SHRI MAFATLAL BACHHRAJ SANGHVI, MUMBAI v. ITO 19(2)(3), MUMBAI

ITA 4852/MUM/2018 | 2011-2012
Pronouncement Date: 14-11-2019 | Result: Partly Allowed

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Appeal Details

RSA Number 485219914 RSA 2018
Assessee PAN AADPS2109K
Bench Mumbai
Appeal Number ITA 4852/MUM/2018
Duration Of Justice 1 year(s) 3 month(s)
Appellant SHRI MAFATLAL BACHHRAJ SANGHVI, MUMBAI
Respondent ITO 19(2)(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2019
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 14-11-2019
Last Hearing Date 22-08-2019
First Hearing Date 22-08-2019
Assessment Year 2011-2012
Appeal Filed On 14-08-2018
Judgment Text
T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 4852 /MUM/ 201 8 (ASSESSMENT YEAR 20 11 - 1 2 ) SHRI MAFATLAL BACHHRAJ SANGHVI 15 NANDWANA BUILDING 2/6 NANUBHAI DESAI ROAD C.P. TANK MUMBAI - 400004. PAN : AA DPS2109K V S . ITO - 19(2)(3) MATRU MANDIR TARDEO ROAD MUMBAI - 400 007. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI R.N. MEHTA DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 22.08 . 201 9 DATE OF PRONOUNCEMENT 14 . 1 1 . 201 9 O R D E R TH IS IS AN APPEAL BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT - A HAS ERRED IN SUSTAINING 1 2 . 5% DISALLOWANCE ON ACCOUNT OF BOGUS PURCHASES VIDE ORDER DATED 6.6. 2018 PERTAINING TO ASSESSMENT YEAR 2011 - 12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL RUNNING A PROPRIETARY FIRM IN THE NAME AND STYLE OF M/S. J.D. STEEL CORPORATION WHICH IS TRADING IN THE BUSINESS OF FERROUS AND NON - FERROUS METAL. THE ASSESSMENT IN THIS CASE WAS REOPENED UPON RECEIPT OF INFORMATION F ROM THE SALES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE W ERE NOT DOUBTED. 3. THE INCOME TAX OFFICER IN THIS CASE HAS MADE 1 2 . 5% ADDITION ON ACCOUNT OF BOGUS PURCHASE RESULTING IN DISALLOWANCE OF RS. 5 15 997 / - . UPON ASSESSEES APPEAL ID CIT(A) CONFIRMED THE SAME. SHRI MAFATLAL BACHHRAJ SANGHVI 2 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. 5. 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 THE 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 PURCHASE CANNOT BE DONE. THE RATIO NALE 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 H IGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THAT ASSESSEE HAS MADE PURCHA SE 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 PROFIT ELEMENT EMBEDDED IN MAKING OF SUCH BOGUS/ UNSUBSTANTIATED PURCHASES BY THE ASSESSEE I FIND THAT IT IS THE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE THAT IT WILL BE DOUBLED PREJUDICE IF THE GROSS PROFIT ALREADY DECLARED IS NOT REDUCED FROM THE STANDARD 12.5% BEING DISALLOWED ON ACCOUNT OF BOGU S PURCHASES. 6. UPON CAREFUL CONSIDERATION I FIND CONSIDERABLE COGENCY IN THE ABOVE SUBMISSION. ACCORDINGLY I DIRECT THAT DISALLOWANCE IN THIS CASE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASE AS REDUCED BY THE GROSS PROFIT ALREADY DECLARED BY THE ASSES SEE. LEARNED COUNSEL OF THE ASSESSEE FAIRLY AGREED TO THE ABOVE. SHRI MAFATLAL BACHHRAJ SANGHVI 3 7 . IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 14 . 1 1 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 14 / 1 1 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// ( A SSISTANT REGISTRAR ) PS ITAT MUMBAI