ADINATH METALS, MUMBAI V. INCOME TAX OFFICER-31(1)(1), MUMBAI

ITA 5998/MUM/2018

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9643 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Bogus purchase
• Section: 201; 10

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 5998/MUM/2018 (ASSESSMENT YEAR 209 - 10) I.T.A. NO. 5999/MUM/2018 (ASSESSMENT YEAR 2013 - 14) I.T.A. NO. 6000 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 12 ) M/S. ADINATH METALS OPP. CHOUDHARY HARDWARE NEAR POOJA BAR & RESTAURANT IB PATEL ROAD, GOREGAON - E MUMBAI - 400 063. PAN : AAFFA8271N V S . ITO - 31(1)(1) MUMBAI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI VIMAL PUNMIYA DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 04 . 09 . 201 9 DATE OF PRONOUNCEMENT 02. 1 2 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - TH E S E ARE APPEAL S 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 VIDE COMMON ORDER DATED 28.6.2018 FOR A.Y S . 2009 - 10 , 201 1 - 1 2 & 2013 - 1 4 . 2. B RIEF FACTS OF THE CASE ARE THAT ASSESSEE IN TH E BUSINESS OF DEALING IN FERROUS AND NON FERROUS METAL . THE ASSESSMENT IN THIS CASE WAS RE OPENED UPON RECEIPT 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 SUPPLIERS WERE NOT PRODUCED BEFORE THE ASS ESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. M/S. ADINATH METALS 2 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 1 00 % ADDITION FOR A.Y. 2009 - 10 & 2011 - 12 AND 12.5% ADDITION FOR A.Y. 2013 - 14 ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE AS UNDER : - A.Y. 2009 - 10 RS. 13,42,987/ - A.Y. 2011 - 12 RS. 4,69,691/ - A.Y. 2013 - 14 RS. 1,40,460/ - 4. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE SAME TO 12.5 %. 5. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. 6. U PON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE I NFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE 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 D ONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM H ONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT . 18.6.2014). IN THIS CASE T HE H ONOURABLE 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. 7. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSE SSEE 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. AS REGARDS THE QUANTIFICATION OF THE PROFIT ELEMENT EMBEDDED IN MA KING OF SUCH BOGUS/UNSUBSTANTIA TED PURCHASES BY THE ASSESSEE, WE FIND THAT IT IS THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE THAT IT WILL BE DOUBLED PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED FROM THE STANDARD 12.5% BEING DISAL LOWED ON ACCOUNT OF BOGUS M/S. ADINATH METALS 3 PURCHASES. IN THIS REGARD HE SUBMITTED THAT THE ASSESSEE HAS ALREADY SHOWN FOLLOWING GROSS PROFIT : - A.Y. 2009 - 10 : 8.09% A.Y. 2011 - 12 : 8.41% A.Y. 2013 - 14 : 9.6% 8 . UPON CAREFUL CONSIDERATION WE FIND CONSIDERABLE COGENCY I N THE ABOVE SUBMISSION. ACCORDINGLY WE DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICT ED TO 12.5% OF THE BO GUS PURCHASES AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSESSEE. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE A BOVE . 9 . IN T HE RESULT , ASSESSEE'S APPEAL S ARE PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 02/12 / 201 9 . SD/ - SD/ - ( AMARJIT SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 02 / 1 2 / 20 1 9 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// ( ASSISTANT REGISTRAR ) PS IT AT, MUMBAI