ITO 17(2)(1), MUMBAI vs. SMT. JAYASHREE DILIP SHAH, MUMBAI

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ITA 3005/MUM/2019Status: DisposedITAT Mumbai17 November 2020AY 2010-113 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 a 10% disallowance on bogus purchases. It reasoned that since the sales were not doubted, a 100% disallowance was not justified, and the 10% reduction met the ends of justice.

What were the facts?

The Assessing Officer made an addition for bogus purchases based on information from the Sales Tax Department. The CIT(A) reduced this addition, sustaining only 10% disallowance, noting that the assessee's sales were not doubted.

What were the issues?

Whether a 100% disallowance for bogus purchases is justified when the corresponding sales are not doubted. The appropriateness of a partial disallowance in such circumstances.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI SHAMIM YAHYA

For Appellant: Ms. Smita Verma
For Respondent: Ms. Vanshika Agarwal
Hearing: 09/11/2020Pronounced: 17/11/2020
2.

The assessee’s business is not dealt with in Assessing Officer’s order, but the nature of business is mentioned as manufacturer. The assessment was reopened upon information from Sales Tax Department that assessee has made purchases of Rs.15,54,983/- from bogus dealers. The Assessing Officer made 12% addition of the bogus purchase. 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 10% disallowance out of the bogus purchases.

Smt. Jayashree D. Shah 3. Against the above order, Revenue is in appeal before the ITAT. I have heard both the counsel 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 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 10% disallowance out of bogus purchases done by the learned CIT(A) meets the end of justice. Accordingly, I uphold the order of learned CIT(A).

4.

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

5.

Before parting, I 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.

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