MONARCH METAL AND WIRES, MUMBAI V. INCOME TAX OFFICER WARD 19(2)(3), MUMBAI

ITA 6695/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 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: 27-11-2018
• 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 . 6695 / MUM . /2018 ( ASSESSMENT YEAR : 20 09 10 ) MONARCH METAL AND WIRES 2, AMIN HOUSE, KHETWADI 8 TH LANE, MUMBAI 400 004 PAN AAAFM2371A . APPELLANT V/S INCOME TAX OFFICER WARD 19(2)(3), MUMBAI . RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI R. BHOOPATHI DATE OF HEARING 10 . 12 .2019 DATE OF ORDER 05.02.20 2 0 O R D E R THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 25% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RESELLING OF WIRE AND M.S. WIRE RODS. INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES IN RESPECT OF BOGUS PURCHASE. THE ASSESSMENT WAS ACCORDINGLY RE OPENED. THE ASSESSING OFFICER IN THIS CASE HAS 2 MONARCH METAL AND WIRES MADE 25% ADDITION ON ACCOUNT OF BOGUS P URCHASE AMOUNTING TO ` 6 , 42 , 379 . UPON ASSESSEES APPEAL, THE LEARNED CIT(A) CONFIRMED THE SAME. 3. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. 4. UPON CA REFUL CONSIDERATION, I FIND THAT THE ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE 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, 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 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 THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON 3 MONARCH METAL AND WIRES ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE 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 WOULD MEET THE END OF JUSTICE. I DIRECT ACCORDINGLY. 5. IN THE RESULT, ASSESSEES 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