JAI SAI TRADERS,THANE vs. ITO WD 2(2), KALYAN

The solitary issue pertains to disallowance of 25% bogus purchases amounting to Rs.5,57,725. Pursuant to information received from Sales-tax department that assessee had received bogus purchase entries, the AO disallowed a sum of Rs.22,30,899. Upon assessee’s appeal, Ld.CIT(A) restricted the disallowance to 25%. Against this order, assessee is in appeal before ITAT.

Upon careful consideration, 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 is supported from honourable 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 2 M/s Jai Sai Traders asseessee 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. Accordingly I hold that the disallowance in this case should be restricted to 12.5% of the bogus purchase. Learned counsel of the assessee has fairly agreed to this proposition.