IT- 4 (2)(4), MUMBAI vs. JUGAL SEDULAL KHETAN, THANE

ITA 5964/MUM/2018Status: DisposedITAT Mumbai07 January 2020AY 2009-103 pages

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to sustain only 12.5% disallowance on bogus purchases. It reasoned that when sales are not doubted, 100% disallowance is not justified, and 12.5% meets the ends of justice given purchases were from the grey market.

What were the facts?

The revenue appealed against the CIT(A)'s decision to reduce the addition for bogus purchases from 20% to 12.5%. 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

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

N.K\nProteins v. DCIT
250 Taxmann 22 · 2017 · SC
105 citing

Income Tax Appellate Tribunal, “SMC” Bench, Mumbai

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

For Respondent: Shri Akhtar H. Ansari

Hearing: 26.11.2019Pronounced: 07.1.2020

This is an appeal by the revenue wherein the revenue is aggrieved that the learned CIT-A has reduced the addition of bogus purchase by sustaining only 12.5 % disallowance on account of bogus purchases, vide order dated 31.7.2018 pertaining to AY 2009-19.

The assessee in this case is engaged into the business of trading. 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 20% addition on account of bogus purchase amounting to Rs. 2,05,182/-.

Upon assessee's appeal learned CIT-A has noted that the sale has not been doubted. Accordingly placing reliance upon several case laws and up on the facts of the case he sustained 12.5% disallowance out of the bogus purchases.

2 Shri Jugal Sedulal Khetan

Against above order revenue is in appeal before the ITAT. We have heard learned Departmental Representative 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 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 TAXMAN 0022). 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 this appeal filed by the revenue stands dismissed. Order has been pronounced in the Court on 07.01.2020.

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