RAJENDRA NARSINGHMAL SANGHVI, MUMBAI V. ITO 19 (3)(1), MUMBAI

ITA 5379/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7431 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 18 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: 18-09-2018
• 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. 5378/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5379/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5380/MUM/2018 (ASSESSM ENT YEAR 2011 - 12) SHRI RAJENDRA NARSINGHMAL SANGHVI ROOM NO. 5 - A, PURSHOTTAM MULJI BUILDING, 144/46 DR. M.G. MAHIMTURA MARG MUMBAI - 400 004. PAN : AAJHR 9849D V S . ITO 19(3)(1) MATRU MANDIR NANA CHOWK MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSE E BY SHRI VIMAL PUNMIYA DEPARTMENT BY SHRI AKHTAR H. ANSARI DATE OF HEARING 09 . 10 . 201 9 DATE OF PRONOUNCEMENT 06 . 0 1 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE APPEALS BY THE ASSESSEE IN INDIVIDUAL AND IN HUF CAPACITY, WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 10 % DISALLOWANC E ON ACCOUNT OF BOGUS PURCHASES, BY RESPECTIVE ORDER PERTAINING TO A.Y. 2010 - 11 & 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN TRADING IN FERROUS AND NON FERROUS METAL. 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 WERE MADE THROUGH BA NKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. SHRI RAJENDRA NARSINGHMAL SANGHVI 2 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE AS UNDER : - ITA NO. 5380/MUM/2018 RS. 17,95,156/ - ITA NO. 5378/MUM/2018 RS. 6,72,144/ - ITA NO. 5379/MUM/2018 RS. 10,65,318/ - 4. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE SAME TO 10 %. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 6. UPON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE T O THE INABILITY OF THE ASSE SSEE 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 PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO S ALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS U PHELD 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 MADE PURCHASE FROM THE GRE Y 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. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIA TED PURCHASES BY THE ASSESSEE, WE FIND THAT 12.5% DISALLOWANCE OUT OF BOGUS PURCHASE MEETS THE ENDS OF JUSTICE. HOWEVER, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT GROSS PROFIT ALREADY DISCLOSED SHOULD BE REDUCED FROM THIS, AS OTHERWISE THERE WILL BE DOUBL E PREJUDICE TO THE ASSESSEE. WE FIND CONSIDERABLE COGENCY IN THE SUBMISSION. WE DIRECT THAT THE D ISALLOWANCE SHOULD BE 12.5% AS REDUCED BY SHRI RAJENDRA NARSINGHMAL SANGHVI 3 THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND RE FLEC TED IN TAX AUDIT REPORT AS UNDER : - ITA NO. 5378/MUM/20 18 7.18% ITA NO.5379/MUM/2018 8.88% ITA NO. 5380 /MUM/2018 7.74 % 8. IN THE RESULT, ASSESSEE'S APPEALS ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 1 . 20 20 . SD/ - SD/ - ( PAWAN SINGH ) (SH A MIM YAHYA ) JUDICI AL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 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. B Y ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI