MAYUR HIMMATLAL MADHANI, MUMBAI V. ITO 12 (2)(4), MUMBAI

ITA 7979/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7911 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 26-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL J
• Keywords: Bogus purchase; Opportunity of being heard; Set aside
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NOS.6851 & 7979/MUM/2019 ASSESSMENT YEARS: 2010-11 & 2009-10 MAYUR HIMMATLAL MADHANI, A/204, SILVER BIRCH CHS LTD, VASANT GARDEN, NEAR SWAPNA NAGARI, MULUND (W), MUMBAI 400 080. PAN AACPM6145J VS ITO 23(2)(4), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BHADRESH DOSHI RESPONDENT BY : SHRI MICHAEL J DATE OF HEARING :28.07.2020 DATE OF PRONOUNCEMENT : 25.08.2020 O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER: THESE ARE APPEALS BY THE ASSESSEE WHEREIN THE ASSES SEE IS AGGRIEVED THAT THE LEARNED CIT-A HAS ERRED IN SUSTAINING 100% DIS ALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, VIDE ORDER DATED 30.09.2019 FOR A.Y. 201 0-11 AND 18.03.2014 FOR A.Y 2009-10, AMOUNTING TO RS 30,37,859/- AND RS 50,01,4 18/- RESPECTIVELY. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THI S CASE IS A TRADER OF ALL CONTROL PANEL ACCESSORIES. 3. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RE CEIPT OF INFORMATION FROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOG US PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WE RE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BE FORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUBTED. ITA NOS.6851 & 7979/MUM/2019 MAYUR HIMMATLAL MADHANI. 2 4. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 100 % PERCENT ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS 30,37,859 FOR A.Y. 2010- 11 AND RS. 50,01,418/- FOR A.Y.. 2009-10. UPON ASSE SSEES APPEAL LD CIT A CONFIRMED THE SAME 5. AGAINST ABOVE ORDERS, ASSESSEE IS IN APPEAL BEFO RE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 6. UPON CAREFUL CONSIDERATION, WE FIND THAT ASSESSE E HAS PROVIDED DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND T HAT 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 D ONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PR OPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN TH E 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, IN THAT CASE A LL THE SUPPLIES WERE TO GOVERNMENT AGENCY 7. IN THE PRESENT CASE, THE FACTS INDICATE THAT ASS ESSEE 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. AS REGARDS THE QUANTIFICATION OF THE PRO FIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/UNSUBSTANTIATED PURCHASES BY THE ASSE SSEE, WE FIND THAT AS HELD BY HONOURABLE HIGH COURT OF BOMBAY IN ITS RECENT JUDG EMENT IN THE CASE OF PRINCIPLE COMMISSIONER OF INCOME TAX VERSUS M HAJI ADAM & CO (ITA NUMBER 1004 OF 2016 DATED 11/2/2019 IN PARAGRAPH 8 THERE OFF), THE ADDI TION IN RESPECT OF BOGUS PURCHASES IS TO BE LIMITED TO THE EXTENT OF BRINGIN G THE GROSS PROFIT RATE ON SUCH PURCHASES AT THE SAME RATE AS OF OTHER GENUINE PURC HASES. 8. WE RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMEN T OF THE HONOURABLE HIGH COURT SET ASIDE THE MATTER TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO RESTRICT THE ADDITION AS REGARDS THE BOGUS PURCHASE S BY BRINGING THE GROSS PROFIT RATE ITA NOS.6851 & 7979/MUM/2019 MAYUR HIMMATLAL MADHANI. 3 ON SUCH BOGUS PURCHASES AT THE SAME RATE AS THAT OF THE OTHER GENUINE PURCHASES. NEEDLESS TO ADD THE ASSESSEE SHOULD BE GRANTED ADEQ UATE OPPORTUNITY OF BEING HEARD. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY AGREED TO THE ABOVE. 9. IN THE RESULT ASSESSEES APPEALS ARE ALLO WED FOR STATISTICAL PURPOSES.. ORDER PRONOUNCED UNDER RULE 34(4) OF TH E ITAT RULES ON 25/08/2020. SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 25 TH AUGUST , 2020. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), 4. THE C I T 5. THE DR, D BENCH BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI