8. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE ASSESSEE. ACCORDINGLY, I MO DIFY THE ORDER OF LEARNED CI T - A AND DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF T HE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY T HE ASSESSEE ON THESE TRANSACTIONS L D COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. IN THE RESULT , THESE AP PEALS FILED BY THE ASSESSES STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.11 . 201 8 . SD/ - ( SHAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI; DATED : 05.11 . 2 018 MANGILAL P. CHANDAN 4 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. REGIS TRAR) , / ITAT, MUMBAI