SHRI RAJESHKUMAR C JAIN, MUMBAI V. INCOME TAX OFFICER WARD - 19(3)(1), MUMBAI

ITA 2732/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1318 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Bogus purchase; Opportunity of being heard; Set aside

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) I.T.A. NO. 2732/MUM/2019 (ASSESSMENT YEAR 2011-12 ) SHRI RAJESHKUMAR CHUNILAL JAIN SHOP NO. 8, 289- SHREE BHAVAN 4 TH FLOOR, KHETWADI LANE MUMBAI-400 004. PAN : AACPJ7705P VS . ITO-19(3)(1) MATRU MANDIR NANA CHOWK MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RAJESH JAIN DEPARTMENT BY MS. SMITA VERMA DATE OF HEARING 15.12.2020 DATE OF PRONOUNCEMENT 08.02.2021 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE AS SESSEE IS AGGRIEVED THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [IN SH ORT LEARNED CIT(A)] HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT O F BOGUS PURCHASES, VIDE ORDER DATED 26.2.2019 PERTAINING TO ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THI S CASE IS ENGAGED IN THE BUSINESS OF FERROUS AND NON FERROUS METAL. THE ASSE SSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES 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 INCOME TAX OFFICER IN THIS CA SE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWA NCE OF RS. 9,65,693/- . 3. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE SAME. 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. SHRI RAJESHKUMAR CHUNILAL JAIN 2 5. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCES 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. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PUR CHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT AC TUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTI ONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETIT ION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGU S 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 THA T ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THR OUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMEN T OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICA TION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PU RCHASES BY THE ASSESSEE, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT AS HELD BY HONOURABLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGE MENT 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 O FF) /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 O F OTHER GENUINE PURCHASES. 6. I RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE BOGUS PURCH ASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHASES AT THE SAME RAT E AS THAT OF THE OTHER GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHO ULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD SHRI RAJESHKUMAR CHUNILAL JAIN 3 7. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES BY PLACING THE RESULT ON NOTICE BOARD ON 8.2.2021. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 08/02/2021 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