SHRI MAGANLAL M. PATEL, MUMBAI V. THE ITO 22(1)(3), NAVI MUMBAI

ITA 5117/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3378 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Assessee Lawyers: RUCHI RATHOD
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 5117/MUM/2018 (ASSESSMENT YEAR: 2009-10) SHRI MAGANLAL M. PATEL 502, NEW VISHWAJYOTI APTT. BALAJI LANE, TILAK ROAD GHATKOPAR (E) MUMBAI 400077 VS. INCOME TAX OFFICER - 27(2)(5) ROOM NO. 421, 4TH FLOOR TOWER NO. 6, VASHI RLY. STN. NAVI MUMBAI 400703 PAN AABPP4490L APPELLANT RESPONDENT APPELLANT BY: MS. RUCHI RATHOD RESPONDENT BY: SHRI AKHTAR H. ANSARI DATE OF HEARING: 19.09.2019 DATE OF PRONOUNCEMENT: 03.12.2019 O R D E R PER SHAMIM YAHYA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-25, MUMBAI DATED 14.06.2018 AND IT RELATES T O A.Y. 2009-10. 2. THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT(A) H AS ERRED IN SUSTAINING 12.5% PERCENT DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 14.06.208. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN TH IS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN TIMBER. THE A SSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WE RE MADE THROUGH BANKING CHANNEL. HOWEVER, THE SUPPLIERS WERE NOT PR ODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUB TED. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% PERCENT ADDITIO N ON ACCOUNT OF ITA NO. 5117/MUM/2018 SHRI MAGANLAL M. PATEL 2 BOGUS PURCHASES RESULTING IN DISALLOWANCE OF ` 3,39,222/-. UPON ASSESSEES APPEAL THE LEARNED CIT(A) CONFIRMED THE SAME. AGAINST THIS ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4. UP ON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE H AS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODU CE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUB TED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DI SALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPO RTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF N IKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860, ORDER DATED 18.06.2014). IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD HUNDRED PERC ENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT D OUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENC Y. 5. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURC HASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOU NT OF NON- PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MA KING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE, WE FIND THAT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE T HAT IT WILL BE DOUBLE PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED, WHI CH IS 6.16%, IS NOT REDUCED FROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. 6. UPON CAREFUL CONSIDERATION WE FIND CONSIDERABLE COG ENCY IN THE ABOVE SUBMISSIONS. ACCORDINGLY WE DIRECT THAT DISAL LOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS RED UCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. LEARNED CO UNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE. ITA NO. 5117/MUM/2018 SHRI MAGANLAL M. PATEL 3 7. IN THE RESULT ASSESSEE'S APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DECEMBER, 2019. SD/ - SD/ - (MAHAVIR SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 3 RD DECEMBER, 2019 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) -25, MUMBAI 4. THE PR.CIT - 27, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.