SHREEJI CONSTRUCTION, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX-30(3), MUMBAI

ITA 5400/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1500 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 21-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH KUMAR
• Keywords: Bogus purchase; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM I.T.A. NOS.5400 & 5401/MUM/2017 (ASSESSMENT YEARS: 2012-13) SHREEJI CONSTRUCTION A-402, AADARSH GALAXY OFF MARVE ROAD MALAD (W), MUMBAI-400 064 VS. DCIT-30(3) C 10/709 PRATYAKSHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (EAST) MUMBAI-400 050 PAN/GIR NO. AAOFS9070J ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : ASISH KUMAR DATE OF HEARING : 03.01.2019 DATE OF PRONOUNCEMENT : 15.03.2019 O R D E R PER SHAMIM YAHYA, A. M.: THESE ARE ASSESSEES APPEALS RELATING TO ADDITIONS SUSTAINED ON ACCOUNT OF BOGUS PURCHASE AND PENALTY LEVIED THERE ON. ITA NO.5401/MUM/2017 2. THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE AS SESSEE IS AGGRIEVED THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING 30% DISA LLOWANCE ON ACCOUNT OF BOGUS PURCHASES RESULTING IN ADDITION OF RS.5,08 ,399/- 3. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.16,94,665 /-. UPON ASSESSEES APPEAL LD. CIT(A) REDUCED THE SAME TO 30%. 2 ITA.NOS. 5400 & 5401/MUM/2017 SHREEJI CONSTRUCTION 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD THE LD. DR AND PERUSED THE RECORDS. NONE APPE ARED ON BEHALF OF ASSESSEE DESPITE NOTICE. 5. UPON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCE HAVE 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, 100% DISALLOWANCE FOR BO GUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONB LE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRI SES (IN WRIT PETITION NO 2860, ORDER DATED 18/06/2014). IN THIS CASE THE HON BLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE B OGUS 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 I NDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S THROUGH THE GREY MARKET GIVE THE ASSESSEE SAVING ON ACCOUNT OF NON-P AYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SIT UATION IN OUR CONSIDERATION OPINION ON THE FACTS AND CIRCUMSTANCE S OF THE CASE THE 12.5% DISALLOWANCE OUT OF BOGUS PURCHASES MEETS THE END OF JUSTICE. 3 ITA.NOS. 5400 & 5401/MUM/2017 SHREEJI CONSTRUCTION ACCORDINGLY, WE MODIFY THE ORDER OF LD. CIT(A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 6. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ITA NO.5400/MUM/2017 7. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE C ONFIRMATION OF LEVY OF PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS. 5,08,399/- BY THE LD. CIT VIDE ORDER DATED 06.06.2017. 8. WITH RESPECT TO THE ADDITION ON ACCOUNT OF BOGUS PURCHASE AS DEALT WITH BY US IN ITA NO. 5401/MUM/2017 ABOVE THE AO HA S LEVY OF PENALTY OF RS.5,25,000/-. UPON ASSESSEES APPEAL LD. CIT(A) HAD REDUCED THE PENALTY TO RS.5,08,399/- IN ACCORDANCE WITH THE ADD ITIONS SUSTAINED BY HIM. 9. AGAINST THE ABOVE ORDER ASSESSEE HAS FILED APPEA L BEFORE THE ITAT 10. UPON CAREFUL CONSIDERATION, WE FIND THAT THE AD DITIONS SUSTAINED IN THIS REGARD HAS BEEN CONSIDERABLY REDUCED BY US AS DETAILED IN OUR ORDER IN ITA. NO. 5041/MUM/2017 ABOVE. 11. FURTHER, WE NOTE THAT THE PENALTY U/S. 271(1)(C) IS LEVIED ON ACCOUNT OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS. 12. IN THE PRESENT CASE WE FIND THAT THERE IS NO CA SE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY T HE ASSESSEE. ALL THE PARTICULARSDETAILS OF PURCHASE WERE DULY SUBMITTED . ADVERSE INFERENCE AND 4 ITA.NOS. 5400 & 5401/MUM/2017 SHREEJI CONSTRUCTION ADHOC DISALLOWANCES IS SUSTAINED ONLY FOR NON-APPEA RANCE OF SUPPLIERS BEFORE THE AO. NO CONTUMACIOUS CONDUCT IS ATTRIBUT ABLE TO THE ASSESSE. HONBLE APEX COURT IN THE CASE OF HINDUSTAN STEEL L TD VS. STATE OF ORISSA 83 ITR 26 HAS EXPOUNDED THAT THE AUTHORITIES CAN DE CLINE TO LEVY OF PENALTY IF THE CONDUCT OF THE ASSESSEE IS BONAFIDE AND HAS BEEN NOT FOUND TO BE CONTUMACIOUS. 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN O UR CONSIDERED OPINION THE ASSESSEES CASE DOESNT DESERVE THE RIGOURS OF PENALTY UNDER SECTION 271(1)(C). ACCORDINGLY, WE SET ASIDE THE ORDERS O F AUTHORITIES BELOW AND DELETE THE PENALTY. 14. IN THE RESULT, ASSESSE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2019. SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI; DATED : 15.03.2019 THIRUMALESH , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE 5 ITA.NOS. 5400 & 5401/MUM/2017 SHREEJI CONSTRUCTION BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI