M/S. STERLING STEEL INDUSTRIES, MUMBAI V. INCOME TAX OFFICE 19(3)(4), MUMBAI, MUMBAI

ITA 7096/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8343 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM / I .T.A. NO. 7096 / MUM/ 20 1 8 ( / ASSESSMENT YEAR: 2011 - 12 ) M/S. STERLING STEEL INDUSTRIES 129/131, KIKA STREET, GULALWADI, MUMBAI - 400004 . / VS. ITO 19(3)(4) MUMBAI ./ ./ PAN/GIR NO. : AAAFS 3142 F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 18/ 0 2/ 20 20 / DATE OF PRONOUNCEMENT : 20 / 0 4 / 2020 / O R D E R PER SHAMIM YAHYA, AM: THIS IS AN APPEAL BY THE ASSESSEE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUST AINING ONLY 12.5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 19.09.2018 PERTAINING TO A.Y.2011 - 12. 2 . THE ASSESSEE IN THIS CASE IS ENGAGED INTO BUSINESS OF FERROUS & NON - FERROUS METALS. 3. THE ASSESSMENT WAS REOPENED UPON INFORMATION FROM SWALES TAX DEPARTMENT THAT ASSESSEE HAS MADE PURCHASES FROM BOGUS DEALERS. 4. THE AO IN THIS CASE HAS MADE 12.5% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS. 17,89,063/ - . THE AO MADE THE ASSESSEE BY : NONE REVENUE BY: SHRI CHAITANYA ANJARIA ITA. NO.7096 /M/2018 A.Y.2011 - 12 2 ADDITION ON THE BASIS OF INFORMATION FROM THE SALES TAX DEP ARTMENT. HE DID NOT MAKE ANY ENQUIRY FROM THE ALLEGED BOGUS SUPPLIES . HE DID NOT ISSUE NOTICE U/S 133(6) OF THE ACT. 5. UP ON ASSESSEES APPEAL LD. CIT(A) HAS NOTED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY PLACING RELIANCE UPON SEVERAL CASE LAWS AN D UP ON THE FACTS OF THE CASE HE SUSTAINED 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES. 6. AGAINST ABOVE ORDER REVENUE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD LD. DR AND PERUSED THE RECORDS. 7. 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 POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DE CISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO 2860, ORDER DT 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT 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. HOWEVER, IN THE ABSENCE OF ANY ENQUIRY BY THE AO F ROM THE ALLEGED BOGUS SUPPLIES I N MY CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 2% DISALLOWANCE OUT OF THE BOGUS ITA. NO.7096 /M/2018 A.Y.2011 - 12 3 PURCHASES MEETS THE END OF JUSTICE. ACCORDINGLY, I DIRECT THAT DISALLOWANCE BE RESTRICTED @ 2% OF TH E BOGUS PURCHASE . I N THE RESULT , THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20 /0 4 /2020 SD/ - ( SHAMIM YAHYA ) / ACCOUNTANT MEMBER MUMBAI; DATED : 20 / 04 / 2020 VIJAY PAL SINGH /SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REG ISTRAR) , / ITAT, MUMBAI