ITO 28(1)(3), Mumbai V. M/S COMPUTER WORLD, Mumbai

ITA 2147/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4865 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOMNATH WAJALE
• Assessee Lawyers: KALPESH TURALKAR
• 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. 2147 /MUM/ 201 9 (ASSESSMENT YEAR 2009 - 10 ) ITO - 28(1)(3) ROOM NO. 327, 3 RD FLOOR TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI - 400703. V S . M/S. C OMPUTER WORLD RH - 01, G - 55, SECTOR - 07 VASHI , NAVI MUMBAI PINCODE - 400 703. PAN : AAFFC6439G ( APPELLANT ) ( RESPONDENT ) C.O. NO. 4 6 /MUM/20 20 (ASSESSMENT YEAR 2009 - 10) M/S. COMPUTER WORLD RH - 01, G - 55, SECTOR - 07 VASHI, NAVI MUMBAI PINCODE - 400 703. PAN : AAFFC6439G V S . ITO - 28(1)(3) ROOM NO. 327, 3 RD FLOOR TOWER NO. 6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI - 400703. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI KALPESH TURALKAR DEPARTMENT BY SHRI SOMNATH WAJALE DATE OF HEARING 08 . 10 . 20 2 0 DATE OF PRONOUNCEMENT 08 .10 . 20 20 O R D E R THIS IS AN APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE, WHEREIN THEY ARE AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEARNED CIT(A)] HAS ERRED IN SUS TAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 25.1.2019 P ERTAINING TO ASSESSMENT YEAR 2009 - 10. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN COMPUTER PARTS AND PERIPHERALS. THE AS SESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING M/S. COMPUTER WORLD 2 CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 18,92,775/ - . 3. UPON ASSESSEE S APPEAL LEARNED CIT( A) REDUCED THE SAME TO 12.5%. 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT AND ASSESSEE HAS FILED CROSS OBJECTION . I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE D OCUMENTARY 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 PER CENT 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 E XIMP E NTERP RISES (IN WRIT PETITI ON 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 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. AS REGARDS THE QUANTIFICA TION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, I FIND THAT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT IT WILL BE DOUBLED PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT RED UCED FROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. M/S. COMPUTER WORLD 3 6. UPON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSIONS. ACCORDINGLY I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHA SE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE 7. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED AND ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED UNDER R ULE 34(4) OF THE ITAT RULES ON 08.10.2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 08 / 1 0 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPEL LANT 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