INCOME TAX OFFICER 10(1)(4), MUMBAI V. TV TELESHOP PRIVATE LIMITED, MUMBAI

MA 535/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2081 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 24-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 69C; 143(3); 254(2); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND S/SHRI AMARJIT SINGH, JUDICIAL MEMBER M.A. N O S . 535 & 536 / M UM /201 9 (ARISING OUT OF ITA N OS. 992 & 991 /MUM/201 8 ) ( / ASSESSMENT YEAR S : 2009 - 10 & 2010 - 11 ) ITO - 10(1)(4) ROOM NO.458, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 . / VS. TV TELESHOP PVT. LTD. SHOP NO.10, BHAVESHWAR PLAZA, L. B.S. MARG, GHATKOPAR (W), MUMBAI - 400086. / . / . PAN/GIR NO.: AAECM1078M ( / APPELLANT ) / APPLICANT .. ( / RESPONDENT ) / DATE OF HEARING: 18 / 0 6 /2 0 21 /DATE OF PRONOUNCEMENT: 18 /06 / 2021 ORDER PER AMARJIT SINGH, J M THIS ORDER SHALL DISPOSE OF THE MISCELLA N EOUS APPLICATION BEARING NO S. 5 35 /M UM /201 9 & 536/MUM/2019 ARISING OUT OF ITA. NO S . 992 & 991 /M UM /1 8 FOR THE A.Y.200 9 - 1 0 & 2010 - 11 RESPECTIVELY . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT PROCEEDING U/S 143(3) R.W.S. 147 OF THE I. T. ACT WAS COMPLETED VIDE ORDER DATED 27.03.2014 WHEREIN THE AO HAS RAISED THE ADDITION TO THE EXTENT OF 25% OF THE BOGUS PURCHASE IN VIEW OF THE PROVISIONS U/S 69C OF THE ACT. SUBSEQUENTLY, THE REVENUE FILED AN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF THE BOGUS PURCHASES. THE REVENUE AS WELL AS ASSESSEE FILED AN APPEAL BEFORE THE HONBLE ITAT. THE REVENUE FILED AN APPEAL BEFORE THE HONBLE ITAT IN ITA. NO.830/MUM/2018 DATED 14.02.2019 AND THE HONBLE ITAT HAS GIVEN THE FOL LOWING FINDING: - REVENUE BY: SHRI BRAJENDRA KUMAR ( D R) ASSESSEE BY: NONE M.A. NOS. 535 & 536/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 4. WE HAVE CONSIDERED THE SUBMISSION OF ID. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE NOTED THAT DURING THE ASSESSMENT, THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT NOR DOUBTED THE GENUINENESS OF SALE OF THE ASSESSEE. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DISALLOWED THE 25% OF THE PURCHASES. THE ID. CIT(A) BY FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN CIT VS. SIMITH P. SHETH (365 ITR 451) HELD THAT THERE CAN BE NO SALE WITHOUT CORRESPONDING PURCHASES. IN SUCH CASES, THE ONLY PROFIT ELEMENT EMBEDDED IN THESE PURCHASE WAS TO BE DISALLOWED. THE ID. CIT(A) AFTER EXAMINING THE GROSS PROFIT RATIO OF ASSESSEE FROM ASSESSMENT YEAR 2008 - 09 TO 2010 - 11 WHICH IS RANGING 7.13% TO 12.88% RESTRICTED THE DISALLOWANCE TO 15%. 5. WE ARE ALSO CONSIDERED VIEW THAT UNDER THE INCOME TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REV ENUE. WE MAY FURTHER CONCLUDE THAT EVEN IF THE TRANSACTION IS NOT VERIFIABLE, THE ONLY TAXABLE IS TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. AND AFTER CONSIDERING THE FACTS OF THE CASE AND THE RIVAL CONTENTION OF THE PARTIES, WE ARE OF THE OP INION THAT IN ORDER TO FULFIL THE GAP OF REVENUE LEAKAGE THE DISALLOWANCE OF REASONABLE PERCENTAGE OF SUCH PURCHASES WOULD MEET THE END JUSTICE. CONSIDERING THE ABOVE FACTUAL DISCUSSION, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY THE ID. CIT(A). 