SHRI SOHIL P.SHAH, MUMBAI V. ITO WD 19(3)(4), MUMBAI

ITA 4748/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2980 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: M K PATEL
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 4748 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 4749/MUM/2018 (ASSESSMENT YEAR 2010 - 11) MR. SOHIL P. SHAH B - 19/20 COMMERCE CE NTRE 78, TARDEO ROAD, SATIVALI MUMBAI - 400 034. PAN : AADPS8113M V S . ITO 19(3)(4) 1 ST FLOOR MATRU MANDIR TARDEO ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI M.K. PATEL DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 3 1 . 7 . 201 9 DATE OF PRONOUNCEMENT 19 . 8 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AG G RIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES FOR A .Y. 20091 - 10 & 2010 - 11. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF STAINLESS STEEL HARDWARE. 3. I NFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS INDUL GED IN BOGUS PURCHASES . THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 5 , 67 , 341 / - FOR A.Y. 2009 - 10 AND RS. 11,67,074/ - FOR A.Y. 2010 - 11 . 4. U PON ASSESSEE S APPEAL ID CIT A CONFIRMED THE S AME . 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE H AVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. MR. SOHIL P. SHAH 2 6. U PON CAREFUL C ONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE S . ADVERSE INFERENCE HA S B EEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE, PRODUCTION OR 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 FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP ENTERP 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 SALES ARE NOT DOUBTED. HOWEVER THIS WAS A CASE OF TRADER AND IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF TH E 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 EX CHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINI ON ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. ACCORDINGLY WE M ODIFY THE OR DER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS P URCHASES. LEARNED COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 7. IN THE RESULT, THESE APPEALS FILED BY THE ASSESSEE STAND PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 1 9 . 8 . 201 9 . SD/ - SD/ - (PAWAN SINGH) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 19 / 8 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT MR. SOHIL P. SHAH 3 5. DR, ITAT, MUMBAI 6. GUAR D FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI