LAXI STEEL (INDIA), MUMBAI V. ITO 19(2)(1), MUMBAI

ITA 5349/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7428 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HANSARI
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 5349/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5348 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) LAXMI STEEL (INDIA) SHOP NO. 1, SH REEPATI CASTLE ANNEX NO. 2, 10 TH KHETWADI LANE, GIRGAON MUMBAI - 400 004. PAN : AAAFL0753H V S . ITO - 19(2)(1) MATRU MANDIR TARDEO ROAD MUMBA - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI AKHTAR H. ANSARI DATE OF HEARING 09.10 . 201 9 DATE OF PRONOUNCEMENT 06.01.2020 O R D E R TH E S E ARE A PPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES PERTAINING TO ASSESSMENT Y EAR S 2010 - 11 & 2011 - 12 . 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN BUSINESS OF TRADING OF FERROUS AND NON - FERROUS METALS . I NFORMATION WAS RECEIVED FROM T HE SALES TAX DEPARTMENT THAT ASSE SSEE HAS MADE BOGUS PURCHASES. T HE ASSES S MENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS. 16,84,687/ - FOR A.Y. 2010 - 11 & RS. 8,78,092/ - FOR A.Y. 2011 - 12. 3. UPON ASSESSEE S APPEAL ID CIT ( A ) CONFIRMED THE SAME. 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED THE RECORDS. LAXMI STEEL (INDIA) 2 5. U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS 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 DOU BTED, 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 ENTERPRISE S (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 BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. I N 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 ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUC H SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD IT IS NOTED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PU RCHASES TRANSACTION IS TO BE TAXED THE 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 PURCHASES. 6. ACCORDINGLY, WE MODIFY THE ORDER OF LEARNE D CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. LEARNED COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 7. IN THE RESULT , THESE ASSESSEE'S APPEAL S STAND PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 06.01.2020 . SD/ - SD/ - (PAWAN SINGH) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER LAXMI STEEL (INDIA) 3 MUMBA I ; DATED : 06 / 1 / 20 20 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