SMT. MINTUSAYERMAL JAIN, MUMBAI V. DCIT-CC1(2), MUMBAI

ITA 220/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3975 (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: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHARM VEER SINGH
• Keywords: Bogus purchase; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.220 /MUM/2019 ASSESSMENT YEAR : 2011-12 MINTU SAYERMAL JAIN, 105, NANUBHAI DESAI ROAD, SHOP NO.101, JEEVAN BHAVAN, NEAR ALANKAR CINEMA, MUMBAI 400 004. PAN ADCPJ3983C VS. THE DCIT CC 1(2), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI DHARM VEER SINGH DATE OF HEARING : 15 .0 1 .20 20 DATE OF PRONOUNCEMENT : 02 .0 3 . 20 20 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSE SSEE IS AGGRIEVED THAT THE LEARNED CIT-A HAS ERRED IN SUSTAINING 12.5% DISALLO WANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 17.08.2018 PERTAINING T O ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THI S CASE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON-FERROUS META LS. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE S ALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUB MITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER, THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OF FICER. SALES IN THIS CASE WERE NOT DOUBTED. THE ASSESSING OFFICER IN THIS CASE HA S MADE ADDITION OF 12.5% ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS 6,18,389/-. UPON ASSESSEES APPEAL, LEARNED CIT A CONFIRMED THE SAME. ITA NO.220/MUM/2019 MINTU SAYERMAL JAIN 2 3. AGAINST THE SAID ORDER OF THE CIT(A), ASSESSEE I S IN APPEAL BEFORE THE ITAT. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOT ICE. I HAVE HEARD THE LEARNED DR AND PERUSED THE RECORDS. 4. UPON CAREFUL CONSIDERATION, I FIND THAT ASSESSEE HAS PROVIDED DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BE EN 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 THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NI KUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860, ORDER DT 18.6.2014). IN THIS CAS E THE HONBLE 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 SUPPL IES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS INDICATE THAT ASSESS EE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARK ET 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, I FIND THAT AS HELD BY HONBLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGMENT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. M HAJI ADAM & CO (ITA NO. 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THEREOF), THE ADDITION IN RESPECT OF BO GUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUC H PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. 5. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT, I 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 OTH ER GENUINE PURCHASES. NEEDLESS TO ADD, THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPP ORTUNITY OF BEING HEARD. ITA NO.220/MUM/2019 MINTU SAYERMAL JAIN 3 6. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWE D. 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