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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya (AM)
These are appeals by the revenue wherein the revenue is aggrieved that the learned CIT-A has reduced the addition of bogus purchases vide orders dated 21.6.2018 pertaining to A.Ys. 2008-09, 2010-11 & 2011-12.
The assessee in this case is engaged into the business of trading in SS sheets and scrap. 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 12.5% addition on account of bogus purchase amounting to Rs. 1,36,841/- for A.Y. 2008-09, Rs. 11,40,438/- for A.Y. 2010-11 and Rs. 12,79,340/- for A.Y. 2011-12.
Upon assessee's appeals learned CIT-A has noted that the sales has not been doubted. Accordingly placing reliance upon several case laws and on the facts of the case he directed that 12.5% as reduced by gross profit already declared should be disallowed on bogus purchases.
2 Mr. Sehrullah Karamdar Khan Prop. of M/s. Steel Steel Traders
Against above order revenue is in appeal before the ITAT. I have heard learned Departmental Representative and perused the records. 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 my considered opinion on the facts and circumstances of the case the 12.5 % disallowance as reduced by gross profit already declared 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 has already been distinguished by Hon’ble Bombay high court in the case of M Haji Adam& Co. (ITA no 1004 of 20016 dt 11/2/2019).
In the result these appeals filed by the revenue stand dismissed. Order has been pronounced in the Court on 4.2.2020.