DHOLAN KUKREJA (HUF),ULHASNAGAR vs. ITO WD 2(1), KALYAN

The solitary issue raised pertains to 100% disallowance of bogus purchases as under:- A.Y. Amount 2009-10 Rs. 26,936 2010-11 Rs.7,16,068 2011-12 Rs.1,70,625 In this case, AO made enquiry pursuant to information received from Sales-tax department that assessee had obtained bogus purchase bills. Consequent upon the enquiry, AO held that the impugned purchases were bogus and he made 100% addition of the same.

Upon assessee’s appeals, Ld.CIT(A) confirmed the addition. Against those

I have heard the Ld.DR and perused the records. An adjournment petition was moved on behalf of the assessee on the ground of counsel being unwell. However, since the issue pertains to bogus purchases and has been adjudicated by the Mumbai Tribunal, the petition is rejected.

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 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.

Learned departmental representative has placed reliance upon a honourable Gujarat High Court decision wherein hundred percent disallowance of bogus purchase has been upheld. Special leave petition against this order has been dismissed by the honourable apex court. I find that dismissal of SLID by a non speaking order by the honourable apex court doesn't merge the order of the honourable High Court with that of the apex court. Moreover such disallowances depend upon the facts and circumstances of the case as expounded by honourable jurisdictional High Court in the case of Nikunj Eximp Enterprises. Accoringly, I direct that the disallowance be restricted in this case to 12.5% of the bogus purchase.