Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 0781 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 1 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-08-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Assessment Year
2010-2011
Appeal Filed On
16-07-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NOS.4501 & 4502/MUM/2018 ASSESSMENT YEARS: 2010-11 & 2011-12 ARIHANT METAL CORPORATION, 58, RANGAWALA BUILIDNG, ISLAMPURA STREET, MUMBAI 400 004. PAN AAFFA5502L VS. THE ITO WARD 19(1)(1 ) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MS DIPALI BAKLIWAL RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 0 3 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 23 .0 8 . 201 9 O R D E R THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF LEARNED CIT(A)-6, MUMBAI, BOTH DATED 04.05.2018, PE RTAINING TO ASSESSMENT YEARS 2010-11 AND 2011-12. SINCE THE ISSUE INVOLVED IS C OMMON, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO NSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THESE APPE ALS IS AGAINST THE SUSTENANCE OF 12.5% DISALLOWANCE ON ACCOUNT OF BOGU S PURCHASES BY THE LEARNED CIT(A) AMOUNTING TO ` 15,03,464/- FOR A.Y. 2010-11 AND ` 10,77,391/- FOR A.Y. 2011-12. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF METAL TRADING. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT A SSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUC HERS AND THE PAYMENTS WERE ITA NO.4501 & 4502/MUM/2018 ARIHANT METAL CORPORATION 2 MADE THROUGH BANKING CHANNEL. HOWEVER, THE SUPPLIER S WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. 4. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12. 5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF ` 15,03,464/- FOR A.Y. 2010-11 AND ` 10,77,391/- FOR A.Y. 2011-12. UPON ASSESSEES APPEA L LEARNED CIT A CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER. AGAINST A BOVE ORDERS 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 INFERENCES HAVE 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, HUN DRED 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. LIMITED (IN WRIT PETITION NO. 2860, ORDER DT 18.6.2014). IN THIS CASE THE HON BLE 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 WER E TO GOVERNMENT AGENCY 6. IN THE PRESENT CASE THE FACTS OF THE CASE INDICA TE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THR OUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF T AX 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 T HE ASSESSEE, WE FIND THAT AS HELD BY HONBLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGMENT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VERSUS M HAJI ADAM & CO (ITA NUMBER 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THEREOF) THE ADDITIO N IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROS S PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. ITA NO.4501 & 4502/MUM/2018 ARIHANT METAL CORPORATION 3 7. I, RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HONBLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER FOR BOTH THE ASSESSMENT YEARS WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGA RDS THE BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHA SES AT THE SAME RATE AS THAT OF THE OTHER GENUINE PURCHASES. NEEDLESS TO ADD THE AS SESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD 8. IN THE RESULT ASSESSEE'S APPEALS ARE PARTLY ALLO WED. 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
