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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAM LAL NEGI
This is an appeal by the Revenue wherein the Revenue is aggrieved that the learned Commissioner of Income Tax (Appeals) – 12, Mumbai (in short ‘CIT(A)’) has reduced the addition for bogus purchases of Rs.2,82,844/- done @ 100% by the Assessing Officer by sustaining only 12.5% for the Assessment Year 2010-11 vide order dated 12.04.2019.
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.
M/s. Dolphin Marine Enterprises Pvt. Ltd. The Assessing Officer made 100% addition of the bogus purchases. Upon assessee’s appeal, learned CIT(A) has noted that the sales has 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.
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.
M/s. Dolphin Marine Enterprises Pvt. Ltd.
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.
Order pronounced under Rule 34(4) of ITAT Rules on 11th March, 2021.