SMT. PRITI JAYESH GANDHI, MUMBAI V. INCOME TAX OFFICER-27(2)(5), MUMBAI

ITA 5119/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3377 (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: 2010-2011
• 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; Opportunity of being heard; Set aside

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. 5119/MUM/2018 (ASSESSMENT YEAR: 2010-11) SMT. PRITI JAYESH GANDHI 10, PARAS DARSHAN 5TH FLOOR, M.G. 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 ACGPG0790B 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 REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-25, MUMBAI DATED 15.06.2018 AND IT RELATES T O A.Y. 2010-11. 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 15.06.208. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN TH IS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN CHEMICALS AND SOLVENTS. THE ASSESSMENT 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 PRO DUCED 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 BOGUS PURCHASES RESULTING IN DISALLOWANCE OF ` 5,46,716/-. UPON ASSESSEES ITA NO. 5119/MUM/2018 SMT. PRITI JAYESH GANDHI 2 APPEAL THE LEARNED CIT(A) CONFIRMED THE SAME. AGAIN ST THIS ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECO RDS. UP ON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PRO VIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BE EN DRAWN 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, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PUR CHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITH OUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDIC TIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (I N WRIT PETITION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONBLE HI GH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, IN THAT CASE ALL THE SUPP LIES WERE TO GOVERNMENT AGENCY. 5. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S 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 EMBEDDED IN MAKING OF SUCH BOGUS/UNS UBSTANTIATED PURCHASES BY THE ASSESSEE, THE LEARNED COUNSEL OF T HE ASSESSEE SUBMITTED THAT AS HELD BY HONBLE HIGH COURT OF BOMBAY IN ITS RECENT JUDGEMENT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VS . M HAJI ADAM & CO. (ITA NO. 1004 OF 2016 DATED 11.02.2019 IN PARAGRAPH 8 THERE OFF) THE ADDITION IN RESPECT OF BOGUS PURCHASES IS TO BE LIM ITED TO THE EXTENT OF BRINGING THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURCHASES. 6. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENT O F THE HONBLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE B OGUS PURCHASES BY BRINGING THE GROSS PROFIT RATE ON SUCH BOGUS PURCHA SES AT THE SAME RATE AS ITA NO. 5119/MUM/2018 SMT. PRITI JAYESH GANDHI 3 THAT OF THE OTHER GENUINE PURCHASES. NEEDLESS TO AD D, THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 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 RESPONDENT0 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.