ITO 26 (1)(1), MUMBAI vs. ALTAF NISAR AHEMEAD KHAN, MUMBAI

PDF · subscribers
ITA 7100/MUM/2018Status: DisposedITAT Mumbai20 April 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 order, finding that a 9% disallowance was just and reasonable when sales were not doubted. It noted that 100% disallowance is not permissible if sales are genuine, as some purchase is necessary for sales.

What were the facts?

The Revenue appealed against the CIT(A)'s decision to sustain only 9% disallowance on bogus purchases, while the AO had made a 12.5% addition. The assessee is in the scrap business and purchases were from alleged bogus dealers.

What were the issues?

The primary issue was the extent of disallowance for purchases from bogus dealers when the assessee's sales were not doubted. The Tribunal also considered the implications 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

Income Tax Appellate Tribunal, “SMC” BENCH,

Before: SHRI SHAMIM YAHYA, AM

Hearing: 18/02/2020Pronounced: 20/04/2020

O R D E R PER SHAMIM YAHYA, AM: These are appeals by the revenue wherein the revenue is aggrieved that the Ld. CIT(A) has deleted part of the addition of bogus purchase by sustaining 9% only disallowance on account of bogus purchase pertaining to A.Ys.2009-10 & 2010-11. The assessee in this case is engaged into Scrap Business. 2. 3. The assessment was reopened upon information from sales tax department that assessee has made purchases from bogus dealers.

1.

ITA. NO.7100 & 7101/M/2018 A.Y.2009-10 & 2010-11 4. The AO in this case has made 12.5% addition on account of bogus purchase amounting to Rs.3,44,276/- for the A.Y.2009-10 of Rs.9,47,584/- for the A.Y.2010-11.

5.

Up on assessee’s appeal Ld. 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 9% disallowance out of the bogus purchases by giving credit to the assessee for profit already declared.

6.

Against above order revenue is in appeal before the ITAT. I have heard Ld. DR and perused the records.

7.

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 my considered opinion on the facts and circumstances & 7101/M/2018 A.Y.2009-10 & 2010-11 of the case the 9% disallowance out of the bogus purchases meets the end of justice. Accordingly, I uphold the order of Ld. CIT(A).

8.

The decision of N.K. Proteins referred by revenue in grounds of appeal has already been distinguished by Hon’ble Bombay High Court in the case of M. Haji Adam & Co. of 2016 dated 11.02.2019.

In the result, this appeal filed by the revenue stand dismissed.

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →