INCOME TAX OFFICER WARD 3(4), MUMBAI V. SHRI HITESH RAMESHCHANDRA THAKKAR, MUMBAI

ITA 5313/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0921 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 14-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NOS. 5313 & 5314/MUM/2018 (ASSESSMENT YEARS: 2009-10 & 2011-12) INCOME TAX OFFICER - 3(4) 2ND FLOOR, RANI MANSION MURBAD ROAD KALYAN (W) - 421301 VS. SHRI HITESH RAMESHCHANDRA THAKKAR SAI KUNJ, SAI PARK, SHIVAJI PATH KALYAN (W) - 421301 PAN AAIPT0778J APPELLANT RESPONDENT APPELLANT BY: SHRI AKHTAR H. ANSARI RESPONDENT BY: NONE DATE OF HEARING: 03.10.2019 DATE OF PRONOUNCEMENT: 20.12.2019 O R D E R PER SHAMIM YAHYA, AM THESE ARE APPEALS BY THE REVENUE WHEREIN THE REVEN UE IS AGGRIEVED THAT THE LEARNED CIT(A) HAS DELETED PART OF THE 100 % ADDITION BY SUSTAINING ONLY 12.5 % DISALLOWANCE ON ACCOUNT O F BOGUS PURCHASES, VIDE COMMON ORDER DATED 08.06.2018 PERTAINING TO AS SESSMENT YEARS 2009-10 & 2011-12. 2. THE ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSI NESS OF MANUFACTURING OF PHARMACEUTICAL CHEMICALS. THE ASSE SSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT THE ASSESSEE HAS MADE PURCHASE FROM BOGUS DEALERS. THE AO IN THI S CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTIN G TO ` 44,554 FOR A.Y. 2009-10 AND ` 2,70,907/- FOR A.Y. 2011-12. 3. UP ON ASSESSEE'S APPEAL LEARNED CIT(A) HAS NOTED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY, PLACING RELIANCE UPO N SEVERAL CASE LAWS AND UP ON THE FACTS OF THE CASE HE SUSTAINED 12.5% DISALLOWANCE OUT OF THE ITA NOS. 5313 & 5314/MUM/2018 SHRI HITESH RAMESHCHANDRA THAKKAR 2 BOGUS PURCHASES. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. 4. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLO WANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SAL ES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NI KUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DATED 18.06.2014). IN THIS CASE THE HONBLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT CASE INDICATE 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 EXP ENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN OUR CONSIDERED OPINION, ON TH E FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT(A) MEETS THE END OF JUSTICE. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(A). 5. THE DECISION IN THE CASE OF N.K. PROTEINS LTD, T AX APPEAL NO. 242 OF 2003 DATED 20.06.2016 REFERRED BY REVENUE IN GROUND S OF APPEAL HAS ALREADY BEEN DISTINGUISHED BY HONBLE BOMBAY HIGH C OURT IN THE CASE OF M. HAJI ADAM & CO. IN ITA NO. 1004 OF 20016 DATED 1 1.02.2019. 6. IN THE RESULT THESE APPEALS FILED BY THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2019. SD/ - SD/ - (PAWAN SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH DECEMBER, 2019 ITA NOS. 5313 & 5314/MUM/2018 SHRI HITESH RAMESHCHANDRA THAKKAR 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -3, NASIK 4. THE PR.CIT - 1 THANE 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.