ACIT 28(1), MUMBAI vs. MR. JAISINGH PATEL (PROP SEPARATION ENGINEERS (INDIA)), NAVI MUMBAI

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ITA 2996/MUM/2019Status: DisposedITAT Mumbai12 November 2020AY 2009-104 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 permissible when sales are genuine.

What were the facts?

The Assessing Officer added ₹4,36,010/- for bogus purchases on a peak credit basis. The CIT(A) reduced this addition 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 if a partial disallowance is appropriate in cases of grey market purchases.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI SHAMIM YAHYA

For Appellant: Shri Smita Verma, DR
Hearing: 09.11.2020Pronounced: 12.11.2020

आदेश / O R D E R This is an appeal by the Revenue wherein the Revenue is aggrieved that the learned Commissioner of Income Tax [Appeals (in short ‘the CIT(A)’] has reduced the addition for bogus purchases of The assessee in this case is engaged into business of manufacturing of screening machine. The assessment was reopened upon information from Sale Tax Department that assessee has made 21,24,977/- purchases from bogus dealers. The Assessing Officer made addition of the bogus purchases amounting to ₹4,36,010/- on peak credit basis. Upon assessee’s appeal the 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 above order Revenue is in appeal before the ITAT.

2.

I have heard the learned Departmental Representative and perused the record. I find that in this case the sales or any other aspect of assessee looking, 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 (P.) Ltd. vs. ACIT [2014] 48 taxmann.com 20 (Bombay) in writ petition no. 2860 of 2012 vide 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

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