ITO 28(3)(4), MUMBAI V. M/S VALSON FABRICATORS, MUMBAI

ITA 207/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DHARM VEER SINGH
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.207 /MUM/2019 ASSESSMENT YEAR : 2009-10 ITO 28(3)(4) MUMBAI VS. VALSON FABRICATORS, PLOT NO.85, MIDC THANE BELAPUR ROAD, TTC INDUSTRIAL AREA, NAVI MUMBAI 400 701. PAN AACFV5519P (APPELLANT) (RESPONDENT) CO NO. 06/MUM/2020 (ARISING OUT OF ITA NO.207 /MUM/2019 FOR ASSESSMENT YEAR : 2009-10) VALSON FABRICATORS, NAVI MUMBAI 400 701. PAN AACFV5519P VS. ITO 28(3)(4) MUMBAI (CROSS-OBJECTOR) (RESPONDENT) FOR THE REVENUE : SHRI DHARM VEER SINGH FOR THE ASSESSEE : MS. NEHA PARANJPE DATE OF HEARING :15.01.2020 DATE OF PRONOUNCEMENT : 02.03.2020 O R D E R THIS APPEAL BY THE REVENUE AND CROSS-OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED CIT-A SUSTAINING 25% DISAL LOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENG AGED IN THE BUSINESS OF FABRICATION. INFORMATION WAS RECEIVED FROM THE SAL ES TAX DEPARTMENT THAT ASSESSEE HAS INDULGED IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ITA NO.207/MUM/2019 & CO NO.06/MUM/2020 VALSON FABRICATORS 2 ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITI ON ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS 5,06,766/-. UPON ASSESSEE S APPEAL LEARNED CIT(A) RESTRICTED THE ADDITION TO 25% OF THE ENTIRE BOGUS PURCHASES. AGAINST THE SAID ORDER OF THE CIT(A) BOTH THE REVENUE AND THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASES. ADVERSE INFERENCE HAS 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, 100% D ISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF HO NBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (I N WRIT PETITION NO. 2860, ORDER DATED 18.6.2014). IN THIS CASE HONBLE HIGH COURT H AS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT D OUBTED. HOWEVER, IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKE T. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOU NT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH A S ITUATION, IN MY CONSIDERED OPINION, DISALLOWANCE @12.5% OF BOGUS PURCHASES WOU LD BE SUFFICIENT. SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2010-11 VIDE ORDER DATED 30.09.2019. THE DECISION REFERRED BY THE REVENUE H AS ALREADY BEEN DISTINGUISHED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PRI NCIPAL COMMISSIONER OF INCOME ITA NO.207/MUM/2019 & CO NO.06/MUM/2020 VALSON FABRICATORS 3 TAX VS. M HAJI ADAM & CO (ITA NO. 1004 OF 2016 DATE D 11/2/2019. IN SUCH SITUATION, IN MY CONSIDERED OPINION, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE, 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEET S THE END OF JUSTICE. 5. IN THE RESULT, THE REVENUES APPEAL AND THE ASSE SSEES CROSS-OBJECTIONS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 ND MARCH, 2020. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATED : 2 ND MARCH, 2020. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI