DCIT-10 (2) (2), MUMBAI , MUMBAI V. MANIK MACHINERY MANUFACTURERS PRIVATE LIMITED , MUMBIA

ITA 6176/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0898 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 30-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE HONBLE JUSTICE P.P. BHATT (PRESIDENT) & HONBLE SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER) I.T.A. NO. 6176/MUM/2019 (ASSESSMENT YEAR 2010-11) DCIT - 10(2)(2) ROOM NO. 216-A AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. MANIK MACHINERY MANUFACTURERS PVT. LTD. 24, SONAL UDYOG, PARSI PANCHAYAT ROAD, ANDHERI EAST MUMBAI-400 069. PAN : AAACM4260F ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI BHARAT ANDHLE DATE OF HEARING 05 .0 7 .2021 DATE OF PRONOUNCEMENT 13 .0 7 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE REVENUE WHEREIN THE ASSESS EE IS AGGRIEVED THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ONLY 12. 5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 29.7.2019 PERT AINING TO ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THI S CASE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS TYPES OF SPRAY GUNS. THE ASSESSMENT IN THIS CASE WAS REOPENED 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 TH ROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BE FORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE RES ULTING IN DISALLOWANCE OF RUPEES 1,41,39,860/-. 3. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE SAME TO 12.5%. M/S. MANIK MACHINERY MANUFACTURERS PVT. LTD. 2 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. 5. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE RECORD. UPON CAREFUL CONSIDERATION WE FIND THAT ASS ESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFE RENCE 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 SE TTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITH OUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTI ONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETIT ION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCES FOR THE PURCHASES SAID TO BE BOG US WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THA T ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THR OUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMEN T OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION THE DISALLOWANCE OF 12.5% MEETS THE ENDS OF JUSTICE . THE DECISION OF N.K. PROTEINS LTD.(250 ITR 22) RELIED BY THE REVENUE IN THE GROUNDS OF APPEAL HAS BEEN DULY DISTINGUISHED AND EXPLAINED BY HON'BLE BO MBAY HIGH COURT IN THE CASE OF M. HAZI ADAM & CO. (ITA NO. 1004 OF 2006 DA TED 11.2.2019). 6. IN THE RESULT THIS APPEAL FILED BY THE REVENUE S TANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13.07.2021 SD/- SD/- (JUSTICE P.P. BHATT) (SH AMIM YAHYA) PRESIDENT ACCOUN TANT MEMBER MUMBAI; DATED : 13 /07/2021 COPY OF THE ORDER FORWARDED TO : M/S. MANIK MACHINERY MANUFACTURERS PVT. LTD. 3 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 ITAT, MUMBAI