ITO 27 (1)(4), MUMBAI V. DIVYESH L. MEHTA , MUMBAI

ITA 5628/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9101 (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. 562 8 / MUM/ 2018 (ASSESSMENT YEAR: 20 10 - 11 ) ITO - 27(1)(4), TOWER NO. 6, 4 TH FLOOR, ROOM NO.409, VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI VS. DIVYESH L. MEHTA FLAT NO. 14, 2 ND FLOOR, MATRU KRUPA CHS, 254, HINGWALA LANE, GHATKOPAR (E), MUMBAI - 400 077 PAN/GIR NO. AAGPM 8738 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. 2 8,001/ - BY SUSTAINING ONLY 12.5 % DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 12.06.2018 PERTAINING TO ASSESSMENT YEAR 20 10 - 11 . 2. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. THE ASSESSING OFF ICER IN THIS CASE HAS MADE 100 % ADDITIONS ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 3 2 , 00 1 / - . 3 . UPON ASSESSEE'S APPEAL LEARNED CIT - A HAS NOTED THAT THE SALES HAS NOT BEEN 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 . 4 . AGAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE THE ITAT. 2 ITA NO. 5628/MUM/2018 ITO VS. DIVYESH L. MEHTA 5 . WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) 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 ACTUAL 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 BOGU S 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 - PAYMENT OF TAX AND OTHERS AT THE EXPENS E OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FACTS AND C IRCUMSTANCES OF THE CASE THE 8 % DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT - A MEETS THE END OF JUSTICE. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT - A. 6 . 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 . 7. 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 3 ITA NO. 5628/MUM/2018 ITO VS. DIVYESH L. MEHTA 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