M/S.HARSORA ENGINEERING PRIVATE LIMITED, MUMBAI V. ACIT-5(1)(2), MUMBAI

ITA 4274/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9648 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 21-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 4274 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) M/S. HARSORA ENGINEERING PVT. LTD. 1 - D, DR. HAKIM WADI BESIDE SUPER CINEMA GRANT ROAD, MUM BAI - 400007. PAN : AAACH8196D V S . ACIT - 5(1)(2) ROOM NO. 568 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI SANJAY PARIKH DEPARTMENT BY SHRI RAJESH KUMAR YADAV DATE OF HEARING 17 . 09 . 201 9 DA TE OF PRONOUNCEMENT 03 . 1 2 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 21.3.2018 PERTAINING TO ASSESSMENT YEAR 2009 - 10. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING AND C O N STRUCTION . THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPA RTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. THE I NCOME TAX OFFICER IN THIS CASE HAS MADE 12.5 % ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 24,73,603/ - . M/S. HARSORA ENGINEERING PVT. LTD. 2 3. UPON ASSESSEES APPEAL ID CIT ( A ) CONFIRMED THE SAME . AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. W E HAVE HE ARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 4. U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HA S BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIN D 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 PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS S UPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP 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 BOG US WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY . IN T HE 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 ASSE SSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICATION OF THE PROFIT E L E MEN T EM BEDD E D IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, WE FIND THAT AS HELD BY H ONOURABLE HI GH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VERSUS M . HAJI ADAM & CO . ( 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THERE OFF) THAT IN THE CASE OF TRADING ITEMS THE ADDITION IN RESPECT OF BOGUS PURCHASE IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT SAME RATE AS OF OTHER GENUINE PURCHASES. LD COUNSEL OF THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE IN THIS CASE ON ACCOUNT OF BOGUS PURCHASE RELATES TO TRADING ITEMS. 5. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER T O THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGU S PURCHASES AT THE SAME RATE AS THAT OF THE M/S. HARSORA ENGINEERING PVT. LTD. 3 OTHER GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD . ID . COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE . 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 3.12 . 201 9 . SD/ - SD/ - ( PAWAN SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 3 / 1 2 / 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