ARUN R. VICHARE,MUMBAI vs. ITO 24(1)(1), MUMBAI

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ITA 1176/MUM/2017Status: DisposedITAT Mumbai03 July 2017AY 2009-103 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the purchases were bogus, a 100% disallowance is not justified when sales are not doubted. The disallowance should be restricted to 12.5% of the bogus purchases to meet the ends of justice.

What were the facts?

The assessee is aggrieved by the confirmation of 100% disallowance on account of bogus purchases amounting to Rs. 5,10,182. The authorities below found overwhelming evidence that the purchases were bogus with no proof of goods movement.

What were the issues?

Whether 100% disallowance of bogus purchases is justified when sales are not doubted. The extent to which disallowance for bogus purchases should be made.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI

Before: Shri Shamim Yahya

For Appellant: Shri Sunil Kadam (LA not filed), Shri B.Satyanarayana Raju (Sr.DR)
For Respondent: Shri B.Satyanarayana Raju (Sr.DR)
Hearing: 16.05.2017Pronounced: 03.07.2017

O R D E R This is an appeal by the assessee, pertaining to assessment year 2009-2010, wherein the assessee is aggrieved by the order of the learned CIT(A) wherein 100% disallowance on account of bogus purchase amounting to Rs.5,10,182 has been confirmed.

2.

I have heard the learned Departmental Representative and perused the records. An adjournment petition has been filed on behalf of the assessee. However, the issue of bogus purchases has already been dealt with by the Mumbai Tribunal in a number of cases, hence the petition has been rejected.

3.

Upon careful consideration of the facts of the case, I find that overwhelming evidences have been referred by the authorities below that the impugned purchases are bogus. There is no evidence of the actual

1.

. Shri Arun R.Vichare. 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 dt 20/06.2016, wherein 100% of the bogus purchases was held to be added in the hands of the assessee and Tribunal’s 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'". 4. 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 High Court with that of the Hon’ble Supreme Court. Furthermore, the addition/disallowance for bogus purchases depends upon the facts of each case.

5.

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 Exim 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 assessee savings on account of non-payment of tax and others at . Shri Arun R.Vichare. 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 purchase.

6.

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

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