Appeal details
Counselvise Citation
[2021] 109 COUNSELVISE.COM (IT) 6317 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-02-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Assessment Year
2009-2010
Appeal Filed On
17-07-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, M UMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH , JM ITA NO. 4807/MUM/2019 (ASSESSMENT YEAR: 2009-10) SHRI NARPAT H. MEHTA GR. FLOOR, 48 NOOR MANGIL 54, 6 TH KUMBHARWADA T.P. STREET, MUMBAI-400 004 VS. ITO-19(2)(4) MUMBAI PAN/GIR NO. AAEPJ 3897 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI SANJAY J. SETHI DATE OF HEARING : 27.01.2021 DATE OF PRONOUNCEMENT : 01.02.2021 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSES SEE IS AGGRIEVED THAT THE LEARNED CIT-A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 29.05.2019 PERTAINING TO RESPECTIVE ASS ESSMENT YEAR 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON FERROUS METAL. THE AS SESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPA RTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES AMOUNTING TO RS.88,94,906/-. 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 THI S CASE WERE NOT DOUBTED. 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12. 5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS.11,11,863/ -. 2 ITA NO. 4807/MUM/2019 SHRI NARPAT H. MEHTA VS. ITO 4. UPON ASSESSEES APPEAL, THE LD. CIT(A) CONFIRMED THE SAME. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HA S PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES HAVE BEEN DRAW N DUE TO THE INABILITY OF THE ASSESSEE 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, HUNDRE D PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SAL ES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOU RABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (I N 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 N OT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. 7. IN THE PRESENT CASE, THE FACTS OF THE CASE INDI CATE 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 EM BEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, WE NOTE THAT THE LD. COUNSEL OF THE ASSESSEE IN A WRITTEN SUBMISSION HAS REFERRED TO TH E HONBLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPLE COMMISSI ONER OF INCOME TAX VERSUS M HAJI ADAM & CO (IN ITA NUMBER 1004 OF 2016 DATED 11/2/20 19 IN PARAGRAPH 8 THERE OFF), THAT THE ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RAT E AS OF OTHER GENUINE PURCHASES. 8. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMEN T OF THE HONBLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE BOGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHASES AT THE SAME RATE AS THAT OF THE OTHER GEN UINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 3 ITA NO. 4807/MUM/2019 SHRI NARPAT H. MEHTA VS. ITO 9. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD ON 01.02.20 21 SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 01.02.2021 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
