YASH ENTERPRISES, MUMBAI V. ITO 21(3)(5), MUMBAI

ITA 6665/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4741 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R BHOOPATHI
• Assessee Lawyers: UMANG SHAH
• Keywords: Bogus purchase
• Section: 13; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO . 6665 & 6666 & 6667 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 & 2010 11 & 2011 12 ) Y A SH ENTERPRISES B 7, WADALA UDYOG BHAVAN NAIGAON CROSS ROAD 8, KATRAK ROAD, WADALA (W) MUMBAI 400 013 PAN AAAFY0147Q . APPELLANT V/S INCOME TAX OFFICER WARD 21(3)(5), MUMBAI . RESPONDENT ASSESSEE BY : SHRI UMANG SHAH REVENUE BY : SHRI R. BHOOPATHI DATE OF HEARING 10 . 12 .2019 DATE OF ORDER 05.02.2020 O R D E R THE S E ARE A PPEAL S 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 COMMON ORDER DATED 13 TH APRIL 2016 , PERTAINING TO THE ASSESSMENT YEAR 2009 10 , 2010 11 AND 2011 12 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN WELDING ELECTRODES. INFORMATION WAS RECEIVED 2 FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS TAKEN ACCOMMODATION E NTRIES IN RESPECT OF BOGUS PURCHASE. THE ASSESSMENT WAS ACCORDINGLY RE OPENED. THE ASSESSING OFFICER IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO ` 2,49,227 FOR A.Y. 2009 10, ` 12,79,381 FOR A.Y. 2010 11 AND ` 5,07,116 FOR A.Y. 2011 12. UPON ASSESSEES APPEAL, 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 CONSIDERAT ION, I FIND THAT THE ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASES. ADVERSE INFERENCES 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, 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 EXIMP ENTERPRISES PVT. LTD. V/S ACIT, WRIT PETITION NO.2860, ORDER DATED 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 3 DOUBTED. HOWEVER, IN THAT CASE, ALL THE SUPPLIES WERE TO GOVERNMENT 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 EXP ENSE OF THE EXCHEQUER. 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 F OR 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 ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO B E DISALLOWED 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 JEOPARDY TO THE ASSESSEE. ACCORDINGLY, I MODIFY THE ORDER OF THE L EARNED 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. IT GOES WITHOUT SAYING THAT IF GROSS PROFIT ALREADY DECLAR ED IS MORE THAN 4 12.5%, NO DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE IS REQUIRED. THE LEANED COUNSEL FOR THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 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