WESTERN INDIA MARINE MILLS & ENGINEERS, MUMBAI V. INCOME TAX OFFICER, WARD 17(3)(5), MUMBAI

ITA 4844/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3395 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANAY ANJARIA
• Assessee Lawyers: IDRIS KARCHIWALA
• 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. 4844 /MUM/ 201 8 (ASSESSMENT YEAR 20 1 0 - 1 1 ) WESTERN INDIA MARINE MILLS & ENGINEERS 185, JANJIKAR STREET MUMBAI - 400 003. PAN : AAAFW0103E V S . ITO WARD 17 (3)(5) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI IDRIS KARCHIWALA DEPARTMENT BY SHRI CHAITANAY ANJARIA DATE OF HEARING 22.08 . 201 9 DATE OF PRONOUNCEMENT 18 . 1 1 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT - A DATED 19.6.2018 AND PERTAINS TO A.Y. 2010 - 11. 2. THE ISSUE RAISED IS THAT LEARNED CIT(A) ERRED IN SUSTAINING DISALLOWANCE OF RS. 6,25,985/ - BEING 14.97% OF NON GENUINE PURCHASES. 3. B RIE F FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF DEALING IN WIRE ROPES, CHAINS, PULLEY BLOCK AND OTHER MATERIAL HAND L ING EQUIPMENT. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEP ARTMENT 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. 4. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 14.97% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISAL LOWANCE OF RS. 6,25,985 . UPON ASSESSEE S APPEAL ID CIT - A CONFIRMED THE SAME . WESTERN INDIA MARINE MILLS & ENGINEERS 2 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 6. UP ON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HA S BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I F IND 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 BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP 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 B OGUS 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 A SSESSEE 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/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, I FIND THAT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT IT WILL BE DOUBLED PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED FROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. 7. UPON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSIONS. ACCORDINGLY I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. SINCE THE ASSESSEE HAS ALREADY D ECLARED 14.97% GROSS PROFIT NO DISALLO WANCE IS CALLED FOR. WESTERN INDIA MARINE MILLS & ENGINEERS 3 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 18 . 1 1 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 18 / 1 1 / 2 0 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUM BAI