HASMUKH JAGSHI VISARIA, THANE V. ITO 1 (1) KALYAN, KALYAN

ITA 2302/MUM/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2791 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 2302 /MUM/ 201 6 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 2303/MUM/2016 (ASSESSMENT YEAR 2011 - 12) I.T.A. NO. 1601/MUM/2018 (ASSESSMENT YEAR 2011 - 12) SHRI HASMUKH JAGSHI VISARIA 201, VAGAD APARTMENT NEAR JANAM HOSPITAL CHARAI, THANE(W) - 400 601. PAN : AAAPV9059L V S . ITO 1(1) KALYAN ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI MANI JAIN DEPARTMENT BY SHRI BHARTI SINGH DATE OF HEA RING 19.12. 20 19 DATE OF PRONOUNCEMENT 02 . 0 3 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THE S E ARE APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS A G GRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PUR CHASES BY HIS RESPECTIVE ORDERS IN THESE APPEALS . 2. IN THIS CASE ITAT NO. 2302 & 2303/MUM/2016 WERE EARLIER DISPOSED OFF BY THE TRIBUNAL UNDER COMMON ORDE R DATED 29.8.2017. HOWEVER THEY WERE RE CALLED VIDE MISCELLANEOUS APPLICATION ORDER DATED 18.5.2018. 3. PURSUANT TO THE SAID RECALL THESE APPEALS HAVE BEEN HEARD. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN ALL KINDS OF PAPER. INF ORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS THAT IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. 4. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE . WHILE MAKING THE ADDITION, THE ASSESSING OFFICER DID NOT MAKE ANY ENQUIRY OF HIS OWN FROM THE ALLEGED BOGUS IN S UPPLIERS. SHRI HASMUKH JAGSHI VISARIA 2 5. U PON ASSESSEE S APPEAL LEARNED CIT(A) REDUCED THE SAME TO 12.5% AND SUSTAINED FOLLOWING ADDITIONS : - ITA NO. 2302/MUM/2016 RS. 64,54,166 / - ITA NO. 2303 /MUM/2016 RS. 76,87,019/ - ITA NO. 1601/MUM/2018 RS. 2,75,480/ - 6. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS . U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE S HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSE SSEE 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, HUNDRED PERCENT 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 NTERPRISES (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 MARK ET. 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. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWA NCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN B Y THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. SHRI HASMUKH JAGSHI VISARIA 3 8. UP ON CAREFUL CONSIDERATIONS WE FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE , AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY W E M ODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 9. IN THE RESULT TH E S E APPEAL S FILED BY THE ASSESSEE STAND PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 02.03 . 20 20 . SD/ - SD/ - ( RAMLAL NEGI ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 2 / 0 3 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CI T 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI