DILIP METAL SYNDICATE, MUMBAI V. INCOME TAX OFFICER WARD 19(1)(4), MUMBAI

ITA 4496/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1479 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 16-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: RAJESH CHAMARIA
• Keywords: Bogus purchase; Set aside
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.4496/MUM/2018 ASSESSMENT YEAR: 2011-12 DILIP METAL SYNDICATE, 175 KIKA STREET, GULALWADI, MUMBAI- 400 004. PAN AAAFD0953H VS. THE ITO WARD 19(1)(4) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH CHAMARIA RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 0 3 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 23.08 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST ORDER OF LEARNED CIT(A)- 29, MUMBAI, DATED 18.04.2018, PERTAINING TO ASSESSM ENT YEAR 2011-12. 2. THE GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNE D CIT-A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS P URCHASES, VIDE ORDER DATED 18.04.2018 FOR A.Y. 2011-12. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN METAL. THE ASSESSMENT IN TH IS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMEN T THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHAS E VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER, THE SUP PLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WE RE NOT DOUBTED. 4. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5 % ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS 8,60 ,594/-. UPON ASSESSEES APPEAL ITA NO.4496/MUM/2018 DILIP METAL SYNDICATE 2 LD CIT(A) CONFIRMED THE SAME. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RE CORDS. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO T HE 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, HUNDRE D PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FRO M HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRI SES PVT. LTD. (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGU S WHEN SALES ARE NOT DOUBTED. HOWEVER, IN THAT CASE ALL THE SUPPLIES WERE TO GOVE RNMENT AGENCY 6. IN THE PRESENT CASE, THE FACTS INDICATE THAT ASS ESSEE 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 PRO FIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSE SSEE, WE FIND THAT AS HELD BY HONBLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGMENT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. M HAJI ADAM & CO (IT A NUMBER 1004 OF 2016 DATED 11/2/2019, IN PARAGRAPH 8 THEREOF) THE ADDITI ON IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGIN G THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURC HASES. 7. I RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER 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 OTH ER GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPO RTUNITY OF BEING HEARD. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO TH IS PROPOSITION. ITA NO.4496/MUM/2018 DILIP METAL SYNDICATE 3 8. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 23 RD AUGUST, 2019. SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATED : 23 RD AUGUST, 2019. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), 4. THE C I T 5. THE DR, SMC BENCH BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI