M/S.VIDHI POLYPLAST, MUMBAI V. ITO19(3)(5), MUMBAI

ITA 4646/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0375 (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: 2011-2012
• Appeal Filed On: 30-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4646 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) M/S. VIDHI POLYPLAST FLAT NO. 8, 4 TH FLOOR 28, MAHIMWALA BUILDING 12 TH KHETWADI LANE KHETWADI, MUMBAI - 400004. PA N : AABFV4214E V S . ITO - 19(3)(5) MATRU MANDIR TARDEO ROAD GRANT ROAD MUMBAI - 400007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 11 .7 . 201 9 DATE OF PRONOUNCEMENT 06.9 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS A G GRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES VIDE ORDER DATED 15.3.2018 FOR A.Y. 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSES SEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF HDPE/PP WOVEN BAG. I NFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSES SEE HAS MADE BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12 .5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 7,56,055/ - . U PON ASSESSEE S APPEAL ID CIT A CONFIRMED THE SAME . 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECOR DS . NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. M/S. VIDHI POLYPLAST 2 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 SU PPLIERS. 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. THIS PR OPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP E NTERPRISES (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 SALES 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 SAVINGS 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 THIS REGARD IT IS NOTED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BE ING DIRECTED TO BE DISALLOWED ON ACCOUNT OF B OGUS PURCHASES. 6. UPON CAREFUL CONSIDERATION I FIND 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 RES TRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. M/S. VIDHI POLYPLAST 3 7. IN THE RESULT, THIS APPEAL 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. TH E CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI