M/S KULDEEP GLASS AND ALUMINIUM, Mumbai V. ITO 29(2)(1), Mumbai

ITA 2171/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1263 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI VIKAS AWASTHY , JM ITA NOS. ASSESSMENT YEARS 7139/MUM/2018 2009-10 7140/MUM/2018 2010-11 7141/MUM/2018 2011-12 2171/MUM/2019 2011-12 KULDEEP GLASS AND ALUMINIUM SHOP NO. 16, HANSA VILLA, OPP. VIJA Y NAGAR, MULUND (W), MUMBAI-400 080 VS. INCOME TAX OFFICER-23(2)(4), MUMBAI PAN/GIR NO. AAAFK 6708 M ( ASSESSEE ) : ( RESPONDENT ) AND ITA NO. 3355/MUM/2019 (ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER-23(2)(4), MUMBAI VS. KULDEEP GLASS AND ALUMINIUM SHOP NO. 16, HANSA VILLA, OPP. VIJA Y NAGAR, MULUND (W), MUMBAI-400 080 ( RESPONDENT ) : ( ASSESSEE ) APPELLANT BY : NONE RESPONDENT BY : SHRI GURBINDER SINGH DATE OF HEARING : 15.12.2020 DATE OF PRONOUNCEMENT : 16.12.2020 O R D E R PER SHAMIM YAHYA, A. M.: THESE ARE FOUR APPEALS BY THE ASSESSEE, WHEREIN TH E ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT-A HAS ERRED IN SUSTAINING 12.5% DISALLO WANCE ON ACCOUNT OF BOGUS PURCHASES PERTAINING TO RESPECTIVE ASSESSMENT YEARS. 2. ONE CROSS APPEAL IS ALSO THERE BY THE REVENUE CH ALLENGING THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING 12.5 % INSTEAD OF 100% ADDITION . IN THIS REGARD, IN THE GROUNDS OF APPEAL, THE HON'BLE SUPREME COURTS DECISION IN THE CASE OF N K PROTEINS HAS BEEN REFERRED. 2 ITA NOS 7139 TO 7141/M/18, 2171/M/19 & 3355/M/19 KULDEEP GLASS AND ALUMINIUM 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN ALUMINUM ITEMS. THE ASSESSMENT IN THI S CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSE SSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PA YMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER, THE SUPPLIERS WERE NOT PRODUCED B EFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. 4. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100 % ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE AS UNDER: ITA NOS. ASSESSMENT YEARS AMOUNT (IN RS.) 7139/MUM/2018 2009-10 1,85,30,375 7140/MUM/2018 2010-11 7,78,64,806 7141/MUM/2018 2011-12 98,66,483 2171/MUM/2019 2011-12 99,97,897 5. THE A.O. INTER ALIA RELIED UPON THE SALES TAX DEPARTMENT INFORMATION. HE REJECTED THE ASSESSEES CLAIM THAT ALL THE DOCUMENTARY EVIDE NCE FOR PURCHASE HAS BEEN SUBMITTED BY OBSERVING THAT LORRY TRANSPORTATION RECEIPT HAS NOT BEEN FURNISHED. FURTHERMORE, HE REFERRED TO THE OBSERVATION IN TAX AUDIT REPORT THA T IT IS NOT POSSIBLE TO MAINTAIN QUANTITATIVE DETAIL OF STOCK. HE PROCEEDED TO REJEC T THE BOOKS OF ACCOUNTS AND MAKE THE DISALLOWANCE OF 100% OF THE PURCHASES. HE DID NOT D OUBT THE SALES. HE DID NOT ISSUE ANY NOTICE TO THE ALLEGED BOGUS SUPPLIERS U/S.133(6) DE SPITE WRITTEN REQUEST FROM THE ASSESSEE. HE DREW ADVERSE INFERENCE FOR THE ASSESSEE HAVING F AILED TO PRODUCE THE ALLEGED BOGUS SUPPLIERS BEFORE HIM. 6. UPON THE ASSESSEES APPEAL, THE LD CIT(A) NOTED T HAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WOULD RESULT IN FOLLOWING GROSS P ROFITS WHICH ARE NOT SUSTAINABLE: A.Y. RESULTANT GROSS PROFIT 2009-10 73.66% 2010-11 62.03% 2011-12 40.20% 7. THEREAFTER, PLACING RELIANCE UPON SEVERAL CASE L AWS, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% OF THE BOGUS PURCHASES. 3 ITA NOS 7139 TO 7141/M/18, 2171/M/19 & 3355/M/19 KULDEEP GLASS AND ALUMINIUM 8. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPE AL BEFORE THE ITAT. FOR ASSESSMENT YEAR 11-12, THE REVENUE HAS ALSO FILED ONE CROSS AP PEAL. 9. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION WE FIND THAT THE ASSESSE E HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BE EN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE, THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SAL ES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HON'B LE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PE TITION NO 2860 ,ORDER DT 18.6.2014). IN THIS CASE, THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, IN TH AT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. 10. IN THE PRESENT CASE, THE FACTS OF THE CASE IND ICATE 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 QUANTIFICATION OF THE PROFIT ELEMENT EM BEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, WE FIND THAT AS HELD BY HON'BLE BOMBAY HIGH COURT IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VS. M HAJI ADAM & CO (IN ITA NO. 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THERE OFF) ,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 SAME RATE AS OF OTHER GENUINE PURCHASES. 11. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEME NT OF THE HONBLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER 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 GEN UINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. THE DECISION OF HON'BLE SUPREME COURT REFERRED BY THE REVENUE IN THE CASE O F NK PROTEINS (SUPRA) HAS ALREADY 4 ITA NOS 7139 TO 7141/M/18, 2171/M/19 & 3355/M/19 KULDEEP GLASS AND ALUMINIUM BEEN DEALT WITH BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M HAJI ADAM & CO (SUPRA). 12. IN THE RESULT, THESE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD ON 16.12.20 20 SD/- SD/- (VIKAS AWASTHY) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 16.12.2020 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI