SHISHIKALA R. BOHRA,AMBERNATH vs. DCIT CIR 2, KALYAN

The Assessing Officer in these cases has made 100% addition on account of bogus purchase. Upon assessee’s appeal, learned CIT(A) confirmed the same.

Against the above order, assessee is in appeal before the ITAT.

We have heard both the Counsel and perused the records. The learned Departmental Representative relied upon the decision of Hon’ble Gujarat High Court in the case of N.K.Industries v. DCIT order dated 20.06.2016,wherein 100% disallowance of bogus purchases were sustained. The Hon’ble Apex Court has dismissed the Special Leave Petition against this order. We find that dismissal of a Special Leave Petition by the Hon’ble Apex Court by a non-speaking order does not merge the order of Hon’ble High Court with that of the Hon’ble Apex Court.

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. This proposition is supported from Hon’ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises. 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 selling 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 meets the ends of justice. This is following the decision of the Hon’ble Gujarat High Court in the case of Simit P. Sheth [(2013) 356 ITR 451], followed by the ITAT Mumbai Benches in a number of cases.

Accordingly, we modify the orders of learned CIT(A) and direct that the disallowance be limited to 12.5% of the bogus purchase.

In the result, these appeals filed by the assessee are partly allowed.