SIDHARTHA MISHRA (PROP. SHRADDHA CHEMICALS), MUMBAI V. ITO 3(4), KALYAN

ITA 4442/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5911 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase; Opportunity of being heard; Set aside

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4442 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) MR. SIDHARTHA MISHRA (PROP. SHRADDHA CHEMICALS) M - 7, 1 ST FLOOR, YASHOVARDHAN CO - OP. HOUSING SOCIETY L.T. KOTNIS M ARG, MAHIM MUMBAI - 400 016. PAN : ADGPM7771B V S . ITO 3(4) 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN WEST MAHARASHTRA ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11 .7 . 201 9 DATE OF PRONO UNCEMENT 22 . 7 . 201 9 O R D E R THIS IS AN APPEAL BY THE A SSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING RS. 6,41,094/ - DI SALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 27.4.2018 PERTAINING TO A SSESSMENT YEAR 2011 - 12. 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF DEALERSHIP IN SOLVENT AND CHEMICALS. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT AS SESSEE 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. 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANC E OF RS. 22,26,420/ - . UPON MR. SIDHARTHA MISHRA 2 ASSESSEE S APPEAL ID CIT - A SUSTAINED RS. 6,45,094/ - BEING PROFIT ELEMENT ACCORDING TO HIM. 4. AGAINST ABOVE ORDER ASSESSEE IS IN A PPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE . 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PUR CHASE. ADVERSE INFERENCE HA S 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 PURCH ASE 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 THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE T HAT 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. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDD ED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, 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 THERE OFF) ,THE ADDITION IN RESPECT OF BOGUS 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. 6. I RESPECTFULLY FOLLOWING THE AFORESAID JU DGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION MR. SIDHARTHA MISHRA 3 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 OPPORTUNITY OF BEING HEARD 7. IN THE RESULT ASSESS EE'S APPEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 22 . 7 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 22 / 7 / 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