CORE ENERGY SYSTEMS P. LTD,MUMBAI vs. JT CIT RG 1, KALYAN

This appeal by the assessee is directed against the order of the learned CIT(A) dated 08.01.2016 and pertains to assessment year 2010- 2011.

The issue raised is that CIT(A) erred in sustaining disallowance of 100% of bogus purchase amounting to Rs.25,11,872.

We have heard both the Counsel and perused the records. We find that in this case overwhelming evidence have been brought on record that the concerned purchase are bogus. Cogent information has been received from the Maharashtra Sales Tax Department that the suppliers have admitted that they were supplying bogus bills. The Assessing Officer has also made enquiries. No response to his notices came from the suppliers.

Up on careful consideration of the facts of the case, we find that overwhelming evidence have been referred by the authorities below that the impugned purchases are bogus. The evidence of the actual movement of the goods under dispute is doubtful. In these circumstances learned departmental representative has referred to Hon’ble Gujarat High Court decision in the case of tax appeal no 240 of 2003 in the case of N K Industries vs Dy. CIT, order dated 20.06.2016, wherein hundred percent of the bogus purchases was held to be added in the hands of the assessee and tribunals restriction of the addition to 25% of the bogus purchases was set aside. The Special Leave Petition against this order along with others has been dismissed by the Hon’ble Apex Court vide order dated 16.1.2017.

However we note that dismissal of a special leave petition simply without any speaking order, does not merge the order of the Hon’ble High Court with that of the Hon’ble Apex Court. Furthermore when sales are not doubted 100% disallowance for bogus purchase is not possible. This has been so held by Hon’ble jurisdictional High Court in the case of Nikunj Eximp enterprises. However we also note that facts of the case before the jurisdictional High Court were different from that in the present case. Facts of the present case clearly indicate that assessee has engaged in transaction in the grey market. Making transactions in the grey market gives the assessee savings of taxes etc at the expense of Exchequer. In similar situation following the Hon’ble Gujarat High Court decision in the case of Simit P Seth

Accordingly we modify the order of learned CIT(A) and hold that the disallowance in this case should be made at the rate of 12.5% of the bogus purchase.

Learned counsel of the assessee has fairly agreed to the above proposition.

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