SEHRULLAH KARAMDAR KHAN, MUMBAI V. ITO 26(3)(2), MUMBAI

ITA 3941/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3470 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITNYA ANJARIA
• 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.3941/MUM/2018 ASSESSMENT YEAR-2009-10 SEHRULLAH KARAMDAR KHAN, PRO. M/S SAMIR STEEL TRADERS, B/307, DWARKA SHOPPING CENTRE, NEAR CITY HOSPITAL, LBS MARG, KURLA (W), MUMBAI-400070 / VS. ITO - 26(3)(2) MUMBAI PAN NO. AHMPK0007C ( / ASSESSEE) ( / REVENUE) / ASSESSEE BY NONE / REVENUE BY SHRI CHAITNYA ANJARIA / DATE OF HEARING : 25/04/2019 / DATE OF ORDER: 30/04/2019 / 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)-38, MUMBAI, DATED 30/06/2017 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 PURCHASES AMOUNTING TO RS.32,31,272/-. ITA NO.3941/MUM/2018, SEHRULLAH KARAMDAR KHAN 2 3. UPON ASSESSEES APPEAL, LD. CIT(A) CONFIRMED THE SAME. 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORDS. N ONE APPEARED ON BEHALF OF THE ASSESSEE 5. UP ON CAREFUL CONSIDERATION, WE FIND THAT ASSESS EE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABILITY 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 BOGUS PUR CHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FRO M HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN TH E CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION 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 BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE AL L THE SUPPLIES WERE TO GOVERNMENT AGENCY. 6. WE ALSO TAKE NOTE OF THE DECISION OF HONOURABLE GUJARAT HIGH COURT IN THE CASE OF PR CIT VS T R KAPADIA IN TAX APPEAL NO 691 OF 2017. IN THIS CASE, THE HONOURABLE HIGH COURT HAS ITA NO.3941/MUM/2018, SEHRULLAH KARAMDAR KHAN 3 CONFIRMED THE DELETION OF DISALLOWANCE ON ACCOUNT O F ALLEGED BOGUS PURCHASE AS NECESSARY DOCUMENTARY EVIDENCE FO R THE PURCHASES WERE ON RECORD. THE HONBLE APEX COURT HA S DISMISSED SLP AGAINST THIS BY ORDER DATED 04/05/201 8. 7. UPON CAREFUL CONSIDERATION, WE FOUND THAT MAKIN G PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSE E SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN MY CONSIDERED O PINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% D ISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE . HOWEVER IN THIS REGARD, WE NOTE THAT WHEN ONLY THE PROFITS EAR NED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 8. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNED 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. ITA NO.3941/MUM/2018, SEHRULLAH KARAMDAR KHAN 4 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/04/2019. SD/- S D/- (RAVISH SOOD) (SHAMIM YAHYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 30/04/2019 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