SHRI. RAM DARSHANKUMAR PURI, Mumbai V. ITO-27(3)(1), Mumbai

ITA 1965/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1801 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 1965 /MUM/ 201 9 (ASSESSMENT YEAR 2011 - 12 ) SHRI RAM DARSHANKUMAR PURI PROP. - M/S. R.S. INDUSTRIAL PRODUCTS, SHOP NO. 100, BHIMNAGAR CHOWK, PANJRAPOOL DEONAR, MUM BAI - 400 071. PAN : AACPP8373M V S . ITO - 27(3)(1) 4 TH FLOOR, TOWER NO. 6, VASHI RAILWAY STATION BUILDING, VASHI NAVI MUMBAI PINCODE - 400 703. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 25. 11 . 20 20 DATE OF PRONOUNCEMENT 26 .11 . 20 20 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) [IN SHORT LEARNED CIT(A)] HAS ERRED IN SUSTAINING 12.5% DISALLOWANC E ON ACCOUN T OF BOGUS PURCHASES OF RS. 7,35,508/ - AND 100% DISALLOWANCE OF RS. 7,70,752/ - VIDE ORDER DATED 15.2.2019 PERTAINING TO ASSESSMENT YEAR 2011 - 12. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF DEALER IN INDUSTRIAL H ARDWARE AND CONSUMABLE ITEMS. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASE OF RS. 15,06,260/ - . THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MA DE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. SHRI RAM DAR SHANKUMAR PURI 2 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE OF RS. 7,70,752/ - AND ALSO 10 0% OF THE BALANCE DUE TO THE SUPPLIER OF RS. 7,70,752/ - RESULTING IN TOTAL DISALLOWANCE OF RS. 8,62,191 / - . 4. UPON ASSESSEES APPEAL LEARNED CIT( A ) CONFIRMED THE SAME . 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEP ARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. 6. 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 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 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 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. 7. AS REGARDS 100% DISALLOWANCE FOR UNPAID BALANCE OF SUPPLIERS THE SAME IS TOTALLY UNCALLED FOR AS PURCHASES FOR THE YEAR CANNOT BE ADDED BACK AS REMIS SION OF LIABILITY IN THIS YEAR ITSELF WITHOUT COGENT MATERIAL BROUGHT ON RECORD. 8. 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 SA VINGS 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 IT IS THE SUBMISSION OF THE ASSES SEE BEFORE LOWER SHRI RAM DAR SHANKUMAR PURI 3 AUTHORITIES THAT IT WILL BE DOUBLE PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED FROM THE DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. 9 . UPON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSIONS. ACCORD INGLY I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. 10 . IN THE RESULT THE APPEAL STANDS PARTLY ALLOWED . ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLACING THE RESULT ON NOTICE BOARD ON 26.11.2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 26 / 1 1 / 20 20 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// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI