HIMMAT LAL G. THAKKAR,MUMBAI vs. ITO, WARD 22(1)(5), MUMBAI

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ITA 5315/MUM/2019Status: DisposedITAT Mumbai01 July 2021AY 2010-113 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 held that while 100% disallowance of bogus purchases is not permissible when sales are not doubted, the 12.5% disallowance sustained by the CIT(A) was justified given the circumstances of grey market purchases.

What were the facts?

The assessee was engaged in the business of printing and information was received from the Sales Tax Department regarding bogus purchases. The assessee failed to provide evidence for purchases, leading to additions by the AO and CIT(A).

What were the issues?

Whether disallowance on account of bogus purchases is justified when sales are not doubted, and if so, to what extent.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

For Respondent: Shri Anoop-DR
Hearing: 19.05.2021Pronounced: 01.07.2021

Heard together (2 matters)

I.T.A. No. 5315/Mum/2019
I.T.A. No. 5316/Mum/2019

Read from the judgment's own cause title. This page is filed under one of them.

O R D E R Per Shamim Yahya (AM) :- These are appeals by the Assessee wherein the assesse is aggrieved that the Ld.CIT(A) has erred in sustaining 12.5% disallowance on account of bogus purchases vide common order dated 09.05.2019.

2.

Brief facts of the case are that assesse is engaged in the business of printing Information was received from the Sales tax Department that assessee has engaged in bogus purchases. The assessment was accordingly reopened. Except for bank statement assessee did not provide any evidence in support of the purchases. Even, the purchase bills were not provided to AO.

2 Himmatlal G.Thakkar

3.

The AO in this case has made 15.08% addition on account of bogus purchase. The disallowance came to Rs.8,35,389/- for AY 2010-11 and Rs.16,96,623 for AY 2011- 12. Upon assessee’s appeal Ld.CIT(A) reduced the same to 12.5%.

4.

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

5.

Upon careful consideration, we find that the assessee has not provided any documentary evidence for the purchase. Adverse inference have also been drawn due to the inability of the assessee to produce the suppliers. However, we note that 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% allowance for the purchases said to be bogus, when sales are not doubted. However, in that case all the supplies were to government agency. 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. In such situation in my considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases meets the end of justice.

6.

Hence, w affirm the order of Ld.CIT(A)

7.

In the result, assessee’s appeals are dismissed.

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Pronounced in the open court on 01.07.2021

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