M/S.R.J.TRADERS, MUMBAI V. ITO 3(5), KALYAN

ITA 4285/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1739 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4284 /MUM/ 201 8 (ASSESSMENT YEAR 20 10 - 11 ) I.T.A. NO. 4285/MUM/2018 (ASSESSMENT YEAR 2011 - 12) M/S. R.J. TRADERS DR.AMBEDKAR ROAD SHIVAJI CHOWK KALYAN (WEST) PINCODE - 421 301. PAN : AABFR4471K V S . ITO 3(5) RANI MANSION MURBAD ROAD KALYAN WEST PINCODE - 421 301. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RAVINDRA POOJARY DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11.6 . 201 9 DATE OF PRON OUNCEMENT 12 . 6 . 201 9 O R D E R THESE ARE APPEALS BY THE ASSESSEE AGAINST RESPECTIVE ORDERS OF LEARNED CIT(A) FOR CONCERNED ASSESSMENT YEARS. ISSUE PRESSED IS THAT LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 8,986/ - FOR A.Y. 2010 - 11 AND RS. 80,244/ - FOR A.Y. 2011 - 12 AS 100% DISALLOWANCE FOR BOGUS PURCHASES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS REOPENED PURSUANT TO INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE WAS BENEFICIARY OF BOGUS ACCOMMODATION ENT RIES. SALES WERE NOT DOUBTED. HOWEVER, THE ASSESSING OFFICER TOOK ADVERSE INFERENCE FOR INABILITY OF THE ASSESSEE TO PRODUCE THE PARTIES AND FOR NON - SUBMISSION OF COPIES OF DELIVERY CHALLAN. HENCE HE MADE DISALLOWANCE FOR 100%. 3. UPON ASSESSEES APPEAL, LEARNED CIT(A) CONFIRMED THE ADDITION. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. M/S. R.J. TRADERS 2 4. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT SALES IN THIS CASE HAVE NOT BEEN DOUBTED SO 100% DISALLOWANCE CANNOT BE DONE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ALREADY SHOWN GROSS PROFIT OF 7.13% FOR A.Y. 2010 - 11 & 5.15% FOR A.Y. 2011 - 12. HENCE, LEARNED COUNSEL PRAYED THAT FROM THE STANDARD DISALLOWANCE OF 12.5% DUE CREDIT SHOULD BE GIVEN FO R GROSS PROFIT RATE SHOWN. 5. U PON CAREFUL CONSIDERATION . I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURIS DICTIONAL HIGH COURT DECISI ON IN THE CASE OF NIKUNJ EXIMP E NTERP RISES (IN WRIT PETITION NO 2860 , ORDER DT . 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER I N THAT 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 DI SALLOWED 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 - M/S. R.J. TRADERS 3 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. 7. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 12 . 6 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 12 / 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 ITA T, MUMBAI