SAMARTHMAL H. SHAH JAIN, MUMBAI V. ITO 19(3)(2), MUMBAI

ITA 3754/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3380 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• Assessee Lawyers: HARSHAL DOSHI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER AND ITA NO.3754/MUM/2018 ASSESSMENT YEAR-2009-10 SHRI SAMARTHMAL H. SHAH JAIN, M/S JAYBEE TUBE & ENGINEERING SHOP NO.1, HIRA BUILDING, 1 ST PARSIWADA LANE, KHETWADI, MUMBAI-400004 / VS. ITO - 19(3)(2), MATRU MANDIR, 02 ND FLOOR, MUMBAI-400007 PAN NO. ASUPS8435M ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY SHRI HARSHAL DOSHI / REVENUE BY SHRI CHAITNYA ANJARIA / DATE OF HEARING : 24/04/2019 / DATE OF ORDER: 24/04/2019 / O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE, WHEREIN THE ASSE SSEE IS AGGRIEVED THAT THE LEARNED CIT(A)-30, MUMBAI, DATED 26/03/2018 HAS ERRED IN SUSTAINING 12.5 PERCENT DIS ALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12. 5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.6,68,423/-. ITA NO.3754/MUM/2018, SHRI SAMARTHMAL H. SHAH JAIN 2 3. UPON ASSESSEES APPEAL ID CIT(A) CONFIRMED THE SAME. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEF ORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED TH E RECORDS. IN SUPPORT OF HIS CASE LEARNED COUNSEL OF THE ASSES SEE HAS PLACED RELIANCE UPON THE DECISION OF HONOURABLE GUJ ARAT HIGH COURT IN THE CASE OF PR CIT VS T R KAPADIA IN TAX A PPEAL NO 691 OF 2017. IN THIS CASE THE HONOURABLE HIGH COURT HAS CONFIRMED THE DELETION OF DISALLOWANCE ON ACCOUNT O F ALLEGED BOGUS PURCHASE AS NECESSARY DOCUMENTARY EVIDENCE FO R THE PURCHASE WERE ON RECORD. THE SPECIAL LEAVE PETITION AGAINST THIS ORDER HAS BEEN DISMISSED BY THE HONOURABLE SUPREME COURT IN ITS DECISION DATED 4/5/2018 S L P CIVIL DIARY NO 12 670/2018. 3. UP ON CAREFUL CONSIDERATION, WE FIND THAT ASS ESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCH ASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABI LITY OF THE ASSESSEE 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 B OGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SAL ES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION ITA NO.3754/MUM/2018, SHRI SAMARTHMAL H. SHAH JAIN 3 IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PE TITION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONO URABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVE R IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE H AS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THR OUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT O F NON- PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXC HEQUER. IN SUCH SITUATION IN MY CONSIDERED OPINION ON THE FACT S AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OU T OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER I N THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED T HAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BO GUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFI T ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALL OWED ON ACCOUNT OF BOGUS PURCHASE. 4. UP ON CAREFUL CONSIDERATION, WE FIND CONSIDERAB LE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY T O THE ITA NO.3754/MUM/2018, SHRI SAMARTHMAL H. SHAH JAIN 4 ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER OF LEAR NED CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RE STRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GRO SS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRAN SACTIONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOS ITION. 5. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSE E STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/04/2019. SD/- S D/- (RAVISH SOOD) (SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 24/04/2019 F{X~{T? P.S/. .. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. !'# / THE RESPONDENT. 3. $# $# % ( ) / THE CIT, MUMBAI. 4. $# $# % / CIT(A)- , MUMBAI, 5. ( )*# !+ , $# # +- , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, '#( ! //TRUE COPY// / (DY./ASSTT. REGISTRAR) $%&', / ITAT, MUMBAI