ACIT 22 (1), MUMBAI V. CYPRIAN ANTHONY MASCARENHAS, MUMBAI

ITA 6791/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9508 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 04-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANOOP
• Keywords: Bogus purchase
• Section: 133(6); 37(1)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 6791/MUM/2019 (ASSESSMENT YEAR 2009-10) ACIT-22(1) 322, 3 RD FLOOR PIRAMAL CHAMBERS LAL BAUG, PAREL MUMBAI-400 012. VS. CYPRIAN ANTHONY MASCARENHAS 384, SANE GURUJI MARG BARUCHA COMPOUND GHASS BAZAR, AGRIPADA MUMBAI-400 011. PAN : AFZPM8409B (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI ANOOP DATE OF HEARING 19 .0 5 .2021 DATE OF PRONOUNCEMENT 01.07.2021 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 25% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES. 2. BRIEF FACTS ARE THAT IN THIS CASE, RETURN OF INCOME WAS FILED ON 26.09.2009 DECLARING TOTAL INCOME AT RS. 19,81,553/-. THE CASE WAS RE-OPENED U/S.147 OF THE ACT ON THE BASIS OF INFORMATION RECE IVED FROM SALES TAX DEPARTMENT MAHARASHTRA THAT ASSESSEE HAS TAKEN BOGU S PURCHASES BILLS WITHOUT ANY PHYSICAL DELIVERY OF GOODS FROM M/S. PR AGATI ENTERPRISES, J.C. TRADING CO. AND KAUSHAL CORPORATION. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS PUR CHASE GOODS OF RS. 3,90,222/- FROM THE ABOVE MENTIONED PARTIES. THE AS SESSEE FILED COPY OF LEDGERS AND BANK STATEMENT SHOWING PAYMENTS TO THE ALLEGED BOGUS PARTIES. ACCORDING TO THE AO, THE SUBMISSION OF THE ASSESSEE IS CONSIDERED. HOWEVER, ONLY THE FACT THAT INVOICES WERE RAISED AND PAYMENT WAS MADE BY BANKING CHANNELS DOES NOT PROVE BEYOND DOUBT THAT THE PURCH ASES ARE GENUINE IN CYPRIAN ANTHONY MASCARENHAS 2 NATURE. THE ASSESS HAS NOT BEEN ABLE TO PROVE THAT DIRECT CORRELATION BETWEEN THE PURCHASES MADE AND CORRESPONDING SALES. THE ONU S OF PROVING THE GENUINENESS OF THE PURCHASE LIES ON THE ASSESSEE AS PER THE RULING OF THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. KORLAY TR ADING CO. LTD. REPORTED IN 232 ITR 820 WHERE IT WAS HELD THAT THE INITIAL BURD EN IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES. 3. THE AO HAD ALSO RELIED ON THE DECISION IN THE CA SE OF M/S KACHWALA GEMS VS. JCIT WHEREIN IT HAS BEEN HELD BY THE HON'B LE SUPREME COURT THAT THE EVEN PAYMENT MADE BY ACCOUNT PAYEE CHEQUE IS NOT SU FFICIENT TO ESTABLISH THE GENUINENESS OF PURCHASES. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA AGENC Y LTD., (19 ITR 191) WHEREIN IT WAS HELD THAT THE ONUS OF PROVING NECESS ARY FACTS IN ORDER TO AVAIL THE DEDUCTION U/S 37(1) IS ON THE ASSESSEE AND IF T HE ASSESSEE FAILS TO ESTABLISH THE FACTS NECESSARY TO SUPPORT HIS CLAIM FOR DEDUCT ION U/S. 37(1), THE CLAIM FOR DEDUCTION OF EXPENDITURE IS NOT ADMISSIBLE. THUS, T HE ONUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES CLAIMED B Y HIM. MERELY STATING THAT THE BILLS HAVE BEEN ISSUED AND PAYMENTS HAVE BEEN M ADE BY A/C. PAYEE CHEQUE DOES NOT AUTOMATICALLY ENTAIL INTO THE TRANS ACTION BEING RECOGNIZED AS A GENUINE ONE. RELIANCE IS ALSO PLACED ON THE DECISIO N OF THE HON'BLE ANDHRA PARADESH HIGH COURT IN THE CASE OF CIT VS. TRANSPOR T CORPORATION OF INDIA LTD., 256 ITR 701 AND ON THE DECISION IN THE CASE OF CIT VS. IMPERIAL CHEMICAL INDUSTRIES (I) PVT. LTD., 74 ITR 17. THE ASSESSEE H AS NOT PRODUCED COPY OF INVOICES, STOCK REGISTER, TRANSPORT PROOF ETC. THE NOTICE UNDER SECTION 133(6) OF THE ACT SENT TO THE ABOVE PARTIES HAVE RETURNED WIT H NO REPLY. FURTHER THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE PARTIES. IN VIEW OF THE ABOVE FACTS, AN AMOUNT OF RS. 3,90,222/- CORRESPONDING TO THE NO N-GENUINE PURCHASES WAS ADDED TO THE INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO 25%. 5. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEF ORE THE ITAT. CYPRIAN ANTHONY MASCARENHAS 3 6. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION WE FIND THAT AS SESSEE 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 ALLOWANCE FOR THE PURCHASES SAID TO BE BOGU S 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 SUCH SITUATION IN MY C ONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 25% DISALLO WANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HENCE WE UPHOLD THE ORDER OF LEARNED CIT(A). THE DECISION OF N.K. PROTEINS LTD.(250 ITR 22) REFERRED BY THE REVENUE IN THE GROUNDS OF APPEAL HAS ALREADY BEEN DISTINGUI SHED AND EXPLAINED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF M. HAZI AD AM & CO. (ITA NO. 1004 OF 2006 DATED 11.2.2019). 7. IN THE RESULT THIS APPEAL FILED BY THE REVENUE S TANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 1.7.2021. SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 01/07/2021 COPY OF THE ORDER FORWARDED TO : CYPRIAN ANTHONY MASCARENHAS 4 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