M/S VITRAG STELL, Mumbai V. ITO WARD 18(3)(5), Mumbai

ITA 315/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6251 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Set aside
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 315/MUM/2019 (ASSESSMENT YEAR: 2010-11) M/S. VITRAG STEEL FLAT NO. 207, 4TH FLOOR SWAMY NARAYAN BLDG 3RD BHOIWADA MUMBAI 400002 VS. INCOME TAX OFFICER - 18(3)(5) MATRUMINDER MUMBAI PAN AAGFV2087G APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI PRAMOD NIKALJE DATE OF HEARING: 21.09.2020 DATE OF PRONOUNCEMENT: 22.09.2020 O R D E R PER SHAMIM YAHYA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-53, MUMBAI DATED 20.12.2018 AND IT RELATES T O A.Y. 20106-11. 2. THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT(A) H AS ERRED IN NOT CONDONING THE DELAY IN FILING THE APPEAL AND THAT T HE SAME TIME SUSTAINING 25% PERCENT DISALLOWANCE ON ACCOUNT OF BOGUS PURCHA SES, VIDE ORDER DATED 20.12.2018 AS AGAINST 12.5% DONE BY THE ASSESSING O FFICER PERTAINING TO ASSESSMENT YEAR 2010-11. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS C ASE IS ENGAGED IN THE BUSINESS OF STEELE TRADING. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMEN T THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PU RCHASE 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 TH IS CASE HAS MADE ITA NO. 315/MUM/2019 M/S. VITRAG STEEL 2 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTI NG IN DISALLOWANCE OF ` 7,88,781/-. 4. UPON ASSESSEES APPEAL LEARNED CIT(A) NOTED THAT TH ERE WAS A DELAY IN FILING THE APPEAL. WITHOUT EVEN BOTHERING TO MEN TION THE QUANTUM OF DELAY IN HIS ORDER, THE LEARNED CIT(A) PROCEEDED TO HOLD THAT DELAY WAS NOT CONDONED. AFTER HOLDING THAT HE WAS NOT CONDONING THE DELAY AND ACCORDINGLY THE APPEAL REMAINED UNADMITTED, HE PROC EEDED TO DECIDE UPON THE MERITS OF THE CASE. HE CONCLUDED THAT 25% DISAL LOWANCE ON ACCOUNT OF BOGUS PURCHASE IS CONFIRMED. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE TH E ITAT. I HAVE HEARD LEARNED D.R. AND PERUSED THE RECORDS. UP ON C AREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVI DENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO T HE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN T HIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CAN NOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTI ONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISE (IN WRIT PETITION NO. 2860, ORDER DATED 18.06.2014). IN THIS CASE THE HONOURABL E HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. 6. I FIND THAT IN THE PRESENT CASE THE ASSESSING OFFIC ER HAS MADE A DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE. UPON A SSESSEE'S APPEAL LEARNED CIT(A) HAS HELD THAT HE WAS NOT CONDONING T HE DELAY IN FILING THE APPEAL WITHOUT EVEN MENTIONING THE NUMBER OF DAYS F OR WHICH CONDONATION WAS SOUGHT. IN MY CONSIDERED OPINION THIS ORDER OF CIT(A) REFLECTS CO MPLETE NON-APPLICATION OF MIND. 7. THEREAFTER HAVING HELD THAT HE WAS NOT CONDONING TH E DELAY AND HENCE THE APPEAL REMAINED UNADMITTED THE LEARNED CI T(A) PROCEEDED TO ADJUDICATE UPON THE MERITS OF THE CASE. IT HAS BEEN ALREADY HELD BY HIGHER ITA NO. 315/MUM/2019 M/S. VITRAG STEEL 3 COURTS THAT ONCE THE DELAY WAS NOT BEING CONDONED, THE MERITS OF THE APPEAL CANNOT BE GONE INTO. THIS ORDER BY THE LEARN ED CIT(A) FAILS ON THIS ACCOUNT ALSO. THEREAFTER LEARNED CIT(A) ON THE MERI TS OF THE CASE HAS HELD THAT HE WAS SUSTAINING 25% DISALLOWANCE DONE BY THE ASSESSING OFFICER. THIS IS ALSO ANOTHER NON-APPLICATION OF MIND AND VI RTUALLY AMOUNTS TO ENHANCEMENT. AS PER LAW ENHANCEMENT BY THE LEARNED CIT(A) WITHOUT NOTICE TO THE ASSESSEE IS NOT SUSTAINABLE. HENCE OR DER OF LEARNED CIT(A) IS LIABLE TO BE SET ASIDE THIS ACCOUNT ALSO. 8. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSI ON AND PRECEDENT I SET ASIDE THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE ADDITION IN THIS CASE BE DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE STANDS ALLOW ED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES ON 22 ND SEPTEMBER, 2020. SD/ - (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATED: 22 ND SEPTEMBER, 2020 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -53, MUMBAI 4. THE PR.CIT - 18, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.