STYROPLAST TRADING PRIVATE LIMITED, MUMBAI V. ITO 11(2)(3), MUMBAI

ITA 4445/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5906 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2018
• Court: TRIBUNAL

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4445 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 4447/MUM/2018 (ASSESSMENT YEAR 2011 - 12) M/S. STYROPLAST TRADING PVT. LTD. E - 402, REMIBIZ COURT SHAH IND USTRIAL ESTATE VEERA DESAI ROAD ANDHERI (WEST) MUMBAI - 400 053. PAN : AAJCS1634C V S . ITO - 11(2)(3) ROOM NO. 425 AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI MANI JAIN DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11 .7 . 201 9 DATE OF PRONOUNCEMENT 22 . 7 . 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 1 2 . 5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES FOR A.Y. 20 09 - 10 & 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALER IN CHEMICAL, SOLVENT STEEL, STEEL , FURNITURE ETC . INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS THAT IN BOGUS PURCHASES. THE ASSE SSMENT WAS ACCORDINGLY REOPENED. 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE 1 2 . 5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTANTLY IN FOLLOWING DISALLOWANCES : - A.Y. 2009 - 10 : RS. 9,38,028 / - A.Y. 2011 - 12 : RS. 13,87,509 / - 4. UPON ASSESSEES APP EALS ID CIT - A CONFIRMED THE SAME. M/S. STYROPLAST TRADING PVT. LTD. 2 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 6. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHA SE. 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 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 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 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 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 C IRCUMSTANCES 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 DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 7. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMIS SION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY I MODIFY THE ORDER OF LEARNED C1T - 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. NEEDLESS TO ADD IF THE GROSS PROFIT ALREADY M/S. STYROPLAST TRADING PVT. LTD. 3 DECLARED IS MORE THAN 12.5% NO DISALLOWANCE WILL BE WARRANTED ID COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 8. IN THE RESULT BOTH TH E APPEAL S FILED BY THE ASSESSEE STANDS 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