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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: Shri Shamim Yahya
O R D E R This appeal by the assessee is directed against the order of CIT(A) dated 01.08.2015 and pertains to assessment year 2009-2010.
The grounds of appeal read as under:-
“1. The assessment order passed u/s 143(3) read with section 147 is bad in law and be set aside as statutory notice u/s 148 was not served to the Appellant Company. 2. The Assessing Officer erred in adding Rs.4,60,705/- as being purchase from M/s. Span Enterprises as unproved / bogus purchases and the learned CIT erred in upholding the action of the learned Assessing Officer.
. M/s.Kay Kay Art Private Limited. 3. The Appellant Company reserves the right to add, amend or alter any of the grounds at a later stage.” 3. In this case the Assessing Officer made addition on account of bogus purchases amounting to Rs.14,16,955. These works out 100% disallowance of the bogus purchases.
Upon assessee’s appeal, the learned CIT(A) confirmed the addition.
Against this order, assessee is in appeal before the ITAT challenging both the reopening and the merits.
Up on careful consideration of the facts of the case, I find that overwhelming evidence have been referred by the authorities below that the impugned purchases are bogus. There is no evidence of the actual movement of the goods under dispute. 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 100% of the bogus purchases will 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 as under:
"'Delay Condoned. The special leave petitions are dismissed. Pending application(s) if any stands disposed of accordingly'". 7. I find that dismissal of Special Leave Petition by the Hon’ble Apex Court by a simple non-speaking order does not merge order of the Hon’ble
. M/s.Kay Kay Art Private Limited. High Court with that of the Hon’ble Supreme Court. Furthermore the addition/disallowance for bogus purchases depends upon the facts of each case.
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. This proposition finds support from the Hon’ble Gujarat High Court in the same combined order as mentioned above in case of therein. This proposition is further 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 purchase through the grey market gives the asseessee’s savings on account of non-payment of tax and others at the expense of the exchequer. In similar situation on the facts and circumstances of the case a disallowance of 12.5% of the bogus purchase has been considered to meet the end of justice in a number of cases at the Mumbai tribunal following Hon’ble Gujarat High Court decision in the case of Simit P Seth. Accordingly I hold that the disallowance in this case should be restricted to 12.5% of the bogus. I modify the order of the learned CIT(A) accordingly.
The learned Counsel of the assessee fairly agreed to the above addition. Since the learned Counsel of the assessee has agreed to the above, no adjudication on the issue of reopening has been pressed by him. Hence the same is not being adjudicated.