SHRI HARAKCHAND TIKAMCHAND SANGHVI, MUMBAI V. ITO 19 (1)(5), MUMBAI

ITA 5512/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8360 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133(6); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM / I .T.A. NO S . 5512 & 5513 / MUM/ 20 1 8 ( / ASSESSMENT YEAR S : 2010 - 11 & 2009 - 1 0 ) SHRI HARAKCHAND TIKAMCHAND SANGHVI 323/330, SHUJA MANSION, 1 ST FLOOR, ROOM NO.34, MAULAN AZAD ROAD, MUMBAI - 400004 . / VS. ITO 19(1)(5) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007. ./ ./ PAN/GIR NO. : AADPS 8452 K ( / APPELLANT ) .. ( / RESPO NDENT ) / DATE OF HEARING : 18/ 0 2/ 20 20 / DATE OF PRONOUNCEMENT : 20 / 0 4 / 2020 / O R D E R PER S HAMIM YAHYA, AM: THESE ARE APPEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT(A) ERRED IN SUSTAINING ONLY 12.5 % DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE S PERTAINING TO A.YS . 2009 - 10 & 2010 - 11. 2 . THE ASSESSEE IN THIS CASE IS ENGAG ED INTO BUSINESS OF FERROUS AND NON - FERROUS METALS . 3. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM S ALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. ASSESSEE BY : SHRI AMIT BOTHRA REVENUE BY: SHRI CHAITANYA ANJARIA ITA. NO S.5512 & 5513 /M/2018 A.Y.2010 - 11 & 200 9 - 1 0 2 4. THE AO IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE A MOUNTING TO RS. 17,56,536 / - FOR THE A.Y.20 10 - 1 1 AND RS.4,25, 208/ - FOR THE A.Y.2009 - 10 . THE AO MADE THE ADDITION ON THE BASIS OF SALES TAX INFORMATION. HE DID NOT MAKE ANY ENQUIRY FROM THE ALLEGED BOGUS SUPPLIES . 5. UP ON ASSESSEES APPEAL LD. CIT(A) HAS NO TED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UP ON THE FAC TS OF THE CASE HE SUSTAINED 12.5 % DISALLOW ANCE OUT OF THE BOGUS PURCHASES B Y GIVING CREDIT TO THE ASSESSEE FOR PROFIT ALREADY DECLARED. 6. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LD. DR AND PERUSED THE RECORDS. 7. I 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 SALES 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 T HIS CASE THE HONOURABLE 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 TH ROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE ITA. NO S.5512 & 5513 /M/2018 A.Y.2010 - 11 & 200 9 - 1 0 3 EXCHEQUER. HOWEVER, I NOTE THAT NO ENQUIRY WHATSOEVER WITH THE ALLEGED BOGUS SUPPLIES HAS BEEN DONE BY THE AO . HE HAS NOT EVEN GIVEN NO TICE U/S 133(6) OF THE ACT TO THE ALLEGED BOGUS SUPPLIERS . IN SUCH SITUATION IN MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 2 % DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. ACCORDINGLY, I UPHOLD THE ORDER OF LD. CIT(A). ACCORDINGLY, I DIRECT THAT DISALLOWANCE BE RESTRICTED TO 2% OF THE BOGUS PURCHASES. I N THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STAND PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 /0 4 /2020 SD/ - ( SHAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI; DATED : 20 / 04 / 2020 VIJAY PAL SINGH /SR. PS / 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// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI