ITO 27 (2)(5), MUMBAI vs. PRIYA DWEDI, MUMBAI

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ITA 6823/MUM/2018Status: DisposedITAT Mumbai02 March 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 only a 12.5% disallowance on bogus purchases. It reasoned that 100% disallowance is not justified when sales are not doubted, as sales are impossible without purchases. However, considering purchases were made from the grey market, the 12.5% disallowance was deemed to meet the ends of justice.

What were the facts?

The revenue appealed against the CIT(A)'s decision to delete 100% addition on account of bogus purchases, sustaining only a 12.5% disallowance. The Assessing Officer had made the addition based on information from the sales tax department regarding purchases from bogus dealers.

What were the issues?

Whether 100% disallowance of purchases is justified when sales are not doubted. The appropriateness of a partial disallowance for purchases made from the grey market.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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  • 250 ITR 22
    250 ITR 22
    36 citing

Income Tax Appellate Tribunal, “C” Bench, Mumbai

Before: Shri Shamim Yahya (AM) & Shri Amarjit Singh (JM)

For Appellant: Ms. Radha Hable
For Respondent: Shri Somnath M. Wajale
Hearing: 08.01.2020Pronounced: 02.03.2020

Heard together (2 matters)

I.T.A. No. 6823/Mum/2018
I.T.A. No. 6824/Mum/2018

Read from the judgment's own cause title. This page is filed under one of them.

Per Shamim Yahya (AM) :- This is an appeal by the revenue wherein the revenue is aggrieved that the learned CIT-A has deleted the addition by sustaining only 12.5% disallowance on account of bogus purchases, vide respective orders pertaining to A.Y. 2010-11 & 2011-12.

2.

The assessee in this case is engaged into manufacturing of packing materials. The assessment was reopened upon information from sales tax department that assessee has made purchases from bogus dealers. The assessing officer in this case has made hundred percent addition on account of bogus purchase amounting to Rs. 3,04,032 in A.Y. 2010-11 & Rs. 2,09,926 in A.Y. 2011-12.

3.

Up on 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 2 Smt. Priya Dwedi 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. We have heard both the counsel and perused the records.

5.

We 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 we uphold the order of learned CIT-A. The decision of N K proteins Ltd. (250 ITR 22) 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 20016 dt 11/2/2019.

6.

In the result these appeals filed by the Revenue stand dismissed.

Order has been pronounced in the Court on 2.3.2020.

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