B S COMPARK,NAVI MUMBAI vs. ITO 28(1)(2) MUMBAI, NAVI MUMBAI

O R D E R Per Shamim Yahya, A. M.:

This is an appeal by the assessee wherein the assessee is aggrieved that the learned Commissioner of Income Tax (Appeals)-26, Mumbai (‘ld.CIT(A) for short) dated 25.09.2019 has sistained the addition for bogus purchase of Rs.81,600/- by the Assessing Officer (A.O. for short) on peak credit basis, for the assessment year (A.Y.) 2009-10.

(A.Y. 2009-10) B S Compark vs. ITO is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from the Hon'ble Jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in Writ Petition No. 2860 vide order dated 18.06.2014). In this case, the Hon'ble High Court has held that hundred percent allowance for the purchases said to be bogus cannot be done, when sales are not doubted. However, the facts of the present case indicate that the 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 expenses 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 justice. Accordingly, I set aside the order of the authorities below and direct that the disallowance be limited to 12.5% of bogus purchase.