OMKARA DIAMOND EXPORTS PRIVATE LIMITED, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-5(2)(1), MUMBAI

ITA 2283/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5216 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUMAR PADMA
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 13; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI M. BALAGANESH , HON'BLE ACCOUNTANT MEMBER ITA NO S . 2283, 2284 /MUM/2018 (A.Y S : 2011 - 12 & 2012 - 13) M/S. OMKARA DIAMOND EXPORTS PVT. LTD., C - 2/16, HARI RATAN CHS LTD., BANGUR NAGAR, GOREGAON (W) MUMBAI 400 090 PAN: AAACO8842P V. ASST . COMMISSIONER OF INCOME - TAX CIRCLE - 5 ( 2 ) (1) AAYAKAR BHAVAN , MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MADHUR AGARWAL DEPARTMENT BY : SHRI KUMAR PADM APANI BORA DATE OF HEARING : 06.02.2020 DATE OF PRONOUNCEMENT : 30 .0 9 . 2020 O R D E R PER C. N. PRASAD (JM) 1. THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 10, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] FOR THE A.Y. 2011 - 12 & A.Y. 2012 - 13 . 2. THE ONLY ISSUE IN THESE APPEALS IS IN RESPECT OF CONFIRMING THE DISALLOWANCE MADE TOWARDS PURCHASES. 2 ITA NOS. 2283, 2284/MUM/2018 (A.YS: 2011 - 12 & 2012 - 13) M/S. OMKARA DIAMOND EXPORTS PVT. LTD., 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDE NTICAL ISSUE FOR THE ASSESSMENT YEARS 2008 - 09, A.Y: 2009 - 10 AND A.Y. 2010 - 11 HAD COME UP BEFORE THE TRIBUNAL IN ITA.NO. 2280 TO 2282 /MUM/20 18 AND THE TRIBUNAL BY ORDER DATED 01.10.2019 FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF PR. CIT V. M. HAJI ADAM & CO. (ITA.NO. 1004 OF 2016 DATED 11.02.2019) SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RESTRICT THE ADDITION/DISALLOWANCE TOWARDS BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHASES AT THE SAME RATE AS THAT OF THE GENUINE PURCHASES. IT IS SUBMITTED THAT THE ORDER OF THE LD. CIT(A) IS COMMON ORDER FOR THE ASSESSMENT Y EARS UNDER CONSIDERATION AND ALSO FOR THE ASSESSMENT Y EAR S A.Y. 2008 - 09, A.Y: 2009 - 10 AND A.Y. 2010 - 11. LD. COUNSEL FOR THE ASSESSEE REQUESTED THAT THE EARLIER ORDER OF THE TRIBUNAL MAY BE FOLLOWED. 4. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IDENTICAL ISSUE HAS COM E UP IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS A.Y. 2008 - 09, A.Y: 2009 - 10 AND A.Y. 2010 - 11 AND THE TRIBUNAL BY ORDER DATED 01.10.2019 HELD AS UNDER: - 3 ITA NOS. 2283, 2284/MUM/2018 (A.YS: 2011 - 12 & 2012 - 13) M/S. OMKARA DIAMOND EXPORTS PVT. LTD., 5. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. 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, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASES 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 ENTERPRISES (IN 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. 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 QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, I FIND THAT AS HELD BY HONOURABLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VERSUS M HAJI ADAM & CO (ITA NUMB ER 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. 6. I RESPECTFULLY FOLLO WING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER 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 GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 6. FOLLOWING THE SAME, WE RESTORE THE ISSUE IN THESE APPEALS TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO APPLY THE GROSS PROFIT RATE AS SHOWN BY THE ASSESSEE IN RESPECT OF GENUINE PURCHASES FOR THE ALLEGED 4 ITA NOS. 2283, 2284/MUM/2018 (A.YS: 2011 - 12 & 2012 - 13) M/S. OMKARA DIAMOND EXPORTS PVT. LTD., BOGUS PURCHASES AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN T HE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE . 8. BEFORE PARTING, WE NOTICED THA T THESE APPEALS WERE HEARD ON 06 .02.2020 AND THE PRONOUNCEMENT IS DELAYED DUE TO LOCKDOWN IN VIEW OF COVID - 19 PANDEMIC. THE PRONOUNCEMENT IS AS PER RULE 34(5) OF INCOME TAX APPELLATE TRIBUNAL RULES, 1963 AND HON'BLE BOMBAY HIGH COURT DECISION VIDE ORDERS DATED 15.04.2020 AND 15.06.2020 EXTENDING THE TIME BOUND PERIODS SPECIFIED BY HON'BLE HIGH COURT BY REMOVING THE PERIOD UNDER LOCKDOWN. THIS ASPECT WAS A LSO DEALT WITH IN DETAIL BY THE MUMBAI BENCH OF THE TRIBUNAL IN CASE OF DCIT V. JSW STEEL VIDE ORDER DATED 14.05.2020 IN ITA.NO. 6264/MUM/2018. OR DER PRONOUNCED ON 30 . 09 .2020 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. SD/ - SD/ - ( M. BALAGANESH ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 30 / 0 9 / 2020 GIRIDHAR , S R. PS 5 ITA NOS. 2283, 2284/MUM/2018 (A.YS: 2011 - 12 & 2012 - 13) M/S. OMKARA DIAMOND EXPORTS PVT. LTD., COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM