KEITH BOSCO DIAS, Mumbai V. ACCIT-21(2), Mumbai

ITA 2346/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1814 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase; Opportunity of being heard
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 2346 /MUM/ 201 9 (ASSESSMENT YEAR 2008 - 09 ) I .T.A. NO. 23 82 /MUM/2019 (ASSESSMENT YEAR 200 9 - 1 0) KEITH BOSCO DIAS 303, 3 RD FLOOR SILVER SAND CHS AGAR BAZAR, S.K. BOLE ROAD, DADAR MUMBAI - 400 028. PAN : AAQPD191B V S . ACIT - 21(2) PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 02 . 12 . 20 20 DATE OF PRONOUNCEMENT 02 .1 2 . 20 20 O R D E R THE S E ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SHORT LEARNED CIT(A)] HAS ERRED IN SUSTAINING 100% DISALLOWANC E ON ACCOUNT OF BOGUS PURCHASES P ERT AINING TO ASSESSMENT YEAR S 2008 - 09 & 2009 - 10. 2. BRIEF F ACTS OF THE CASE A R E THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SPRING BALANCE. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DE P ARTMEN T THAT ASSESSEE H AS M ADE BOGUS PURCHASES AS UNDER : A.Y. 2008 - 09 RS. 6,99,096/ - A.Y. 2009 - 10 RS. 5,35,773/ - THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND T HE PAYMENTS WERE MA DE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODU CED BEFORE THE KEITH BOSCO DIAS 2 ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. NEITHER ANY OBSERVATION OF ANY ANOMALY IS THERE IN PRODUCTION OR CONSUMPTION RAT IO . 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE IN A.Y. 2008 - 09 OF RS. 6,99,096/ - AND IN A.Y. 2009 - 10 OF RS. 5,35,773/ - . 4. UPON ASSESSEES APPEAL S LEARNED CIT ( A ) CONFIRMED THE SAME. 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL S BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL RE PRESENTATIVE A ND PERUSED THE RECORDS. 6. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES 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 NOR ANY ANOMALY IS NOTED IN PRODUCTION OR CONSUMPTION RATIO . IT IS SETTLED LAW THAT WHEN SA L ES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS PO SSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORT ED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT . 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUN DRED 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 . 7. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FRO M THE GREY MA RKET. 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 PURC HASES 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 NUMBER 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THERE KEITH BOSCO DIAS 3 OFF) ,THE ADDI TION 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. 8. I RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASID E 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 9. IN THE RESULT ASSESSEE'S APPEAL S ARE PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLACING THE RESULT ON NOTICE BOARD ON 02/12/2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 02 / 1 2 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 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