DCIT CIR. 2(2)(1), MUMBAI V. KISHCO LTD., MUMBAI

ITA 873/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9980 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 11-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Keywords: Bogus purchase

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.873/MUM/2017 : ASST.YEAR 2010-2011 DY.COMMISSIONER OF INCOME - TAX CIRCLE 2(2)(1) MUMBAI. / VS. M/S.KISHCO LIMITED PLOT NO.54EFGH, BEHIND 53/54 GOVERNMENT INDUSTRIAL ESTATE CHARKOP, KANDIVALI (EAST) MUMBAI 400 067. PAN : AAACK2894K. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI V.JANARDHANAN /RESPONDENT BY : SHRI PARESH SHAPARIA / DATE OF HEARING : 06.07.2017 / DATE OF PRONOUNCEMENT : 01.09.2017 / O R D E R THIS IS AN APPEAL BY THE REVENUE WHEREIN THE REVENUE IS AGGRIEVED THAT THE LEARNED CIT(A) HAS NOT SUSTAINED 100% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES, IN HIS ORDER DATED 16.11.2016 PERTAINING TO ASSESSMENT YEAR 2010-2011. 2. THE ASSESSING OFFICER IN THIS CASE HAS MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASES AMOUNTING TO RS.61,98,189. UPON ASSESSEES APPEAL, THE LEARNED CIT(A) HAS NOTED THAT THE SALES HAS NOT BEEN DOUBTED. ACCORDINGLY, PLACING RELIANCE UPON SEVERAL CASE LAWS AND UPON THE FACTS OF THE CASE HE SUSTAINED 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES. 3. AGAINST THE ABOVE ORDER, ASSESSEE IS IN APPEAL BEFORE THE ITAT. ITA NO.873/MUM/2017. M/S.KISHCO LIMITED. 2 4. I HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE NOTICE. 5. I FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, 100% DISALLOWANCE FOR BOGUS PURCHASE CANNOT BE DONE. THIS PROPOSITION IS SUPPORTED FROM HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES. 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 SELLING ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN MY CONSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE ENDS OF JUSTICE. THIS IS FOLLOWING THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SMIT P. SETH, FOLLOWED BY THE ITAT MUMBAI BENCHES IN A NUMBER OF CASES. 6. ACCORDINGLY, I UPHOLD THE ORDER OF LEARNED CIT(A) AND DIRECT THAT THE DISALLOWANCE BE LIMITED TO 12.5% OF THE BOGUS PURCHASE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 01 ST DAY OF SEPTEMBER, 2017. SD/- ( SHAMIM YAHYA ) ACCOUNTANT MEMBER MUMBAI; DATED : 01 ST SEPTEMBER, 2017. DEVDAS* ITA NO.873/MUM/2017. M/S.KISHCO LIMITED. 3 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI 6. [ / GUARD FILE.