SAB Creations Pvt. Ltd. v. ITO, Ward 3(3), Thane
[Citation -2019-LL-0911-95]

Citation 2019-LL-0911-95
Appellant Name SAB Creations Pvt. Ltd.
Respondent Name ITO, Ward 3(3), Thane
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 11/09/2019
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags documentary evidence • gross profit rate • bogus purchase • grey market • disallowance of purchases • reopening of assessment • banking channel
Bot Summary: PAN : AAKCS9899Q Assessee by Shri Jayesh Vanjara Department by Shri Chaitanya Anjaria Date of Hearing 10.7.2019 Date of Pronouncement 11.9.2019 ORDER This is an appeal by the assessee wherein the assessee is aggrieved that the learned CIT-A has erred in sustaining 100 disallowance on account of bogus purchases vide order dated 28.2.2018 pertaining to A.Y. 2009-10. The assessee submitted the purchase vouchers and the payments were made through banking channel. Upon careful consideration I find that assessee has provided the documentary evidence for the purchase. 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 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 as held by honourable High Court of Bombay in its recent judgement in the case of principle Commissioner of income tax versus M Haji Adam Co ,the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. I respectfully following the aforesaid judgement of the honourable High Court set aside the matter to the file of the assessing officer with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other 3 M / s. SA B C r e a t i o ns P v t. L t d. genuine purchases.


THE INCOME TAX APPELLATE TRIBUNAL SMC Bench, Mumbai Before Shri Shamim Yahya (AM) I.T.A. No. 4617/Mum/2018 (Assessment Year 2013-14) M/s. SAB Creations Pvt. Ltd. ITO Ward 3(3) 8A, Eden Woods, Cedar CHS V s . Aashar I T Park Gladys Alwaries Marg Waghale Estate Pokharan Road No. 2 Thane West Thane-400 601. Thane-400604. PAN : AAKCS9899Q (Appellant) (Respondent) Assessee by Shri Jayesh Vanjara Department by Shri Chaitanya Anjaria Date of Hearing 10.7.2019 Date of Pronouncement 11.9.2019 ORDER This is appeal by assessee wherein assessee is aggrieved that learned CIT-A has erred in sustaining 100% disallowance on account of bogus purchases vide order dated 28.2.2018 pertaining to A.Y. 2009-10. 2. Brief facts of case are that assessee in this case is individual. authorities below have not been bothered to mention as to what is business of assessee. assessment was accordingly reopened upon receipt of information from Sales Tax Department that assessee has made bogus purchases. assessee submitted purchase vouchers and payments were made through banking channel. However suppliers were not produced before assessing officer. Sales in this case were not doubted. 3. income tax officer in this case has made 100% addition on account of bogus purchases resulting in disallowance of Rs. 10,72,673/-. Upon assessee s appeal learned CIT(A) confirmed same. 2 M / s . SA B C r e t i o ns P v t. L t d. 4. Against above order assessee is in appeal before ITAT. I have heard both counsel and perused records. 5. Upon careful consideration I find that assessee has provided documentary evidence for purchase. Adverse inference has been drawn due to inability of assessee to produce suppliers. I find that in this case sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). In this case honourable High Court has upheld hundred percent allowance for purchases said to be bogus when sales are not doubted. However in that case all supplies were to government agency. 6. In present case facts of case indicate that assessee has made purchase from grey market. Making purchases through grey market gives assessee savings on account of non-payment of tax and others at expense of exchequer. As regards quantification of profit element embedded in making of such bogus/unsubstantiated purchases by assessee, I find that as held by honourable High Court of Bombay in its recent judgement in case of principle Commissioner of income tax versus M Haji Adam & Co (ITA number 1004 of 2016 dated 11/2/2019 in paragraph 8 there off) ,the addition in respect of bogus purchases is to be limited to extent of bringing gross profit rate on such purchases at same rate as of other genuine purchases. 7. I respectfully following aforesaid judgement of honourable High Court set aside matter to file of assessing officer with direction to restrict addition as regards bogus purchases by bringing gross profit rate on such bogus purchases at same rate as that of other 3 M / s . SA B C r e t i o ns P v t. L t d. genuine purchases. Needless to add assessee should be granted adequate opportunity of being heard. 8. In result, assessee s appeal is partly allowed. Order has been pronounced in Court on 11.9.2019. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 11/9/2019 Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai SAB Creations Pvt. Ltd. v. ITO, Ward 3(3), Thane
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