NASSER HASSAN KAZEROUNI, MUMBAI V. ACIT CIRCLE 19(2), MUMBAI

ITA 4555/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5932 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 20-07-2018
• 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. 4555 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) NASSER HASSAN KAZEROUNI 101/102, A - WING, 1 ST FLOOR A.H. POTIA APARTMENTS 292, BELASIS ROA D MUMBAI - 400 008. PAN : AAEPK43 97C V S . ACIT CIRCLE - 19(2) MATRU MANDIR TARDEO ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 8 .7 . 201 9 DATE OF PRONOUNCEMENT 29 . 7 . 201 9 O R D E R THIS I S AN APPEAL B Y THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 11.5.2018 PERTAINING TO ASSESSMENT YEAR 2009 - 10. 2. BRIE F FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF SUPPLIER OF PRINTED PACKING MATERIAL. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCH ASES. 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 MA DE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASES RESULTING IN DISALLOWANCE OF RS. 20,39,419/ - . UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE SAME . NASSER HASSAN KAZEROUNI 2 4. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED 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 PURCHASE. 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 W ITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP E NTERP RISES (IN WRIT PETITION NO 2860 , ORDER DT . 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED P ERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY . 6. 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. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED 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. 7. I RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT OF THE HONOURABLE HIGH COURT SET ASIDE THE MA TTER TO THE FILE OF THE ASSESSING OFFICER 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 OTHER NASSER HASSAN KAZEROUNI 3 GENUINE PURCHASES. NEEDLESS TO ADD THE ASSE SSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD 8. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 29 . 7 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 29 / 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// ( ASS ISTANT REGISTRAR ) PS ITAT, MUMBAI