MUKESH DOSHI, MUMBAI V. ITO 3(3), MUMBAI

ITA 4644/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0377 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase
• Section: 201; 2

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4644 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 4645/MUM/2018 (ASSESSMENT YEAR 2011 - 12) MR. MUKESH DOSHI 201, RAJ DARSHAN SARVODAYA NAGAR MULUND WEST MUMBAI - 400 080. PAN : AABPD8994P V S . ITO - 3(3) 2 ND FLOOR RANI MANSION MURBAD ROAD KALYAN WEST ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NIMESH CHOTHANI DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11 .7 . 201 9 DATE OF PRONOUNCEMENT 06.9 . 201 9 O R D E R THE S E ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AG G RIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 25% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES FOR A.Y. 2009 - 10 & 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE DEALER IN STEEL. I NFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS THAT IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE 25 % ADDITION ON ACCOUNT OF BOGUS PURCHASE A S UNDER : - A.Y. 2009 - 10 : RS. 1,01,93,916/ - A.Y. 2011 - 12 : RS. 3,51,643/ - 4. UP ON ASSESSEE S APPEAL S ID CIT - A CONFIRMED THE SAME . MR. MUKESH DOSHI 2 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH T HE COUNSEL AND PERUSED THE RECORDS. 6 . 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 T HIS 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 FR OM HONOURABLE JURISDICTIONAL HIGH COURT D ECISION 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 PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SAL ES 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 SAVING S 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 CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER IN THI S REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE B OGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 1 2.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 7 . UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY I MODIFY THE ORDER OF LEARNED CIT - 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. LD COUNSEL OF THE ASSESSEE FAIRLY ACC EPTED THIS PROPOSITION. MR. MUKESH DOSHI 3 8 . IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 9 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 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