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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM
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.
The assessee in this case is engaged into trading in computer hardware and peripherals. The assessment was reopened upon information from sales tax department that the assessee has made Rs.2,64,264/- purchases from bogus dealers. The A.O. made addition of the bogus purchase for an amount of Rs.81,600/- on peak credit basis.
Upon the assessee’s appeal, the learned CIT(A) confirmed the same.
Against the above order, the Revenue is in appeal before the ITAT.
I have heard the ld. Departmental Representative (ld. DR for short) and perused the material available on record. I find that in this case the sales have not been doubted. It
(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.
In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 28.04.2022.