DC ENGINEERS PRIVATE LIMITED, VASI V. ITO WARD-4(1), THANE

ITA 736/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 9970 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 08-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAILASH GAIKWAD
• Keywords: Bogus purchase
• Section: 208

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-II BENCH , MUMBAI BEFORE SHRI SHAMIM YAHYA, AM ITA NO. 736/MUM/2019 (ASSESSMENT YEAR: 2010-11) M/S. D. C. ENGINEERS PRIVATE LIMITED PLOT NO. 36, SURVEY NO.66-1/2, NAIKPADA, WALIV, OPP. RAPID PACK, VASAI (E) 401 208 VS. ITO, WARD 4(1), THANE PAN/GIR NO. AABCD 1670 R ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : NONE RESPONDENT BY : SHRI KAILASH GAIKWAD DATE OF HEARING : 14.10.2020 DATE OF PRONOUNCEMENT : 01.01.2021 O R D E R PER SHAMIM YAHYA, A. M.: THIS APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, MUMBAI (LD .CIT(A) FOR SHORT) DATED 01.11.2018 HAS ERRED IN SUSTAINING 25% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASE FOR THE ASSESSMENT YEAR (A.Y.) 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOODS. INFORMATION WAS RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE IS ENGAGED IN MAKING B OGUS PURCHASES OF RS.62,25,917/- FROM TWO PARTIES. THE ASSESSMENT WAS ACCORDINGLY RE OPENED. 3. THE ASSESSING OFFICER (A.O. FOR SHORT) IN THIS CASE HAS MADE 25% ADDITION ON ACCOUNT OF BOGUS PURCHASE AMOUNTING TO RS.15,56,480 /-. 4. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) CONFI RMED THE SAME. 2 ITA NO. 736/MUM/2019 (A.Y. 2010-11) M/S. D. C. ENGINEERS PRIVATE LIMITED VS. ITO 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPE AL BEFORE THE ITAT. 6. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHORT) AND PERUSED THE RECORDS. UPON CAREFUL CONSIDERATION I FIND THAT THE ASSESSEE 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. I FIND THAT IN THIS CASE, THE SALES OR ANY OTHER ASPECT OF WORKING OF ASSESSEE HAVE NOT BEEN D OUBTED. 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 HONOURABLE JURISDICTIONAL HIGH COURT DECISION 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 AL LOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER, IN TH AT CASE ALL THE SUPPLIES WERE TO THE GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS O F THE CASE INDICATE THAT THE ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASE S THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF T AX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN MY CONSIDERED OPIN ION, ON THE FACTS AND CIRCUMSTANCES, CERTAIN DISALLOWANCE HAS TO BE DONE, OUT OF THE BOG US PURCHASES TO MEET THE END OF JUSTICE. IN MY CONSIDERED OPINION, DISALLOWANCE OF 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DISCLOSED BY THE ASSESSEE WOULD MEET THE END OF JUSTICE. IT DOES NOT NEED TO BE REITERATED THAT IF THE GROSS PROFIT ALREADY SHOWN IS MORE THAN 12.5%, NO DISALLOWANCE IS REQUIRED. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD ON 01.01.20 21 SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI; DATED : 01.01.2021 ROSHANI , SR. PS 3 ITA NO. 736/MUM/2019 (A.Y. 2010-11) M/S. D. C. ENGINEERS PRIVATE LIMITED VS. ITO COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD FILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI