ITO - 33(2)(2), MUMBAI V. KETAN GOKULDAS BADIANI, MUMBAI

ITA 3094/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9967 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 10-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Opportunity of being heard; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI VIKAS AWASTHY , JM ITA NO. 3094/MUM/2019 (ASSESSMENT YEAR: 2011-12) ITO-33(2)(2) 848, 8 TH FLOOR, KAUTILYA BHAVAN, BKC, BANDRA (E), MUMBAI-400 051 VS. SHRI KETAN GOKULDAS BADIANI D-303, 3 RD FLOOR, BHOOMI ENCLAVE CHS, MAHAVIR NAGAR, DAHANUKARWADI, KANDIVALI (W), MUMBAI-400 067 PAN/GIR NO. AJAPB 1472 C ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI GURBINDER SINGH RESPONDENT BY : NONE DATE OF HEARING : 16.12.2020 DATE OF PRONOUNCEMENT : 01.01.2021 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENU E IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-45, MU MBAI (LD.CIT(A) FOR SHORT) DATED 21.01.2019 HAS REDUCED THE ADDITION FOR BOGUS PURCHASE OF RS.3,12,24,345/- DONE @ 100% BY THE ASSESSING OFFICER (A.O. FOR SHOR T) BY SUSTAINING ONLY 5% FOR THE ASSESSMENT YEAR (A.Y.) 2011-12. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO THE BU SINESS OF TRADING IN PERSONAL ARTICLES LIKE BELTS, WALLETS AND BUCKLES, ETC. 3. THE ASSESSMENT WAS REOPENED UPON INFORMATION FRO M THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS MADE RS.3,12,24,345/- PURCHAS ES FROM BOGUS DEALERS. THE A.O. MADE 100% ADDITION OF THE BOGUS PURCHASE. 2 ITA NO. 3094/MUM/2019 (A.Y. 2011-12) ITO VS. SHRI KETAN GOKULDAS BADIANI 4. UPON ASSESSEES APPEAL, THE LD.CIT(A) NOTED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY, PLACING RELIANCE UPON SEVERAL CASE LAW S AND UPON THE FACTS OF THE CASE, HE SUSTAINED 5% DISALLOWANCE OUT OF THE BOGUS PURCHASE S. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE THE ITAT. 6. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN D OUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HON'BLE JURISDICTIONAL HIGH COURT DE CISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HON'BLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FO R THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, THE FACTS OF T HE PRESENT CASE INDICATE THAT THE ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MA KING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON -PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. 7. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEM ENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, WE FIND THAT AS HELD BY HON'BLE BOMBAY HIGH COURT IN ITS RECENT JUDGEMENT IN THE CA SE OF PRINCIPLE COMMISSIONER OF INCOME TAX VS. M HAJI ADAM & CO (IN ITA NUMBER 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 PU RCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. 8. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT 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 OTHER GEN UINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 3 ITA NO. 3094/MUM/2019 (A.Y. 2011-12) ITO VS. SHRI KETAN GOKULDAS BADIANI 9. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD ON 01.01.20 21 SD/- SD/- (VIKAS AWASTHY) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 01.01.2021 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI