M/S.SAB CREATIONS PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 3(2), THANE

ITA 4617/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8710 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 26-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: JAYESH VANJARA
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4617 /MUM/ 201 8 (ASSESSMENT YEAR 20 13 - 1 4 ) M/S. SAB CREATIONS PVT. LTD. 8A, EDEN WOODS, CEDAR CHS GLADYS ALWARIES MARG POKHARAN ROAD NO. 2 THANE - 400 601. PAN : AAKCS9899Q V S . ITO WARD 3(3) AASHAR IT PARK WAGHALE ESTATE THANE WEST THANE - 400 604. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI JAYESH VANJARA DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 10 .7 . 201 9 DATE OF PRONOUNCEMENT 11.9 . 201 9 O R D E R TH IS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES VIDE ORDER DATED 28.2.2018 PERTAINING TO A.Y. 20 09 - 1 0 . 2. BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE I N THIS CASE IS AN INDIVIDUAL. THE AUTHORITIES BELOW HAVE NOT BEEN BOTHERED TO MENTION AS TO WHAT IS THE BUSINESS OF THE ASSESSEE. THE ASSESSMENT WAS ACCORDINGLY REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX D EPARTMENT THAT THE ASSESSEE 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 PURCHASES RESULTING IN DISALLOWANCE OF RS. 1 0 , 72 , 673 / - . UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE SAME. M/S. SAB CREATIONS PVT. LTD. 2 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE T HE 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. TH IS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT. 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURC HASES 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 G REY 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 MATTER TO THE FILE OF THE ASSES SING 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 M/S. SAB CREATIONS PVT. LTD. 3 GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUA TE OPPORTUNITY OF BEING HEARD . 8. IN THE RESULT , ASSESSEE S APPEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 11.9 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 11 / 9 / 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