ACIT CIR 17(1), MUMBAI V. HEERAMANECK & SON, MUMBAI

ITA 5669/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6266 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 04-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 5669/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 5670 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) ACIT - 17(1) ROOM NO. 117 AAYAKAR BHAVAN M.K. ROAD NEW MARINE LINES MUMBAI - 400 020. V S . M/S. HEERAMANECK & SON GROUND FLOOR, READY MONEY BUILDING, BATTERY STREET MUMBAI - 400 005. PAN :AAFFM4776L ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI PANKAJ KUMAR DATE OF HEARIN G 05.12.2019 DATE OF PRONOUNCEMENT 06 . 0 2 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THESE ARE A PPEA LS BY THE R EVENUE WHEREIN THE REVENUE IS AG G RIEVED THAT THE LEARNED CIT - A HAS DELETED THE ADDITION OF RS. 6,56,573/ - FOR A.Y. 2010 - 11 AND RS. 8,79 ,543/ - FOR A.Y. 2011 - 12 BY SUSTAINING ONLY 2.75% DISALLOW A NCE ON ACCOUNT OF BOGUS PURCHASES, VIDE RESPECTIVE ORDER S FOR A.Y. 2010 - 11 & 2011 - 12. 2. THE AS SESSEE IN THIS CASE IS ENGAGED INTO TRADING BUSINESS. T H E ASSESSMENT WAS REOPENED UPON INFORMATION FR OM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. THE ASSESSING OFFICER IN THIS CAS E HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 841,761/ - FOR A.Y. 2010 - 11 AND RS. 11,27,619/ - FOR A.Y. 2011 - 12. THE ASSES SING OFFICER MADE THE DISALLOWANCE BY REFERRING TO INFORMATION FROM SALES TAX DEPARTMENT. HE DID NOT ISSUE ANY NOTICE TO THE SUPPLIERS. 3. UPON ASSESSEE'S APPEAL LEARNED CI T - A HAS NOTED THAT THE SALES HAVE NOT BEEN DOUBTED. H E NOTE THAT THE ASSESSE E GRO SS PROFIT DECLARED IS ALREADY 9.5% . M/S. HEERAMANECK & SON 2 ACCORDINGLY BY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UP ON THE FACTS OF THE CASE HE SUSTAINED 2.75% D ISALLOWANCE OUT OF THE BOGUS PURCHASES . 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEA RD LEARNED DEPARTMENTAL REPRESENTATIVE A ND PERUSED T HE RECORDS . 5. 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 B EING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE 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 HONOURABLE HIGH C OURT 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 THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT 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 PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED SERVES THE INTER E S T OF JUSTICE. SINCE IN THE PRESENT CASE LD CIT ( A ) HAS FOLLOWED THIS VIEW WE DO NOT FIND ANY INFIRMITY IN HIS ORDER WHERE HE HAS CONSIDERED THE GROSS PROFIT ALREADY DECLARED AND GIVEN CREDIT FOR THAT. 6. IN THE RES ULT TH E S E APPEAL FILED BY THE R EVENUE STAND DISMISSED . ORDER HAS BE EN PRONOUNCED IN THE COURT ON 6 . 2 . 20 20 . SD/ - SD/ - ( RAMLAL NEGI ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 06 / 0 2 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT M/S. HEERAMANECK & SON 3 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI