VILAYTI TUBE INDIA, MUMBAI V. ITO 19 (3)(5), MUMBAI

ITA 5919/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8350 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 5 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: 2009-2010
• Appeal Filed On: 15-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 201; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM / I.T.A. NO S . 5919 TO 5921 / MUM/ 20 1 8 ( / ASSESSMENT YEAR S : 2009 - 10 , 2010 - 11 & 201 1 - 1 2 ) VILAYTI TUBE INDIA BLDG. NO.26, SHOP NO.1, K ANUNGO MENSION, 1 ST CARPENDER STREET, MUMBAI - 400004 . / VS. ITO 19(3)(5) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AABFV 4219 K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 20 / 02/2020 /DATE OF PRONOUNCEMENT: 20 / 0 4 / 2020 / O R D E R PER SHAMIM YAHYA, AM: THESE ARE AP PEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, PERTAINING TO A.Y.2009 - 10, 2010 - 11 & 2011 - 12. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE IS ENGAGED IN THE BUSINESS OF TRADING IN FERROUS AND NON - FERROUS METALS. 3. THE ASSESSMENT IN THI S CASE WAS REOPENED UPON RECEIVED OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER , THE ASSESS EE BY : NONE REVENUE BY: SHRI CHAITANYA ANJARIA ITA. NOS. 5919 TO 5921 /M/2018 A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 2 SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. 4. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PUR CHASE RESULTING IN DISALLOWANCE AS UNDER.: - A.Y.2009 - 10 RS.10,56,628/ - A.Y.2010 - 11 RS.10,22,320/ - A.Y.2011 - 12 RS.8,48,970/ - 5. UPON ASSESSEE APPEAL LD. CIT(A) CONFIRMED THE SAME. 6. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LD. DR AND PERUSED THE RECORDS. NONE - APPEARED ON BEHALF OF ASSESSEE DESPITE NOTICE. 7. ADVERSE INFERENCE HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS S ETTLED 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 ENTERPR ISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER , IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY . 8. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH ITA. NOS. 5919 TO 5921 /M/2018 A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 3 THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSESSEE , I FIND THAT IT WILL BE DOUBLE PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED F ROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGUS PURCHASES. 9. ACCORDINGLY, I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. IN THE RESULT , THE SE APPEALS FILED BY THE ASSESSES STAND PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 /04 /2020 ( SHAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI; DATED : 20 / 04 / 2020 V IJAY PAL SINGH/SR. PS ITA. NOS. 5919 TO 5921 /M/2018 A.YS. 2009 - 10, 2010 - 11 & 2011 - 12 4 / 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