MAHAVIR METAL INDUSTRIES,MUMBAI vs. THE ITO - 27(2)(2), MUMBAI

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ITA 1252/MUM/2020Status: DisposedITAT Mumbai05 May 2022AY 2009-102 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to sustain a 12.5% disallowance on bogus purchases, acknowledging that sales were not doubted. This approach was considered to meet the ends of justice given the grey market purchases.

What were the facts?

The assessee, engaged in steel trading, faced assessment reopening based on information about bogus purchases from the Sales Tax department. The Assessing Officer (AO) made a 12.5% addition on the alleged bogus purchases.

What were the issues?

The primary issue was the extent of disallowance for purchases identified as bogus when the corresponding sales were not doubted.

Which sections of the Income-tax Act were involved?

None explicitly mentioned as the core of the dispute, but the context relates to disallowance of expenses/purchases.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

Before: Shri Shamim Yahya

For Appellant: Ms. Usha Gaikwad
For Respondent: Ms. Usha Gaikwad
Hearing: 25.04.2022Pronounced: 05.05.2022

O R D E R Per Shamim Yahya (AM) :- This is an appeal by the assessee, wherein the assessee is aggrieved that the Ld.CIT(A) has erred in sustaining the addition for bogus purchase of Rs.9,72,625/- done @12.5% by AO for the AY 2009-10 vide order dated 02.11.2018.

2.

The assessee in this case is engaged into trading in steel. The assessment was reopened upon information from Sales tax department that assessee has made Rs. 31,57,734/- purchases from bogus dealers. The AO made 12.5% addition of the bogus purchase.

3.

Upon assessee’s appeal Ld.CIT(A) has noted that the sales have not been doubted. Accordingly placing reliance upon several case laws and upon the facts of the case, he sustained 12.5% disallowance out of the bogus purchases.

4.

Against the above order, assessee is in appeal before the ITAT. I have heard the Ld. DR and perused the record.

5.

I find that in this case, the sales have not been doubted it is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon’ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises( in Writ Petition No.2860, order dated 18.06.2014). In this case, the Hon’ble High Court has upheld 100% disallowance for the purchases said to be bogus, when sales are not doubted. However, the facts of the present 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. In such situation, in my considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases done by the Ld.CIT(A) meets the end of justice. Accordingly, I uphold the order of Ld.CIT(A).

6.

In the result, this appeal filed by the assessee stands dismissed.

Pronounced in the open court on 05 .05.2022

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