ACIT-6(2)(2), MUMBAI vs. M/S DOLPHIN MARINE ENTERPRISES P. LTD., MUMBAI

The assessee in this case is engaged in repairing and maintaining of refrigeration units. The assessment was reopened upon information from the Sales Tax Department that assessee has made purchases from bogus dealers.

Against the above order, Revenue is in appeal before the ITAT.

We have heard the learned DR and perused the record. We find that in this case the sales or any other aspect of working have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchases 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 Nickunj Eximp Enterprises (in Writ Petition No. 2860, order dated 18.06.2014). In this case, the Hon'ble High Court has upheld hundred percent allowance 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 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 our considered opinion, on the facts and circumstances of the case, the 12.5% disallowance out of bogus purchases done by the learned CIT(A) meets the end of justice. Accordingly, we uphold the order of learned CIT(A).

The decision in the case of N.K. Proteins relied by the Revenue was a dismissal of SLP by the Hon'ble Supreme Court and has already been explained and distinguished by Hon'ble Bombay High Court in the case of Adam H. Kazi.

In the result, appeal filed by the Revenue stands dismissed.

Before parting, we may add that if the assessee has filed a cross-appeal or cross-objection, and the same has remained unheard, either party may apply for recall of this order so that the appeals can be heard together.