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Income Tax Appellate Tribunal, SMC Bench, Mumbai
Before: Shri Shamim Yahya & Shri Pawan Singh
These are appeals by the Revenue wherein the Revenue is aggrieved that the learned CIT(A) has deleted part of the 100% addition by sustaining only 12.5 % disallowance on account of bogus purchases, vide common order dated 08.06.2018 pertaining to assessment years 2009-10 & 2011-12.
The assessee in this case is engaged in the business of manufacturing of pharmaceutical chemicals. The assessment was reopened upon information from Sales Tax Department that the assessee has made purchase from bogus dealers. The AO in this case has made 100% addition on account of bogus purchase amounting to `44,554 for A.Y. 2009-10 and `2,70,907/- for A.Y. 2011-12.
Up on assessee's appeal learned CIT(A) has noted that the sales 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
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 by the decision of the Hon’ble Jurisdictional High Court 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 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 in the case of N.K. Proteins Ltd, Tax Appeal No. 242 of 2003 dated 20.06.2016 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. in of 20016 dated 11.02.2019.
In the result these appeals filed by the Revenue stand dismissed.