KETAN PRATAP CHANDAN HUF, MUMBAI V. ITO 28(2)(1), MUMBAI

ITA 4770/MUM/2018

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 2173 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4770 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) KETAN PRATAP CHANDAN HUF 901, ANANTA APARTMENT PLOT NO. 1, SECTOR - 36 OPP. PODAR INTERNATIONAL SCHOOL GATE NO. 3 SEAWOODS, NAVI MUMBAI 400 706. PAN : AAIHK8368M V S . ITO - 28(2)(1) ROOM NO. 326 3 RD FLOOR TOWER NO. 6 VASHI RAILWAY STATION VASHI, NAVI MUMBAI 400 703. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI KIRIT SANGHAVI DEPARTMENT BY SHRI CHAITANYA ANJARI A DATE OF HEARING 22.08 . 201 9 DATE OF PRONOUNCEMENT 14 . 1 1 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 25 % DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE O RDER DATED 10.5 .2018 PERTAINING TO ASSESSMENT YEAR 201 1 - 1 2 . 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF GENERAL TRADERS AND SUPPLIERS . THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM TH E 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 NO T DOUBTED. 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 25% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 1 0 , 30,023 / - . UPON ASSESSEES APPEAL ID CIT(A) CONFIRMED THE SAME. KETAN PRATAP CHANDAN HUF 2 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. UPON CAREFUL CONSIDERATION , I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DR AWN 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 BE ING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COU RT 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 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/UNSUBST ANTIATED PURCHASES BY THE ASSESSEE , I FIND THAT DISALLOWANCE OF 12.5% WOULD MEET THE ENDS OF JUSTICE. HENCE I DIRECT THAT DISALLOWANCE BE RESTRICTED TO 12.5% OF BOGUS PURCHASES. LEARNED COUNSEL OF THE ASSESSEE AGREED TO THE ABOVE. 6 . IN THE RESULT, THE AP PEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 14 . 1 1 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 14 / 1 1 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT KETAN PRATAP CHANDAN HUF 3 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI