RAJESH B. JAIN, MUMBAI V. INCOME TAX OFFICER-19(3)1), MUMBAI

ITA 4753/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3363 (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: 2009-2010
• Appeal Filed On: 06-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• 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. 4753 /MUM/ 2018 (ASSESSMENT YEAR: 2009 - 10 ) SHRI RAJESH B. JAIN 104, 1 ST FLOOR, ASTRAL MANSION, OPP. GODREJ, K. K. MARG, 7 TH RASTA JACOB CIRCLE BYCULLA, MUMBAI - 400 011 VS. INCOME TAX OFFICER - 19(3)(1), MUMBAI PAN/GIR NO. AAEPJ 8093 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI SASHI TULSIYAN 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 21.05.2018 PERTAINING TO ASSESSMENT YEAR 2009 - 10.. 2. B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS. 3. THE ASSESSMENT IN THIS CASE WAS REOPENED U PON RECEIPT OF INFORMA TION 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. 2 ITA NO. 4753/MUM/2018 SHRI RAJESH B. JAIN 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. 13,34,808/ - . 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 OR OTHER WORKINGS HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONA LE 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 NTERPR ISES (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 FR OM 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 SUCH BOGUS/UNSUB STANTIATED PURCHASES BY THE ASSESSEE, THE LD. COUNSEL CONTENDS THAT THE ASSESSEE HAS ALREADY DISCLOSED SUFFICIENT GROSS PROFIT. THE LD. COUNSEL OF THE 3 ITA NO. 4753/MUM/2018 SHRI RAJESH B. JAIN VS. ITO ASSESSEE CONTENDS THAT THIS ITAT IN IDENTICAL CASE OF ASHOK INDUSTRIES CORPORATION IN ITA NO. 647/MUM/201 7 HAS RESTRICTED THE DISALLOWANCE TO 2% OF SUCH SPECULATION. 9. UPON CAREFUL CONSIDERATION, FOLLOWING THE PRECEDENCE AS ABOVE, WE DIRECT THAT DISALLOWANCE BE RESTRICTED TO THE SAME PERCENTAGE. 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