SHRI RAKESH MTILAL JAIN, MUMBAI V. INCOME TAX OFFICER 19(3)(1), MUMBAI

ITA 4291/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8659 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4291 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) I.T.A. NO. 4292/MUM/2018 (ASSESSMENT YEAR 2013 - 14) SHRI RAMESH MOTIAL JAIN 184, SHOP NO. G - 3 VIMAL BUILDING KHET WADI ROAD MUMBAI - 400 004. PAN : ADIPJ7243D V S . ITO - 19(3)(1) ROOM NO. 219 2 ND FLOOR MATRU MANDIR GRANT ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI SANJAY KAPADIA DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 9 .7 . 201 9 DATE OF PRONOUNCEMENT 6.9 . 201 9 O R D E R THESE ARE APPEALS 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 RESPECTIVE ORDERS, PERTAINING T O A.Y. 2010 - 11 & 201 3 - 1 4 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGE D IN THE BUSINESS OF METAL TRADING . THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MA DE 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 ASSESSING OFFICER IN THIS C ASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASES RESULTING IN DISALLOWANCE AS UNDER : - A.Y. 2010 - 11 RS. 7,09,912 / - A.Y. 2013 - 14 RS. 12,65,097 / - 3. UPON ASSESSEES APPEALS ID CIT(A) CONFIRMED THE SAME. SHRI RAMESH MOTIAL JAIN 2 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEALS BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 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 AS SESSEE 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, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT A CTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALL OWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. 6. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURC HASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASS ESSEE, I FIND THAT AS HELD BY HONOURABLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VERSUS M HAJI ADAM & CO(ITA NUMBER 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THEREOF), THE ADDITION IN RESPECT OF BO GUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. 7. I RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO 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 BOGUS PURCHASES AT THE SAME RATE AS THAT OF THE OTHER GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE SHRI RAMESH MOTIAL JAIN 3 OPPORTUNITY OF BEING HEARD. BOTH C OUNSEL FAIRLY AGREED TO THE ABOVE PROPOSITION. 8 . IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 9 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 9 / 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