ITO 12 (3)(3), MUMBAI V. MATCON ENGINEERS INDIA PVT. LTD., MUMBAI

ITA 5623/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9105 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2018
• 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, AM AND SHRI PAWAN SINGH, JM ITA NO. 5623/ MUM/ 2018 (ASSESSMENT YEAR: 2010 - 11 ) ITO - 12(3)(3) ROOM NO. 224, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 VS. M/S. MATCON ENGINEERS INDIA PVT. LTD. 7, RAMKRUPA, ROAD NO. 6, PANDURANGWADI, GOREGAON (E), MUMBAI 400 063 PAN/GIR NO. AABCM 0815 D ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI AKHTAR H. ANSARI RESPONDENT BY : NONE DATE OF HEARING : 20.11.2019 DATE OF PRONOUNCEMENT : 07.01.2020 O R D E R PER SHAMIM YAHYA, A. M.: THIS IS AN APPEAL BY THE R EVENUE WHEREIN THE R EVENUE IS AGGRIEVED THAT THE LEARNED CIT - A HAS DELETED THE ADDITION OF RS.12,80,172/ - BY SUSTAINING ONLY 12 .5 % DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 27.04.2018 PERTAINING TO ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO MANUFACTURING BUSINESS. 3. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. THE ASSESSING OFFICER IN THIS CASE HAS MADE HUNDRED PERCENT ADDITIONS ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.14,63,054/ - . 2 ITA NO. 5623/MUM/2018 M/S. MATCON ENGINEERS INDIA PVT. LTD. 4. UPON ASSESSEE'S APPEAL LEARNED CIT - A HAS NOTED THAT THE SALES HAS NOT B EEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UPON THE FACTS OF THE CASE HE SUSTAINED 12.5 % DISALLOWANCE OUT OF THE BOGUS PURCHASES 5. AGAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE THE ITAT. 6. WE HAVE HEARD BOTH THE C OUNSEL AND PERUSED THE RECORDS . W E 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 AC TUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ E XIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HON'BLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCES 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 - PAYMEN T OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE 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 W E UPHOLD THE ORDER OF LEARNED CIT - A. 7. THE DECISION OF M/S NK PROTEINS LTD. VS. DCIT ( NO. 769 OF 2017 DATED 16 .01.2017 (SC) REFERRED BY REVENUE IN GROUNDS OF APPEAL HAS ALREADY BEEN DISTINGUISHED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF M HAJI ADAM& CO ITA NO 1004 OF 20016 DT 11/2/2019 . 3 ITA NO. 5623/MUM/2018 M/S. MATCON ENGINEERS INDIA PVT. LTD. 8. IN THE RESULT , THIS APPEAL FILED BY THE R EVENUE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 . 0 1 . 2 0 2 0 S D / - S D / - ( PAWAN SINGH ) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 0 7 . 0 1 . 2 0 2 0 ROSHANI , 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 BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI