PANKAJ RAMANLAL SHAH, MUMBAI V. ITO 27(2)(5), MUMBAI

ITA 4263/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1796 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 20-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: UDAY P SHAH
• Keywords: Bogus purchase; Gift
• Section: 2

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4263 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 12 ) MR. PANKAJ RAMANLAL SHAH 11/12, SHREEJI BHUVAN CAMA LANE, GHATKOPAR(W) MUMBAI - 400 086. PAN : AACPS6931N V S . ITO 2 7(2)(5) ROOM NO. 421, 4 TH FLOOR, TOWER NO. 6 VASHI RAILWAY STATION COMMERCIAL COMPLEX VASHI, NAVI MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI UDAY P. SHAH DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11.6 . 201 9 DATE OF PRONOUN CEMENT 13 . 6 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS A G GRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES RESULTING RS. 20,37,259/ - DISALLOWANCE. 2. THE ASSE SSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE . 3. U PON ASSESSEE S APPEAL ID CIT ( A ) CONFIRMED THE SAME . AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD S. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS TRADING IN GIFT ITEMS. PURSUANT TO INFORMATION FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE WAS MAKING BOGUS PURCHASES, ASSESSMENT WAS REOPENED AND DISALLOWANCE OF 12.5% OF BOGUS PURCHASES WAS DONE. 5. U PON CAREFUL CONSIDERATION , I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HA S BEEN DRAWN MR. PANKAJ RAMANLAL SHAH 2 DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN D OUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT . 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 TH AT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED 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 DISAL LOWED ON ACCOUNT OF BOGUS PURCHASE. 6. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY I MODIFY THE ORDER OF LEARNED CIT ( A ) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. MR. PANKAJ RAMANLAL SHAH 3 7 . IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 13 . 6 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 13 / 6 / 20 1 9 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