ITO 33(1)(1), MUMBAI vs. SHRI ASHOK KUMAR SHYAMLAL GUPTA, MUMBAI

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ITA 3106/MUM/2019Status: DisposedITAT Mumbai14 September 2020AY 2009-103 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to sustain only 12.5% disallowance on bogus purchases, considering that the assessee's sales were not doubted. It was reasoned that 100% disallowance is not justified when sales are accepted, but purchases from the grey market warrant some disallowance.

What were the facts?

The assessee was found to have made purchases from bogus dealers. The Assessing Officer made a 100% addition for these purchases. The CIT(A) reduced the disallowance to 12.5% after noting that the assessee's sales were not doubted.

What were the issues?

Whether 100% disallowance of purchases is justified when sales are not doubted, and what is the appropriate disallowance percentage for purchases made from the grey market.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

For Respondent: Shri Aktar H. Ansari
Hearing: 14.09.2020Pronounced: 14.09.2020

This is an appeal by the revenue wherein the revenue is aggrieved that the learned CIT-A has reduced the addition of Rs. 28,68,000/- by sustaining only 12.5 % disallowance on account of bogus purchases, vide order dated 21.1.2019 pertaining to A.Y. 2009-10.

2.

The assessee in this case is engaged into trading business. The assessment was reopened upon information from sales tax department that assessee has made purchases from bogus dealers. The assessee did not file return of income nor responded to any of the notices of the Assessing Officer. The AO made an ex part order making 1OO% addition of the bogus purchase.

3.

Upon assessee's appeal learned CIT-A has noted that the sales has not been doubted. Accordingly placing reliance upon several case laws and up on the facts of the case he sustained 12.5 % disallowance out of the bogus purchases.

4.

Against above order revenue is in appeal before the ITAT. I have heard Id Dr and perused the record. I find that in this case the sales have not been doubted it 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 honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt 18.6.2014). In this case the honourable 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 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 our considered opinion on the facts and circumstances of the case the 12.5 % disallowance out of the bogus purchases done by the learned CIT-A meets the end of justice. Accordingly I uphold the order of learned CIT-A.

5.

In the result this appeal filed by the revenue stands dismissed

6.

Before partying I 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 on 14.9.2020.

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