M/S.M.P.BROTHERS, MUMBAI V. ACIT CIRCLE-17(2), MUMBAI

ITA 4761/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2383 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 06-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Accommodation entries
• Section: 143(1); 201; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO S . 4759, 4760 & 4761 /MUM/201 8 ( / ASSESSMENT YEAR S : 2010 - 11 , 2009 - 10 & 2011 - 12 ) M/S. M. P. BROTHERS 64, EBY CASTLE MOHAMED ALI ROAD, MUMBAI - 400003 . / VS. ACIT CIRCLE 17(2) MUMBAI. ./ ./ PAN/GIR NO. : AACCB6672L ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 04 / 0 9 / 201 9 /DATE OF PRONOUNCEMENT: 07 / 11 / 201 9 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED TH E ABOVE MENTIONED APPEAL S AGAINST THE ORDER DATED 10 . 0 5 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 7 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2009 - 10, 2010 - 11 & 20 1 1 - 1 2 . ITA. NO. 4760/MUM/2018 2 . THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 10.05.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 57 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y S . 2009 - 10. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ASSESSEE BY : SHRI MANDAR VAIDYA REVENUE BY : SHRI CHAITANYA ANJARIA (DR) ITA NO. 4760, 4759 & 4761 / M/201 8 A.Y. 2009 - 10, 20 10 - 11 & 2011 - 12 2 1. THE LEARNED ASSESSING OFFICER RELYING ON LIST RECEIVED IN THE OFFICE OF DGIT (INV.), MUMBAI ERRED IN CONSIDERING PURCHASE OF RS.52,047/ - MADE FROM ANKIT ENTERPRISES AND DARSHANA CORPORATION OF RS.10,795/ - AND RS.41,252/ - RESPECTIVELY AS NON - GENUINE PURCHASES AND ACCORDINGLY ADDED RS.52,047/ - AS 'SUPPRESSION OF PROFIT'. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT AND IN LAW, THE APPELLANT SUBMITS THAT THE PURCHASES MADE BY THE APPELLANT FROM THE ABOVE REFERRED PARTIES ARE GENUINE AS IT BACKED BY INV OICES, ACCOUNT PAYEE CHEQUES AND ALSO BACKED BY THE RESPECTIVE TOTAL SALES OF RS.59,637/ - AND ACCORDINGLY THE APPELLANT HAS SHOWN PROFIT OF RS.6,204/ - ON SALE OF RS.59,637/ - IN THEIR PROFIT & LOSS ACCOUNT. THE LEARNED ASSESSING OFFICER HAS FAILED TO CONSID ER THESE FACTS. YOUR APPELLANT SUBMITS THAT BOTH THE PURCHASES AS WELL AS SALES ARE GENUINE. THE LEARNED ASSESSING OFFICER BE DIRECTED TO DELETE THE SAID ADDITION OF RS.52,047/ - . 2) WITHOUT PREJUDICE TO THE ABOVE, YOUR APPELLANT FURTHER SUBMITS THAT IF A S UM OF RS.52,047/ - RELATING TO NON - GENUINE PURCHASES ARE TO BE DISALLOWED/ADDED, THEN THE CORRESPONDING SALES OF RS.59,637/ - SHOWN IN PROFIT & LOSS ACCOUNT SHOULD ALSO BE REDUCED. ACCORDINGLY, THE LEARNED ASSESSING OFFICER BE DIRECTED TO REDUCE THE SAID SAL E AMOUNT OF RS.59,637/ - FROM THE INCOME. 3) YOUR APPELLANT RESERVES THE RIGHTS TO ADD, AMEND OR ALTER THE AFORESAID GROUNDS OF APPEAL AS THEY MAY THINK FIT BY THEMSELVES OR BY THEIR REPRESENTATIVES. 4 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED HIS RETURN OF INCOME ON 29 . 