ASHWIN CHIMANLAL DOMADIA, Mumbai V. ITO 32(1)(2), Mumbai

ITA 4692/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5621 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 11-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4692 /MUM/ 201 9 (ASSESSMENT YEAR 2010 - 11 ) ASHWIN CHIMANLAL DOMADIA F.NO. 102, SANKET CHS LTD. DAHANUKAR WADI, KANDIVALI WEST, MUMBAI - 400 067. PAN : AAZPD9085H V S . ITO - 32(1)(2) KAUTILAYA BHAVAN BANDRA KURLS COMPLEX, BANDRA EAST, MUMBAI 400 0051. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI RAM TIWARI DATE OF HEARING 28 .09 . 20 20 DATE OF PRONOUNCEMENT 28 .09 . 20 20 O R D E R T HIS IS AN APPEAL BY 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 24.1.2019 PERTAINING TO ASSESSMENT YEAR 2010 - 11. 2. B RIEF FACTS OF THE CA SE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING OF GOODS. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT 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. THE ASSESSING OFFICER DID NOT EVEN ISSUE ANY NOTICE TO THE ALLEGED BOGUS SUPPLIERS. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 6,13,451/ - . ASHWIN CHIMANLAL DOMADIA 2 3. UPON ASSESSEE S APPEAL LEARNED CIT(A) CONFIRMED THE SAME . HE DID NOT ACCEPT THE ASSESSEES PLEA THAT THE ASSESSEE HAS ALR EADY SHOWN SUFFICIENT GROSS PROFIT AND HENCE THE DISALLOWANCE SHOULD BE RESTRICTED TO 5%. 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE S 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, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURC HASES. THIS PROPOSITION 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 T HE 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 TH AT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE BEFORE LEARNED CIT(A) THA T IT WILL BE DOUBLED PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED FROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. 6. UPON CARE FUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSIONS. ACCORDINGLY I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 5% OF THE BOGUS PURCHASES. ASHWIN CHIMANLAL DOMADIA 3 7. I N THE RESULT THE APPEAL STANDS PARTLY ALLOWED . ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULES ON 28.9.2020. SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 28 / 0 9 / 20 20 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