MR.RAJNIKANT V. DOSHI, MUMBAI V. ITO WARD 17(3)(1), MUMBAI

ITA 4747/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3362 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: AMIT JHAVERI
• Keywords: Bogus purchase
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM ITA NO. 4747/ MUM/ 2018 (ASSESSMENT YEAR: 2010 - 11 ) SHRI RAJNIKANT V. DOSHI A - 103, RAJ CRESENT BUILDING, ROYAL COMPLEX, EKSAR ROAD, BORIVALI (W), MUMBAI - 400 092 VS. ITO WARD 17(3)(1), 1 ST FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI - 400 020 PAN/GIR NO. AAEPD 1214 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI AMIT JHAVERI RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 03.09.2019 DATE OF PRONOUNCEMENT : 02.12. 2019 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED C1T - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 22.06.2018 PERTAINING TO ASSESSMENT YEAR 2010 - 11. 2. B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF IRON AND STEEL TRADING. 3. THE ASSESSMENT IN THIS C ASE WAS REOPENED U PON 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 BEFO RE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. 2 ITA NO. 4747/MUM/2018 SHRI RAJNIKANT V. DOSHI VS. ITO 4. THE I NCOME T AX O FFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS.8 , 75 , 741/ - . 5. UPON THE ASSESSEE S APPEAL, THE LD. CIT (A) CONFIRMED THE SAME . 6. AGAINST THE ABOVE ORDE R, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. WE HA VE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. UP ON CAREFUL CONSIDERATION WE FIND THAT THE ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES AR E 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 FROM HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP E NTE RPRISES (IN WRIT PETITION NO 2860 .ORDER DT 18.6.2014). IN THIS CASE THE HONBLE 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 . 8. 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 3 ITA NO. 4747/MUM/2018 SHRI RAJNIKANT V. DOSHI VS. ITO SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE , WE F IND THAT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT 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. 9. UPON CAREFUL CONSIDERATION , WE FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSIONS. ACCORDINGLY WE DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTE D TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE . 10. I N THE RESULT , THE APPEAL STANDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 0 2 . 1 2 . 2 0 1 9 S D / - ` S D / - ( AMARJIT SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 2 . 1 2 . 2 0 1 9 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI