K.KIRIT & CO. , MUMBAI V. ITO 3(1), KALYAN

ITA 6624/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6263 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• 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
• Keywords: Bogus purchase
• Section: 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M I.T.A. NO. 6624 /MUM/ 201 8 (ASSESSMENT YEAR 20 09 - 10 ) I.T.A. NO. 6625/MUM/2018 (ASSESSMENT YEAR 2010 - 11) I.T.A. NO. 6626/MUM/2018 (ASSESSMENT YEAR 2011 - 12) M/S. K. KIRIT & CO. A - 1, HRIDAS CHS CHHEDA ROAD DEDHIA NIWAS DOMBIVALI EAST PINCODE - 421 201. PAN :AAEFK4417D V S . ITO WARD 3(1) RANI MANSION MURBAD ROAD KALYAN WEST PINCODE - 421 301. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI RAVINDRA POOJARY DEPARTMENT B Y SHRI R. BHOOPATHI DATE OF HEARING 09.12.2019 DATE OF PRONOUNCEMENT 06 . 0 2 . 20 20 O R D E R TH E S E ARE APPEAL S BY THE ASSESSEE WHEREIN THE ASSESSEE IS A G GRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES BY COMMON ORDER DATED 27.9.2018 FOR A.Y. 2009 - 10, 2010 - 11 & 2011 - 12 . 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN IRON AND STEEL. I NFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSES SEE HAS THAT IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OFFICER IN TH E S E CASE S HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AS UNDER : - A.Y. RS. 2009 - 10 67,717 2010 - 11 1,51,842 2011 - 12 2,97,626 M/S. K. KIRIT & CO. 2 3. U PON ASSESSEE S APPEAL ID CIT - A CONFIRMED THE SAME . 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. U PON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVID ENCE FOR THE PURCHASE. 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 DOUBTED, HUNDRED PERCENT DISALLOWAN CE 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 E XIMP E NTERPRISES (IN WRIT PETITION NO 2860, ORD ER 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. IN TH E PRESENT CASE THE FACTS OF THIS 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 MY CONSIDERED OP INION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 6. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABL E COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY I MODIFY THE ORDER OF LEARNED CIT - A AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS P URCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE M/S. K. KIRIT & CO. 3 ASSESSEE ON THESE TRANSACTIONS. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 7. IN THE RESULT TH E S E APPEAL S FILED BY THE ASSESSEE STAND PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 6 . 2 . 20 20 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 0 2 / 20 20 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 ITAT, MUMBAI