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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM Shri Rajesh B. Jain
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM
ITA No. 4753/Mum/2018 (Assessment Year: 2009-10) Shri Rajesh B. Jain Income Tax Officer-19(3)(1), 104, 1st Floor, Astral Mansion, Mumbai Opp. Godrej, K. K. Marg, Vs. 7th Rasta Jacob Circle Byculla, Mumbai-400 011 PAN/GIR No. AAEPJ 8093 L (Appellant) : (Respondent)
Appellant by : Shri Sashi Tulsiyan 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 21.05.2018 pertaining to assessment year 2009-10..
Brief facts of the case are that the assessee in this case is engaged in the
business of trading in ferrous and non-ferrous metals.
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. 4753/Mum/2018 Shri Rajesh B. Jain vs. ITO 4. The Income Tax Officer in this case has made 12.5% addition on account of
bogus purchase resulting in disallowance of Rs.13,34,808/-.
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 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 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
such bogus/unsubstantiated purchases by the assessee, the ld. counsel contends that
the assessee has already disclosed sufficient gross profit. The ld. counsel of the
3 ITA No. 4753/Mum/2018 Shri Rajesh B. Jain vs. ITO assessee contends that this ITAT in identical case of Ashok Industries Corporation in
ITA No. 647/Mum/2017 has restricted the disallowance to 2% of such speculation.
Upon careful consideration, following the precedence as above, we direct that
disallowance be restricted to the same percentage.
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