KETVAL GEMS, Mumbai V. ITO 21(2)(1), Mumbai

ITA 1999/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4864 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMNATH WAJALE
• Keywords: Bogus purchase; Set aside
• Section: 201; 13; 6; 263; 63

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 1999 /MUM/ 201 9 (ASSESSMENT YEAR 2010 - 11 ) I.T.A. NO. 2001 /MUM/2019 (ASSESSMENT YEAR 201 1 - 1 2 ) I.T.A. NO. 2003 /MUM/2019 (ASSESSMENT YEAR 201 2 - 1 3 ) I.T.A. NO. 2 1 32 /MUM/2019 (ASSESSMENT YEAR 201 3 - 1 4 ) KETVAL GEMS 5/67, ADARSH NAGAR HOUSING SOCIETY, OPP. CENTURY BAZAR MUMBAI - 400 025. PAN : AAAFK1724D V S . ITO - 21(2)(1) 110, PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI SOMNATH WAJALE DATE OF HEARING 06 . 10 . 20 20 DATE OF PRONOUNCEMENT 08 .10 . 20 20 O R D E R THESE ARE APPEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )[ IN SHORT CIT(A)] HAS ERRED IN SUSTAINING THE GROSS PROFIT ADDITION ON ACCOUNT OF BOGUS PURCHASES, VIDE HIS COMMON ORDER DATED 20.2.2019 PERTAINING TO THE CONCERNED ASSESSMENT YEAR. 2. BRIEF FACTS OF THE CASE ARE THAT PURSUANT TO INFORMATION FROM THE INVESTI GATION WING THAT ASSESSEE HAS ENGAGED INTO BOGUS PURCHASES AS UNDER : - ASSESSMENT YEAR AMOUNT RS . 2010 - 11 45,24,212/ - 2011 - 12 1,22,66,192/ - 3012 - 13 1,43,68,744/ - 2013 - 14 1,39,93,722/ - THE ASSESSING OFFICER MADE DISALLOWANCE TO THE EXTENT O F GROSS PROFIT AS HE NOTED THAT SALES ARE NOT DOUBTED. THE ADDITION MADE BY THE AO ARE AS UNDER : - 2 ASSESSMENT YEAR AMOUNT RS . 2010 - 11 1,48,863 / - @ 3.29% 2011 - 12 4,22,317 / - @ 3.50% 3012 - 13 3,14,675 / - @ 2.19% 2013 - 14 4,82,783/ - @ 3.45% 3. UPON ASSESSEE S APPEAL LEARNED CIT(A) CONFI RMED THE SAME . 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. 5. UPO N CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS P ROVIDED 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 NTERP RISES (I N 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. 6. MOREOVER, I N THE PRESENT CASE AO HAS NOT MADE ANY INDEPENDENT ENQU IRY FROM THE SAID BOGUS SUPPLIERS. HE HAS NOT EVEN ISSUED ANY NOTICE TO THE M FOR MAKING ANY ENQUIRY WHATSOEVER. DESPITE THE QUANTUM OF BOGUS PURCHASES BEING SO HUGE, HE HAS NOT BOTHERED TO MAKE ANY ENQUIRY FOR PURCHASES NOR HE HAS DONE A NY EXAMINATION OF S ALES. IT IS NOT THE CASE THAT ANY ORDER UNDER SECTION 2 6 3 HAS BEEN PASSED BY LEARNED CIT . 7. A S HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE COMMISSIONER OF INCOME TAX VERSUS M . HAJI ADAM & CO . (ITA NO. 1004 OF 2006 DATED 11.2.2019 IN PARAGRAPH 8 THEREOF ), THE ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE 3 SAME RATE AS OF OTHER GENUINE PURCHASES. HENCE, THE ADDITION GROSS PROFIT ITSELF , WHICH IS DONE BY LEARNED CIT(A) IS NOT JUSTIFIED AND THAT ALSO WITHOUT ANY INDEPENDENT INQUIRY. ACCORDINGLY, I SET ASIDE THE ORDER OF AUTHORITIES BELOW AND DELETE THE ADDITION. 8. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES ON 08.10.2020. S D/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 08 / 1 0 / 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