SPECTRA SOLUTIONS,MUMBAI vs. INCOME TAX OFFICER, WARD 22(3)(4), MUMBAI

The assessee as well as revenue has filed the above mentioned appeals against the order dated 13.10.2017 passed by the Commissioner of & 473/M/2018 A.Y. 2009-10 Income Tax (Appeals) -34, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009-10.

The assessee has filed the present appeal against the order dated 13.10.2017 passed by the Commissioner of Income Tax (Appeals) -34, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

The assessee has raised the following grounds: -

The brief facts of the case are that the assessee filed its return of income on 28.09.2009 declaring total income to the tune of Rs.4,56,770/- for the A.Y.2009-10. The return was processed u/s 143(1) of the I.T. Act, 1961. The case of the assessee was reopened u/s 147/148 of the Act. In reply to the notice, the assessee has filed the revised return of income on 17.04.2014 declaring total income to the tune of Rs.3,88,977/-. The case of the assessee was reopened on the basis of information received from the DGIT (Inv.), Mumbai in which it was conveyed that the assessee has taken the bogus purchase entries in sum of Rs.1,09,11,784/- from the following 5 parties.

We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The assessee failed to produce the & 473/M/2018 A.Y. 2009-10 sufficient evidence before the AO to prove the purchase as genuine. The assessee also failed to produce the suppliers before the AO. In the instant case, sale is not doubted. It is settled law that when the sales are not doubted then the 100% addition cannot be made and in this regard we also find support of law settled by the Hon’ble Jurisdictional High Court in the case of Nikunj Eximp Enterprises (in writ petition no.2860 dated 18.06.2014). In the present case the facts of the case seems that the 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 of and others at the expenses of the state-exchequer. In view of the said circumstances, no harms seem if the addition be restricted to the extent of 12.5% of the bogus purchase. The Ld. Representative of the assessee has argued that when only the profit earned by assessee on these bogus transactions is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.

Up on careful consideration, we find strength in the submission of the Ld. Representative of the assessee as otherwise it will be double jeopardy to the assessee. Accordingly, we modify the order of the Ld. CIT(A) and direct that the disallowance in this case be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. Accordingly, the appeal filed by assessee is hereby partly allowed. The facts of the present case are quite similar to the fact of the 8. case as narrated above while deciding the appeal of the assessee