APRATIM EQUIPMENTS,MUMBAI vs. INCOME TAX OFFICER, WARD 3(1), KALYAN

The assessee is aggrieved that the learned CIT(A) has erred in sustaining 100% disallowance on account of bogus purchase.

Brief facts of the case are that the assessee in this case is engaged in the business of manufacturing of engineering goods. The assessments in these cases were reopened upon receipt of information from the Sales Tax Department that the assessee has made bogus purchases. The assessee submitted the purchase vouchers and the payments were made through banking channel. However, the suppliers were not produced before the Assessing Officer. Sales in this case were not doubted.

The Income Tax Officer in this case had made 100% addition on account of bogus purchases resulting in disallowance of `2,08,287/- for

Against the above order the assessee is in appeal before the ITAT. I have heard both the counsel and perused the record. Upon careful consideration I find that the assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. I find that in this case the sales or other workings 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 dated 18.06.2014). In this case the Hon'ble High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However, in that case all the supplies were to government agency. In the present case the facts indicate that assessee has made purchases from the grey market. Making purchases through grey market gives the assessee savings on account of non-payment of tax and others at the expenses of the exchequer. In my considered opinion, on the facts and circumstances of this case, 12.5% out of the bogus purchase would meet the end of justice. I direct accordingly. The learned counsel for the assessee fairly agreed to the above.

In the result, the appeals filed by the assessee are partly allowed.