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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM Shri Rajnikant V. Doshi
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM
ITA No. 4747/Mum/2018 (Assessment Year: 2010-11) Shri Rajnikant V. Doshi ITO Ward 17(3)(1), 1st Floor, Aayakar Bhavan, A-103, Raj Cresent Building, Vs. Royal Complex, Eksar Road, Churchgate, Mumbai-400 020 Borivali (W), Mumbai-400 092 PAN/GIR No. AAEPD 1214 D (Appellant) : (Respondent)
Appellant by : Shri Amit Jhaveri Respondent by : Shri Chaitanya Anjaria
: 03.09.2019 Date of Hearing Date of Pronouncement : 02.12.2019
O R D E R Per Shamim Yahya, A. M.:
This is an appeal by the assessee wherein the assessee is aggrieved that the
learned C1T-A has erred in sustaining 12.5% disallowance on account of bogus
purchases, vide order dated 22.06.2018 pertaining to assessment year 2010-11.
Brief facts of the case are that the assessee in this case is engaged in the
business of iron and steel trading.
The Assessment in this case was reopened upon receipt of information from the
sales tax Department that 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.
2 ITA No. 4747/Mum/2018 Shri Rajnikant V. Doshi vs. ITO
The Income Tax Officer in this case has made 12.5% addition on account of
bogus purchase resulting in disallowance of Rs.8,75,741/-.
Upon the assessee’s appeal, the ld. CIT(A) confirmed the same.
Against the above order, the assessee is in appeal before the ITAT.
We have heard both the counsel and perused the records. Upon careful
consideration we 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. 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
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 of the 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. As regards the quantification of the profit element embedded in making of
3 ITA No. 4747/Mum/2018 Shri Rajnikant V. Doshi vs. ITO
such bogus/unsubstantiated purchases by the assessee, we find that it is the
submission of the learned counsel of the assessee that it will be doubled prejudice if
the gross profit already declared is not reduced from the standard 12.5% being
disallowed on account of bogus purchases.
Upon careful consideration, we find considerable cogency in the above
submissions. Accordingly we direct that disallowance in this case be restricted to
12.5% of the bogus purchase as reduced by the gross profit already declared by the
assessee. Learned counsel of the assessee fairly agreed to the above.
In the result, the appeal stands partly allowed.
Order pronounced in the open court on 02.12.2019
Sd/-` Sd/- (Amarjit Singh) (Shamim Yahya) Judicial Member Accountant Member Mumbai; Dated : 02.12.2019 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,
(Dy./Asstt. Registrar) ITAT, Mumbai