09 .20 0 9 DECLARING TO TAL INCOME TO THE TUNE OF RS .30,86,876 / - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I. T. ACT, 1961. THE CASE WAS SELECTED FOR ASSESSMENT US/ 147 OF THE ACT. NOTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF DEALING IN BALL BE ARING AND ALLIED MATERIALS ETC. AND DE RIVES INCOME FROM BUSINESS & PRO FESSION . THE CASE OF THE ASSESSEE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT( INV.), MUMBAI IN WHICH IT WAS CONVEYED THAT THE ASSESSEE HAS TAKEN THE ACCOMMODATION ENTRIES OF BOGUS PURCHASE IN SUM OF RS. 52,047 / - FROM THE FOLLOWING TWO PARTIES. ITA NO. 4760, 4759 & 4761 / M/201 8 A.Y. 2009 - 10, 20 10 - 11 & 2011 - 12 3 NAME OF THE PARTY AMOUNT ANKIT ENTERPRISES 10,795 DARSHANA CORPORATION 41,252 5 . AFTER THE REPLY OF THE ASSESSEE , THE AO RESTRICTED THE ADDITION TO THE EXTENT OF 100 % OF THE BOGUS PURCHASE IN SUM OF RS. 52,047/ - . THE TOTAL INCOME OF THE ASSESSEE WAS ASSE SSED TO THE TUNE OF RS.31,38,920/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% BUT THE ASSESSEE WAS NOT SATISFIED , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . ITA. NOS. 1 TO 3 6 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PART IES AND PERUSED THE RECORD. ALL THE ISSUES ARE IN CONNECTION WITH THE ADDITION RESTRICTED TO THE EXTENT OF 12.5% BY THE CIT(A). U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSE SSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED THEN HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. NO SALE I S P OSSIBLE WITHOUT ACTUAL PURCHASE . THIS PROPOSITION IS SUPPORTED FROM THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014 . IN THE PRESENT CASE THE FACTS OF THE CASE I NDICATE 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 WE ARE OF THE CONSIDERED OPINIO N ON THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE ITA NO. 4760, 4759 & 4761 / M/201 8 A.Y. 2009 - 10, 20 10 - 11 & 2011 - 12 4 PROFITS EARNED BY THE ASSESSEE ON THESE BOGU S 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% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 7 . UP ON CAREFUL CONSIDERATION, WE FIND CONSIDE RABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE TO BE RESTRICTED TO 12.5% OF TH E BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. THE ASSESSEE IN THE PRESENT CASE HAS A LREADY DECLARED THE G.P. @ 13.75 % WHICH IS MORE THAN THE 12.5%, THEREFORE, THERE IS NO NEED TO RAISE THE DIS ALLOWANCE. ACCORDINGLY, WE DELETE THE ADDITION AND ALLOWED THE APPEAL OF THE ASSESSEE. ITA. NOS. 4759 & 4761/M/2018 8 . THE FACTS OF THE PRESENT CASE ARE QUITE IDENTICAL TO THE FACTS OF THE CASE NARRATED ABOVE, HOWEVER, THE FIGURE IS DIFFERENT, THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. IN THESE CASES ALSO THE BOGUS PURCHASE HAS BEEN RESTRICTED TO THE EXTENT OF 12.5%. THE FINDING GIVEN ABOVE IS QUITE APPLICABLE TO THESE CASES ALSO AS MUTATIS MUTANDIS. T HE GROSS PROFIT HAS BEEN SHOWN @ 13.45% FOR THE A. Y.2010 - 11 AND GROSS PROFIT HAS ALSO BEEN SHOWN @ 12.70% FOR THE A.Y. 2011 - 12 . ACCORDINGLY, NO DEMAND COULD BE RAISED IF GROSS PROFIT BE REDUCED FROM THE ADDITION I.E. 12.5% OF THE BOGUS PURCHASE. ACCORDINGLY, WE DELETE THE ADDITION AND ALLOWED THESE APPEA LS. ITA NO. 4760, 4759 & 4761 / M/201 8 A.Y. 2009 - 10, 20 10 - 11 & 2011 - 12 5 9 . IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE ARE HEREBY ORDERED TO BE ALLOWED ACCORDINGLY . ORDER PRONOUNCED IN THE OPEN COURT ON 07 / 11 /2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 07 /11 /2019 V IJAY SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDEN T. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) , / ITAT, MUMBAI