SHRI BABULAL B. SUTHAR, MUMBAI V. ITO 19(1)(2), MUMBAI

MA 134/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9951 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 28-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER MA NOS. 134 & 135/MUM/2020 (IN ITA NOS. 5674 & 5675/MUM/2018) ( ASSESSMENT YEAR: 2010-11 & 2011-12 ) SHRI BABULAL B. SUTHAR 26 GRO FLOOR, DURGADEVI ROAD, KUMBHARWADA, MUMBAI 400004. / VS. ITO 19(1)(2) MATRU MANDIR, TARDEO ROAD, MUMBAI 400007. ./ ./ PAN/GIR NO. : AADPS7629G ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RUSHABH MEHTA, AR / RESPONDENT BY : SHRI SANJAY J SETHI, SR DR / DATE OF HEARING 25/06/2021 !'# / DATE OF PRONOUNCEMENT 30/06/2021 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED THE MISCELLANEOUS APPLICATIONS FOR THE TWO ASSESSMENT YEARS IN ITA NO.5675/MUM/2018 DATED 11.10.2019 SEEKING MODIFICATIONS IN THE HONBLE ITAT ORDER. SINCE, THE ISSUES INVOLVED IN BOTH THE APPLICATIONS ARE IDENTI CAL MA NOS 134 & 135/MUM/2020 - 2 - AND SIMILAR, HENCE THEY ARE CLUBBED AND HEARD TOGET HER AND CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVENIENCE, WE SHALL TAKE UP MA NO. 134/MUM/2020, FOR THE A.Y 2010-11 AS A LEAD CASE AND THE FACTS NARRATED. 2. THE LD AR SUBMITTED THAT THE HONBLE TRIBUNAL WHILE PASSING THE ORDER DATED 11.10.2019 HAS NOT CONSIDERED THE JURISDICTIONAL HIGH COURT DECISION AND THE ASSESSEES OWN CASE FOR THE A.Y 2009-10 WHICH WAS RELIED IN THE COURSE OF HEARING. THE LD. AR MENTIONED THAT AGAINST THE ADDITION OF 12.5% OF BO GUS PURCHASES MADE BY THE A.O. THE CIT(A) HAS CONFIRMED THE ACTION OF THE A.O. AND ON FURTHER APPEAL ITAT HAS DISMISSED THE ASSESSEE APPEAL. THE CONTENTIONS OF THE LD. AR ARE THAT IN THE ASSESSEES OWN CASE FOR THE A.Y 2009-10 IN ITA NO. 4453/MUM/2018 DATED 22.07.2019. THE HONBLE TRIBUNAL HAS DIRECTED THE A.O. TO REDUCE THE GROSS PROFIT ALREADY OFFERED IN THE RETURN OF INCOME FROM THE 12.5% OF THE BOGUS PURCHASES. WHEREAS, FOR THE AY 2010-11 &2011-12 THE TRIBUNAL HAS CONFIRMED THE ADDITION OF 12.5% OF BOGUS PURCHASES AND DISMISSED THE ASSESSES APPEALS. FURTHER THE LD. AR MENTIONED THAT THE CIT(A) SHOULD MA NOS 134 & 135/MUM/2020 - 3 - HAVE REDUCED THE GROSS PROFIT OF 7.82% OFFERED FROM ESTIMATION OF PROFIT AT 12.5% ON THE ALLEGED BOGUS PURCHASES AND PRAYED THAT SAME DIRECTIONS BE APPLIE D FOR THESE TWO ASSESSMENT YEARS. CONTRA, THE LD. DR SUPPORTED THE ORDER OF THE HONBLE TRIBUNAL. 3. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE LD.AR SUBMISSIONS ARE SUPPORTED WITH THE ORDER OF THE ITAT FOR THE ASST Y EAR 2009-10. WE CONSIDERING THE FACTS AND SUBMISSIONS ARE OF THE OPINION THAT WHEN ISSUES ARE SIMILAR AND IDENTICAL TO THE EARLIER ASSESSMENT YEAR AND WHICH CANNOT BE DISPUTED. WE HAVE TO RESPECTFULLY FALLOW THE JUDICIAL PRECEDENCE. ACCORDINGLY, WE RELY ON THE DECISION OF THE HONBLE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y 2009-10 IN ITA NO. 4453/MUM/2018 DATED 22.07.2019 AS DISCUSSED IN THE ABOVE PARAGRAPHS AND CONSIDERED IT APPROPRIATE TO REFER TO THE OBSERVATI ONS AT PAGE 2 PARA 6 AND 7 OF THE ORDER, WHICH IS READ AS UNDER: 6. UPON CAREFUL CONSIDERATION I FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF TH E ASSESSEE TO PRODUCE THE SUPPLIERS. 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 PUR CHASE MA NOS 134 & 135/MUM/2020 - 4 - CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POS SIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPO RTED 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 AL L THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE P URCHASE 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 CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE 12.5 % DISALLOWANCE O UT OF THE BOGUS PURCHASES MEETS THE END OF JUSTICE. HOWEVER I N THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED T HAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THESE BO GUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFI T ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALL OWED ON ACCOUNT OF BOGUS PURCHASE. 7. UP ON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESS EE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSE E. ACCORDINGLY I MODIFY THE ORDER OF LEARNED C1TA AND DIRECT THAT THE DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5 % OF THE BOGUS PURCHASES AS REDUCED BY THE GROSS PROFIT RATE ALREADY DECLARED BY THE ASSESSEE ON THESE TRANSACTIONS. LEA RNED COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THIS PROPOS ITION. 4. WE FOLLOW THE PRECEDENCE AND MODIFY THE ORDER OF THE HONBLE ITAT WITH THE DIRECTIONS TO THE ASSESSI NG OFFICER TO REDUCE THE GROSS PROFIT RATE ALREADY OF FERED ON THESE TRANSACTIONS FROM THE ESTIMATED INCOME OF 12.5% DISALLOWED. WE ORDER ACCORDINGLY MA NOS 134 & 135/MUM/2020 - 5 - 5. IN THE RESULT THE TWO MISCELLANEOUS APPLICATIONS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2021 SD/- SD/- (S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 30/06/2021 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI