ITO 31(2)(5), MUMBAI vs. P. RAMSUBRA MANIAN, MUMBAI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal upheld the CIT(A)'s decision to sustain a 12.5% disallowance on bogus purchases, considering that sales were not doubted and purchases were made from the grey market.
What were the facts?
The Assessing Officer made a 100% addition for bogus purchases. The CIT(A) sustained a 12.5% disallowance, noting that the sales were not doubted.
What were the issues?
Whether 100% disallowance of bogus purchases is justified when sales are not doubted, and what is the appropriate disallowance percentage in such cases.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya (AM)
This is an appeal by the revenue wherein the revenue is aggrieved that the learned CIT-A has not sustained hundred percent disallowance on account of bogus purchases.
The assessing officer in this case has made hundred percent addition on account of bogus purchase amounting to Rs. 26,71,620/-.
Up on assessee's appeal learned CIT-A has noted that the sale 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 bogus purchases.
Against above order revenue is in appeal before the ITAT. I have heard the Ld DR. None appeared on behalf of assessee despite notice. I have carefully perused the records. I 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 honourable 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 honourable 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 my 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 I uphold the order of learned CIT-A. The decision of N.K. Proteins referred by revenue in grounds of appeal has already been distinguished by Hon'ble Bombay HC as the same is rendered in a different context.
In the result this appeal filed by the revenue stands dismissed Order has been pronounced in the Court on 11.6.2019.
Recent GST High Court judgments
Search GST case law →- Noore Manpower Services vs. Commissioner Central Goods And Services TaxUttarakhand · 2 Nov 2026
- Maa Bhawani Minrals vs. Commissioner Central Goods And Services TaxUttarakhand · 2 Nov 2026
- M/S. Nourangi Paints vs. The Union Of INDIAPatna · 2 Nov 2026
- Basant Kumar Gupta vs. Union Of INDIAPatna · 2 Nov 2026
- M/S Swapnashiyana Homes Developers Private Limited vs. The Union Of INDIAPatna · 2 Nov 2026