MST CERAMIC WORLD, MUMBAI V. ACIT , CIRCLE- 3 , KALYAN

ITA 6623/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4742 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 22-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Keywords: Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO . 6623 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) M/S. MST CERAMIC WORLD LALJI ARCADE, GROUND FLOOR SANTOSHI MATA ROAD OPP. SAIBABA TEMPLE KALYAN (W), THANE 421 301 PAN AABFM8508M . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3, KALYAN . RESPONDENT ASSESSEE BY : SHRI RAVINDRA POOJARY REVENUE BY : SHRI R. BHOOPATHI DATE OF HEARING 0 9 . 12 .2019 DATE OF ORDER 05.02.2020 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT(A) ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE VIDE ORDER DATED 25 TH SEPTEMBER 2018, PERTAINING TO THE ASSESSMENT YEAR 2009 10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SANITARY WARE AND STEEL TUBES. INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS TAKEN 2 M/S. MST CERAMIC WORLD ACCOMMODATION ENTRIES IN RESPECT OF BOGUS PURCHASE. THE ASSESSMENT WAS ACCORDINGLY RE OPENED. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO ` 3,50,831 , SOLELY RELYING ON SALES TAX DEPARTMENTS FINDING WITHOUT ANY EXAMINATION OF HIS OWN . UPON ASSESSEES APPE AL, THE LEARNED CIT(A) CONFIRMED THE SAME. 2. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I HAVE HEARD THE LEARNED COUNSEL FOR BOTH THE PARTIES AND PERUSED THE RECORDS. 3. UPON CAREFUL CONSIDERATION, I FIND THAT THE ASSESSEE HAS P ROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASES. ADVERSE INFERENCE S 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 SETTLED LAW THAT WHEN SALES ARE NOT DOUBTE D, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN NIKUNJ E XIMP E NTERPRISES PVT. LTD. V/S AC IT , WRIT PETITION NO. 2860, ORDER D ATED 18 TH JUNE 2014 . IN THIS CASE , THE HONBLE HIGH COURT HAS UPHELD 100% ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER , IN THAT CASE, ALL THE SUPPLIES WERE TO GOVERNMENT 3 M/S. MST CERAMIC WORLD AGENCY. IN THE PRESENT CASE, THE FACTS OF THE CASE INDICATE THAT THE ASSESSEE HAS MADE PURCHASES FROM 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 EXCHEQU ER. IN SUCH SITUATION , IN MY CONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT(A) MEETS THE END OF JUSTICE. HOWEVER, IN THIS REGARD, THE LEANED COUNSEL FOR THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTIONS IS TO BE TAXED THE GROSS PROFIT @ 6 . 03 % , ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOW ED ON ACCOUNT OF BOGUS PURCHASE. 4. UPON CAREFUL CONSIDERATION, I FIND CONSIDERABLE COGENCY IN THE SUBMISSIONS OF THE LEANED COUNSEL FOR THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE GEOPARDY TO THE ASSESSEE. ACCORDINGLY, I MODIFY THE ORDER OF THE LEARNED CIT (A) AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. THE LEANED COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION . 4 M/S. MST CERAMIC WORLD 5. IN THE RESULT, APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.2020 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER MUMBAI, DATED: 05.02.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI