ITO 26(1)(4), MUMBAI V. JANAK GULABCHAND KHANA, THANE

ITA 7044/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8361 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Assessee Lawyers: N O N E
• 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. 7044 /MUM/ 201 8 (ASSESSMENT YEAR 20 1 0 - 1 1 ) ITO 26(1)(4) ROOM NO. 707 7 TH FLOOR PRATYAKSHAKAR BHAVAN BKC, BANDRA MUMBAI - 400 051. V S . SHRI JANAK GULABCHAND KHONA PLOT NO. 267, BATL IWALA COMPOUND, NEAR UPVAN LAKE POKHARAN ROAD NO. 1, THANE - 400 606. PAN : AFJPK0874Q ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY N ONE DEPARTMENT BY SHR I CHAITANYA ANJARIA DATE OF HEARING 17 .2 . 20 20 DATE OF PRONOUNCEMENT 20.4 . 20 20 O R D E R THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENUE IS AG G RIEVED THAT THE LEARNED CIT - A HAS DELETED PART OF THE ADDITION FOR BOGUS PURCHASE BY SUSTAINING ONLY 1 9 . 67 % DISALLOW A NCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 2 9.6.2018 PERTAINING TO A . Y . 2010 - 11. 2. THE ASSESSEE IN THIS CASE IS ENGAGED INTO BUSINESS OF MANUFACTURING. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 1,53,241/ - . 3. UP ON ASSESSEE'S APPEAL LEARNED CIT - A HAS NOTED THAT THE SALES HA VE NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AND UP ON THE FACTS O F THE CASE HE SUSTAINED 19.67% BY GIVING CREDIT OF GROSS PROFIT SHOWN FOR THE YEAR FROM AVERAGE GROSS PROFIT OF EARLIER YEARS DISALLOWANCE OUT OF THE BOGUS PURCHASES . SHRI JANAK GULABCHAND KHONA 2 4. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LEARNED DEPART MENTAL REPRESENTATIVE AND PERUSED THE RECORDS . I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSI BLE 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, ORDER DT . 18.6.2014). IN THIS CASE THE HON HIGH COURT HAS UPHELD HUNDRED PERCE NT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER THE FACTS OF THE PRESENT 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 C O NSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES DONE BY THE LEARNED CIT - A MEETS THE END OF JUSTICE. AC CORDINGLY I UPHOLD THE ORDER OF LEARNED CIT - A. 5. THE DECISION OF N . K . P ROTEINS LTD. (250 ITR 22) REFERRED BY REVENUE IN GROUNDS OF APPEAL HAS ALREADY BEEN DISTINGUISHED BY HON'BLE BOM BAY HIGH COURT IN THE CASE OF M. HAJI ADAM & C O . ( ITA NO 1004 OF 20016 DT . 11/2/2019 ). 6. IN THE RESULT THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED . ORDER HAS BE EN PRONOUNCED IN THE COURT ON 20.4 . 20 20 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 20 / 4 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI SHRI JANAK GULABCHAND KHONA 3 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI