ITO 20 (3)(1), MUMBAI V. RAKESH KUMAR MITHALAL JAIN, MUMBAI

ITA 6827/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6556 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R BHOOPATHI
• Keywords: Bogus purchase
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO S . 6826 & 6827 /MUM/2018 : A.Y : 20 09 - 10 INCOME TAX OFFICER - 20(3)(1), MUMBAI (APPELLANT) VS. SHRI RAKESH KUMAR MITHALAL JAIN PROP. M/S. ANKITA CHEMICAL CORPORATION, 7, SAWAN BHAWAN, NAIGAON CROSS ROAD, DADAR (E), MUMBAI 400 014. PAN : AACPJ4524C (RESPONDENT) CO NO S . 250 & 253 /MUM/201 9 : A.Y : 20 09 - 10 SHRI RAKESH KUMAR MITHALAL JAIN PROP. M/S. ANKITA CHEMICAL CORPORATION, 7, SAWAN BHAWAN, NAIGAON CROSS ROAD, DADAR (E), MUMBAI 400 014. PAN : AACPJ4524C (CROSS OBJECTOR) VS. INCOME TAX OFFICER - 20(3)(1), MUMBAI (RESPONDENT/ORG. APPELLANT) ASSESSEE BY : SHRI R. BHOOPATHI RE VENUE BY : SHRI VIMAL PUNMIYA DATE OF HEARING : 12/12/2019 DATE OF PRONOUNCEMENT : 06 / 0 2/20 20 O R D E R TH ESE ARE APPEAL S BY R EVENUE AND CROSS - OBJECTIONS BY ASSESSEE WHEREIN THE GRIEVANCE IS THAT THE LEARNED CIT ( A ) HAS ERRED IN SUSTAINING 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE TWO ORDERS, BOTH PERTAINING 2 SHRI RAKESH KUMAR MITHALAL JAIN ITA NOS. 6826 & 6827/MUM/2018 & CO NOS. 250 & 253/MUM/2019 TO BOGUS PURCHASE ADDITION FOR ASSESSMENT YEAR 2009 - 10 WITH RESPECT TO TWO DIFFERENT PARTIES, AS AGAINST 25% DONE BY THE ASSE S SING OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE IN CHEMICALS AND DRUGS . INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS INDULGED IN BOGUS PURCHASES. THE ASSESSMENT WAS ACCORDINGLY REOPENED. THE ASSESSING OF FICER IN THIS CASE HAS MADE 25% ADDITION ON ACCOUNT OF BOGUS PURCHASE OF RS.6,99,285/ - IN ITA NO. 6826/MUM/2018 AND OF RS.3,18,240/ - IN ITA NO. 6827/MUM/2018. UPON ASSESSEES APPEAL, LEARNED CIT(A) REDUCED THE SAME TO 12.5%. AGAINST THE ABOVE ORDER, ASSE SSEE AND REVENUE ARE IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 3. UPON CAREFUL CONSIDERATION, I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS 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 DISAL LOWANCE 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 NICKUNJ EXIMP ENTERPRISES (P.) LTD. VS ACIT (IN WRIT PETITION NO. 2860 OF 2012, ORDER DATED 18.6.2014) . IN THIS CASE THE H ONOURABLE 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 A GENCY. IN THE PRESENT CASE , THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH 3 SHRI RAKESH KUMAR MITHALAL JAIN ITA NOS. 6826 & 6827/MUM/2018 & CO NOS. 250 & 253/MUM/2019 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 A SITUATION , IN MY CONSIDERED OPINION , ON THE FACTS AND CIRCUMSTANCES OF THE CASE , 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 @ 6.22% SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCH ASE. 4. UPON CAREFUL CONSIDERATION, I FIND CONSIDERABLE 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 DISAL LOWANCE 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. LD COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOSITION. 5. ANOTHER ISSUE RAISED IN ITA NO. 6827/MUM/2018 IS THE AD - HOC DISALLOWANCE OF RS. 1,83,725/ - ON ACCOUNT OF LACK OF FULL VOUCHER FOR EXPENSES CLAIMED, I.E. COMMISSION AND BROKERAGE OF RS.4,97,435/ - , CONVEYANCE OF RS.1,60,268/ - AND TRANSPORT & CARRIAGE OF RS.11,79,543/ - . UPON CAREFUL CON SIDERATION, I FIND THAT THE INTEREST OF JUSTICE WILL BE SERVED IF THE AD HOC DISALLOWANCE IS RESTRICTED TO 5% OF THE EXPENDITURE IN THIS REGARD. I DIRECT ACCORDINGLY. 4 SHRI RAKESH KUMAR MITHALAL JAIN ITA NOS. 6826 & 6827/MUM/2018 & CO NOS. 250 & 253/MUM/2019 6. IN THE RESULT, WHEREAS THE APPEAL S FILED BY THE R E V E N U E STAND D I S M I S S E D , THE C ROSS OBJECTIONS FILED BY THE ASSESSEE STAND P A R T L Y A L L O W E D . ORDER PRONOUNCED IN THE OPEN COURT ON 6 T H F E B R U A R Y , 20 2 0 . SD/ - (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI, DATE : 6 T H F E B R U A R Y , 20 2 0 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, SMC BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI