APRATIM EQUIPMENTS, MUMBAI v. INCOME TAX OFFICER, WARD 3(1), KALYAN

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NOS. 4856 & 4857/MUM/2018 (ASSESSMENT YEARS: 2009-10 & 2010-11) M/S. APRATIM EQUIPMENTS GALA NO. A-19 NEAR W-52 MIDC PHASE II DOMBIVILI (E) THANE 421203 VS. INCOME TAX OFFICER - 3(1) 2ND FLOOR RANI MANSION MURBAD ROAD KALYAN (WEST) - 421301 PAN AAOFA5444N APPELLANT RESPONDENT APPELLANT BY: SHRI MADHAV M. KHISTI RESPONDENT BY: SHRI CHAITANYA ANJARIA DATE OF HEARING: 20.08.2019 DATE OF PRONOUNCEMENT: 05.11.2019 O R D E R PER SHAMIM YAHYA AM THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF THE CIT(A)-1 THANE DATED 29.06.2018 AND IT RELATE TO ASSESSMENT YEARS 2009-10 & 2010-11. 2. THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT(A) H AS ERRED IN SUSTAINING 100% DISALLOWANCE ON ACCOUNT OF BOGUS PU RCHASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN T HIS CASE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOO DS. THE ASSESSMENTS IN THESE CASES WERE REOPENED UPON RECEIPT OF INFORMATI ON FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAS MADE BOGUS PURCHAS ES. THE ASSESSEE SUBMITTED THE PURCHASE VOUCHERS AND THE PAYMENTS WE RE MADE THROUGH BANKING CHANNEL. HOWEVER THE SUPPLIERS WERE NOT PR ODUCED BEFORE THE ASSESSING OFFICER. SALES IN THIS CASE WERE NOT DOUB TED. 4. THE INCOME TAX OFFICER IN THIS CASE HAD MADE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASES RESULTING IN DISALLOWANC E OF ` 2 08 287/- FOR ITA NOS. 4856 & 4857/MUM/2018 M/S. APRATIM EQUIPMENTS 2 A.Y. 2009-10 AND ` 9 77 691/- FOR A.Y. 2010-11. UPON ASSESSEES APPEAL THE LEARNED CIT(A) CONFIRMED THE SAME. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL B EFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORD. UPON CAREFUL CONSIDERATION I FIND THAT THE ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCE HAS BE EN DRAWN DUE TO THE INABILITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS. I FIND THAT IN THIS CASE THE SALES OR OTHER WORKINGS HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW THAT WHEN SALES ARE NOT DOUBTED HUNDRED PERCENT DISALLO WANCE FOR BOGUS PURCHASE CANNOT BE DONE. THE RATIONALE BEING NO SAL ES IS POSSIBLE WITHOUT ACTUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FRO M HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF N IKUNJ EXIMP ENTERPRISES (IN WRIT PETITION NO. 2860 ORDER DATED 18.06.2014) . IN THIS CASE THE HON'BLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOW ANCE FOR THE PURCHASES SAID TO BE BOGUS WHEN SALES ARE NOT DOUBT ED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS INDICATE THAT ASSESSEE HAS MADE PURCHASES FRO M THE GREY MARKET. MAKING PURCHASES THROUGH GREY MARKET GIVES THE ASSE SSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXP ENSES OF THE EXCHEQUER. IN MY CONSIDERED OPINION ON THE FACTS A ND CIRCUMSTANCES OF THIS CASE 12.5% OUT OF THE BOGUS PURCHASE WOULD ME ET THE END OF JUSTICE. I DIRECT ACCORDINGLY. THE LEARNED COUNSEL FOR THE ASS ESSEE FAIRLY AGREED TO THE ABOVE. 6. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE AR E PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH NOVEMBER 2019. SD/ - (SHAMIM YAHYA) ACCOUNTANT MEMBER MUMBAI DATED: 5 TH NOVEMBER 2019 ITA NOS. 4856 & 4857/MUM/2018 M/S. APRATIM EQUIPMENTS 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -1 THANE 4. THE PR.CIT - 1 THANE 5. THE DR SMC BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.