VASANT CONSTRUCTION COMPANY (I), MUMBAI V. DCIT15(2), MUMBAI

ITA 4427/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4069 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 06-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS KAVITA KAUSHAL
• Keywords: Bogus purchase

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, J M & SHRI S . RIFAUR RAHMAN, AM ./ I.T.A. NO . 4427 / MUM/ 2018 ( / ASSESSMENT YEAR: 2009 - 10 ) VASANT CONSTRUCTION CO. (I), 33/37, 1 ST FLOOR, CHANDRA BHAVAN BUILDING, DHANJI STREET, ZAVERI BAZAR, MUMBAI - 400 003 / VS. D CIT - 15(2 ) , ROOM NO. 113, 1 ST FLOOR, MATRU MANDIR, TARDEO ROAD, GRANT ROAD (W), MUMBAI - 400 007 ./ ./ PAN NO. A A AFV 0909 M ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI RAVINDRA POOJARY , AR / RESPONDENTBY : MRS. KAVITA KAUSHAL, DR / DATE OF HEARING : 05.12 .2019 / DATE OF PRONOUNCEMENT : 26.02.2020 / O R D E R PER S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) : THE PRESENT A PPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMIS S IONER OF INCOME TAX (APPEALS) - 28 , MUMBAI, D ATED 06.04.18 FOR AY 2009 - 10 . 2 I.T.A. NO. 4427 /MUM/201 8 VASANT CONSTRUCTION CO. (I) 2 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION. INFORMATION WAS RECEIVED FROM THE SALES TAX D EPARTMENT THAT ASSESSEE HAS IN DULGED IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION O N ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.66,48,430/ - . 3 . AGGRIEVED BY THE ABOVE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) CONFIRMED THE ADDITION MADE BY AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4 . NOW BEFORE US, THE AS SESSEE HAS PREFE RRED APPEAL BY RAISING THE GROUNDS OF APPEAL AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING WITH AO'S TREATMENT OF MAKING ADDITION OF PURCHASES FROM THE FOLLOWING TWO PARTIES A S BOGUS AND MADE ADDITION OF 100% OF TOTAL PURCHASE OF RS.9,62,377/ - SI NO. NAME OF THE PARTY TIN AMOUNT (RS.) 1. CHANCHAL TUBE CORPORATION 27460355491V 87,048/ - 2. DHRUV SALES CORPORATION 27760622173V 8,75,329/ - 3 I.T.A. NO. 4427 /MUM/201 8 VASANT CONSTRUCTION CO. (I) TOTAL 9,62,377/ - 2. WITHOUT PREJUDICE TO GROUND NO. 1 AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE GROSS PROFIT @ 9.50% ON ALLEGED BOGUS PURCHASES 3. THE APPELLANT CRAVES YOUR HONOUR' LEAVE TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL TAKEN AS ABOVE 5 . AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBM ITTED BEFORE US THAT THIS GROUND IS SQUARELY COVERED BY THE ORDER OF COORDINATE BENCH OF HONBLE ITAT IN ITA 4428 /MUM/2018 FOR AY 2011 - 12 IN ASSESS EES OWN CASE, WHEREIN HONBLE ITAT HAS PASSED ITS ORDER IN FAVOUR OF ASSESSEE. 6 . ON THE OTHER HAND, LD. DR FA IRLY CONCEDED THAT THIS GROUND IS COVERED BY THE ORDER OF ITAT. 7 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE SMC BENCH OF ITAT IN ITA NO. 4428/MUM/2018 FOR AY 2011 - 12 IN 4 I.T.A. NO. 4427 /MUM/201 8 VASANT CONSTRUCTION CO. (I) ASSESSEES OWN CASE O N MERITS. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - 5. UPON ON 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, 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 ENTERPRISES (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. 6. IN THE PRESENT CASE THE ASSESSEE IS IN CONSTRUCTION BUSINESS. FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESS EE 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 5 I.T.A. NO. 4427 /MUM/201 8 VASANT CONSTRUCTION CO. (I) THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HENCE , I DIRECT THAT DISALLOWANCE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 8 . T HEREFORE , RESPECTFULLY FOLLOWING THE ABOVE DECISION OF SMC BENCH IN ASSESSEES OWN CASE WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASE, WE ARE INCLINED TO RESTRICT THE DISALLOWANCE @ 12.5%. THEREFORE, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE @ 12.5% OF THE BOGUS PURCHASES. ACCORDINGLY , WE PARTLY A LLOW THE GROUND RAISED BY THE ASSESSEE. 9 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY A LLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEB 2020 . SD/ - SD/ - (PAWAN SINGH ) (S. RIFAUR RAHMAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 26 . 02 .2020 SR.PS. DHANANJAY 6 I.T.A. NO. 4427 /MUM/201 8 VASANT CONSTRUCTION CO. (I) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI