PRADEEP N. SHAH, MUMBAI V. INCOME TAX OFFICER WARD 19(2)(5), MUMBAI

ITA 4795/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1389 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 09-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: LALIT KUMAR CHHAJED
• Keywords: Bogus purchase
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM ITA NO S . 4795 & 4 7 9 6 /MUM/2018 (ASSESSMENT YEAR S : 2010 - 11 & 2011 - 12 ) PRADEEP N. SHAH ROOM NO. 216, 2 ND FLOOR, SETH VIRCHAND BLDG., 3 RD PANJARAPOLE LANE, MUMBAI - 400 004 VS. INCOME TAX OFFICER 19(2)(5) MUMBAI PAN/GIR NO. AWUPS 7526 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI LALIT KUMAR CHHAJED RESPONDENT BY : SHRI CHAITANYA ANJARIA DATE OF HEARING : 28.08.2019 DATE OF PRONOUNCEMENT : 11.09 .2019 O R D E R PER SHAMIM YAHYA, A. M.: TH ESE ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS A G GRIEVED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ( LD. CIT - A FOR SHORT) HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE BY COMMON ORDER DATED 13.06.2018 FOR THE ASSESSMENT YEARS ( A.Y. FOR SHORT) 2010 - 11 AND 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF META L TRADING. THE INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE IS MAKING BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. 3. THE ASSESSING OFFICER ( A.O. FOR SHORT) IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOG US PURCHASE AMOUNTING TO RS.11,68,038/ - FOR A.Y. 2010 - 11 AND RS.14,34,093/ - FOR A.Y. 2011 - 12. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE SAME. 2 ITA NOS.4795 & 4 7 9 6/MUM/2018 PRADEEP N. SHAH VS. ITO 4. AGAINST TH E ABOVE ORDER , THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSE L AND PERUSED THE RECORDS. 6. UPON 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 THI S CASE, THE SALES HAVE NOT BEEN DOUBTED. I T 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 FRO M HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP E NTERPRISES (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, IN THAT CASE ALL THE SUPPLIES WERE TO THE GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS OF THE CASE INDICATE THAT THE 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, THIS IT AT IN ASSESSEES OWN CAE FOR A.Y. 2009 - 10 VIDE ORDER DATED 08.02.2019 HAS DIRECTED THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO 4%. RESPECTFULLY FOLLOWING THE PRECEDENT IN ASSESSEES OWN CASE, WE DIRECT THAT THE DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE S HOULD BE RESTRICTED TO 4% . THE LD. COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE. 3 ITA NOS.4795 & 4 7 9 6/MUM/2018 PRADEEP N. SHAH VS. ITO 7. IN THE RESULT , THE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.09.2019 SD/ - SD/ - ( AMARJIT SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 11.09.2019 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