STG INFASTRUCTURE,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX - 12(1), MUMBAI

This is an appeal by the assessee wherein the assessee is aggrieved that the Ld. CIT(A) has erred in sustaining 100% disallowance on account of bogus purchases amounting to Rs.18,24,489/-.

The AO in this case has made 100% addition on account of bogus purchase amounting to Rs.18,24,489/- from 2 parties. Upon assessee’s appeal Ld. CIT(A) confirmed the same.

Against the above order assessee is in appeal before the ITAT. We have heard the Ld. DR and perused the records. None appeared on behalf of assessee despite notice.

Upon careful consideration we find that assessee has provided the documentary evidence for the purchase. Adverse inference have been drawn due to the inability of the assessee to produce the suppliers and absence of transportation details. We find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, 100% 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 Nijunj eximp enterprises (in writ petition no 2860, order dated 18.06.2014). In this case the Honourable High Court has upheld 100% 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 give the assessee saving on account of non-payment of tax and others at the expense of the exchequer. In such situation in our consideration opinion on the facts and circumstances of the case the 12.5% disallowance out of bogus purchases would meet the end of justice. Hence we modify the order of Ld. CIT(A) accordingly.

In the result, this appeal filed by the assessee stands partly allowed.