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED.' 3 ACCORDINGLY, THE HONBLE ITAT HAS RESTRICTED THE ADDITION TO THE EXTENT OF 15% OF THE BOGUS PURCHASES. THE ASSESSEE HAS ALSO FILED AN APPEAL AGAINST THE ORDER PASSED BY THE LD. CIT(A) DATED 22.11.2017 BEFORE THE HONBLE ITAT IN VIEW OF ITA. NO.992/MUM/2018. THE HONBLE ITAT DISPOSED OFF THE APPEAL HOLDING AS UNDER: - '9. UPON CAREFUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVID ENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BEEN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. WE FIND THAT IN THIS CASE THE SALES HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANC E OF BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT ACTUAL PURCHASE. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THECASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860 ORDER D T. 18.6.2014. IN THIS CASE, THE M.A. NOS. 535 & 536/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 HONOURABLE HIGH COURT HAS UPHELD HUNDRED PER CENT ALLOWANCE FOR THE PURCHASE SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO THE GOVERNMENT AGENCY. IN THE PRESENT CASE, THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVING ON ACCOUNT OF NON - PAYMENT OF TAX AND OTHERS AT THE EXPENSE OF THE EXCHEQUER. IN SUCH SITUATION, IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE, 12.5% DISALLOWANCE OUT OF THE BOGUS PURCHASES MEETS THE END OF THE JUSTICE. HOWEVER, IN THIS REGARD THE LEARNED COUNSEL OF THE ASSESSEE HAS PRAYED THAT WHEN ONLY THE PROFITS EARNED BY THE ASSESSEE ON THES E BOGUS PURCHASE TRANSACTION IS TO BE TAXED THE GROSS PROFIT ALREADY SHOWN BY THE ASSESSEE AND OFFERED TO TAX SHOULD BE REDUCED FROM THE STANDARD 12.5% BEING DIRECTED TO BE DISALLOWED ON ACCOUNT OF BOGUS PURCHASE. 10. UPON CAREFUL CONSIDERATION WE FIND CON SIDERABLE COGENCY IN THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE, AS OTHERWISE IT WILL BE DOUBLE JEOPARDY TO THE ASSESSEE. ACCORDINGLY, WE MODIFY THE ORDER OF THE ID. CIT(A) 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. 11. IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STAND PARTLY ALLOWED. 4. ACCORDINGLY, THE HONBLE ITAT HAS RESTRICTED THE ADDITION TO THE E XTENT OF 12.5% OF THE BOGUS PURCHASES REDUCED BY GROSS PROFIT RATE DECLARED BY ASSESSEE ON THESE TRANSACTIONS. BOTH THE ORDERS HAVE A DIFFERENT VIEW. THE APPEAL BEA RING ITA. NO.830/MUM/2018 AND 992/MUM/2018 WERE NOT CONSOLIDATED. THE REVENUE APPEAL WAS DI SMISSED RESTRICTING THE ADDITION TO THE EXTENT OF 15% OF THE BOGUS PURCHASE WHEREAS APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED RESTRICTING THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES AS REDUCED BY GROSS PROFIT RATE ALREADY DECLARED BY ASSESSE E ON THESE TRANSACTIONS. DIFFERENT FINDING HAS COME IN BOTH APPEALS. DIFFERENT OPINION ON THE SAME ISSUE HAS CAUSE D THE AMBIGUITY. IT IS QUITE MISTAKE APPARENT ON RECORD IN VIEW OF THE SECTION 254(2) OF THE ACT. ACCORDINGLY, WE RECALL THE ORDER IN BOTH THE APPEALS I.E. 830/MUM/2018 & 992/MUM/2018 DATED 01.03.2019. THE REGISTRY M.A. NOS. 535 & 536/MUM/2019 A.YS. 2009 - 10 & 2010 - 11 IS HEREBY DIRECTED TO REFIX THE MATTER IN DUE COURSE. ACCORDINGLY, BOTH T HE MISCELLANEOUS APPLICATIONS ARE HEREBY ALLOWED. ORDER WAS PRON OUNCED IN TH E OPEN COURT ON 18 / 0 6/ 20 21 SD/ - SD/ ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI, DT: 18 /06/2021 VIJAY PAL SINGH (SR. PS) COPY TO : 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) 4 . THE CIT 5 . THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, E , BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES