MADAN SINGH H CHOUHAN, Mumbai V. ITO 19(2)(3), Mumbai

ITA 5004/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2792 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 31-07-2019
• 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. 5004/MUM/2019 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5005 /MUM/ 201 9 (ASSESSMENT YEAR 20 11 - 1 2 ) MADAN SINGH H. CHOUHAN 31 - 33, BHAGWANDAS BHAWAN, 2 ND CARPENTER STREET, C.P. TANK MUMBAI - 400 004. PAN : ADTPC6735A V S . ITO 19(2)(3) MATRU MANDIR BUILDING NANA CHOWK, BHATIA HOSPITAL LANE JAVJI DADAJI MARG GRANT ROAD WEST MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI BHARAT KUMAR DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 1 7 . 01 . 20 20 DATE OF PRONOUNCEMENT 03 .0 3 .2020 O R D E R TH E S E ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AG G RIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT O F BOGUS PURCHASES , FOR A.Y. 2010 - 1 1 & 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS MATERIAL. I NFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS THAT IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED . THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 13,91,472 FOR A.Y. 2010 - 11 & RS. 46,35,090/ - FOR A.Y. 2011 - 12 . 3. UPON ASSESSEES APPEAL ID . CIT - A CONFIRMED THE SAME . AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. M ADAN SINGH H. CHOUHAN 2 4. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCE HA S BEEN DRAWN 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 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 NTERP RISES (IN WRIT PETITION NO 2860 , ORDER DT . 18.6.2014). IN THIS CASE THE H ONOURABLE 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 GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS M ADE 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 IN MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE 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 PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE S TRANSACTION IS TO BE TAXED TH E 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. 5. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY I MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GR OSS PROFIT RATE @ 10.43% FOR A.Y. 2010 - 11 AND @ 10.09% FOR A.Y. 2011 - 12 ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. ID COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. M ADAN SINGH H. CHOUHAN 3 6. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS PARTL Y ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 03 .0 3 .2020. SD / - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 0 3 /0 3 /2020 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, MUMBAI