ITO 12 (3)(3), MUMBAI vs. MATCON ENGINEERS INDIA PVT. LTD., MUMBAI

PDF · subscribers
ITA 5623/MUM/2018Status: DisposedITAT Mumbai07 January 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 was reasoned that when sales are not doubted, a 100% disallowance is not justified, but purchases from the grey market warrant some disallowance.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of 100% addition on account of bogus purchases, where the CIT(A) sustained only a 12.5% disallowance. The assessee is a manufacturing business, and the assessment was reopened based on information about purchases from bogus dealers.

What were the issues?

Whether 100% disallowance of purchases is justified when sales are not doubted, and what is the appropriate disallowance percentage for purchases made from the grey market.

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM

For Appellant: Shri Akhtar H. Ansari
Pronounced: 07.01.2020

O R D E R Per Shamim Yahya, A. M.:

This is an appeal by the Revenue wherein the Revenue is aggrieved that the learned CIT-A has deleted the addition of Rs.12,80,172/- by sustaining only 12.5% disallowance on account of bogus purchases, vide order dated 27.04.2018 pertaining to Assessment Year 2010-11.

2.

The assessee in this case is engaged into manufacturing business.

3.

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 additions on account of bogus purchase amounting to Rs.14,63,054/-.

M/s. Matcon Engineers India Pvt. Ltd. 4. 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 12.5 % disallowance out of the bogus purchases

5.

Against the above order, the Revenue is in appeal before the ITAT.

6.

We have heard both the counsel and perused the records. 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 Hon'ble 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 Hon'ble High Court has upheld hundred percent allowances 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.

7.

The decision of M/s NK Proteins Ltd. Vs. DCIT (No. 769 of 2017 dated 16.01.2017 (SC) 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.

M/s. Matcon Engineers India Pvt. Ltd. 8. In the result, this appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 07.01.2020

Recent GST High Court judgments

Search GST case law →