SHRI TEJAS HARAKCHAND SHAH, MUMBAI V. ITO-30(3)(4), MUMBAI

ITA 1719/MUM/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 8671 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 22-03-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Assessee Lawyers: KUSHAL SHAH
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC - I BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 1719 /MUM/ 201 9 (ASSESSMENT YEAR 2010 - 11 ) SHRI TEJAS HARAKCHAND SHAH 23, PARSURAMPURIYA ENCLAVES HAJI BAPU ROAD, MALAD EAST MUMBAI - 400 097. PAN : AACPS7350K V S . ITO - 30(3)(4) C - 13, PRATYAKSHAKAR BHAVAN, BKC BANDRA EAST MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI KUSHAL SHAH DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 08 . 12 . 20 20 DATE OF PRONOUNCEMENT 09 .1 2 . 20 20 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEARNED CIT(A)] HAS ERRED IN SUSTAINING 10% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 28.11.2018 PERTAI NING TO ASSESSMENT YEAR 2010 - 11. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF DEALING IN FERROUS AND NON - FERROUS METAL. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPA RTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. THE I NCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS.3,40,212/ - . 3. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE SAME TO 10%. SHRI TEJAS HARAKCHAND SHAH 2 4. A GAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE I TAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE S HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPL IERS. 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 PROPO SITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT . 18.6.2014). IN THIS CASE THE HONOURABLE HIGH C OURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SA ID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. 5. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKE T GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, I FIND THAT AS HELD BY HONOURABLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF P RINCIPLE COMMISSIONER OF INCOME TAX VERSUS M . HAJI ADAM & CO (ITA NUMBER 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THERE OFF), THE ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LI MITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. LEARNED COUNSEL OF THE ASSESSEE SUBMITS THAT IN EARLIER YEAR IN ASSESSEES OWN CASE THE ITAT HAS FOLLOWED THIS ORDER. 6. I RESPECTFULL Y FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHASES AT THE SAME RATE AS THAT OF THE OTHER SHRI TEJAS HARAKCHAND SHAH 3 GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD . 7. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLA CING THE RESULT ON NOTICE BOARD ON 08.12.2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 08 / 1 2 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE A PPELLANT 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