What did the Tribunal hold?

The Tribunal held that when sales are not doubted, a 100% disallowance for bogus purchases is not permissible. A disallowance of 12.5% of the bogus purchase was considered to meet the ends of justice, and the assessee's counsel agreed to this.

The assessee's appeal concerned a disallowance on account of bogus purchases, which the CIT-A had sustained at 28.21%. The assessee had made purchases from the grey market, while sales were not doubted.

What were the issues?

The key issue was the extent of disallowance for bogus purchases when sales were not doubted, and whether a 100% disallowance was justified.

Vishal Ravindra Mukane vs ITO | ITAT Mumbai 2017

Income Tax Appellate Tribunal, MUMBAI BENCH SMC, MUMBAI

Before: Shri Shamim Yahya

For Appellant: Shri Virag M Shah

For Respondent: Shri B Satyanarayana Raju

This is an appeal by the assessee wherein the assessee is agrieved by the order of the learned CIT-A wherein 28.21 percent disallowance on account of bogus purchase has been sustained.

I have heard both the counsel and perused the records. 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 Eximp Enterprises. However the facts of the present case indicate that assessee has made purchase from the grey market. Making purchase

2 Vishal Ravindra Mukane 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 SLP 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. Accordingly I direct that the disallowance be restricted in this case to 12.5% of the bogus purchase.

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

VISHAL RAVINDRA MUKANE,MUMBAI vs. ITO WD 5, PALGHAR

What did the Tribunal hold?

What were the facts?

What were the issues?

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