What did the Tribunal hold?

The Tribunal held that a 100% disallowance for bogus purchases cannot be made when sales are not doubted. A disallowance of 12.5% of the bogus purchase was deemed appropriate to meet the ends of justice.

The assessee's appeal concerned a 100% disallowance on account of bogus purchases amounting to Rs. 12,41,102. The assessee had purchased goods from the grey market.

What were the issues?

Whether 100% disallowance of bogus purchases is justified when sales are not doubted, and if not, what is the appropriate disallowance percentage.

Sigma Printers P.Ltd vs ITO | ITAT Mumbai 2017

Income Tax Appellate Tribunal, MUMBAI BENCH SMC, MUMBAI

Before: Shri Shamim Yahya

For Appellant: Shri Vimal Punmiya

For Respondent: Shri B Satyanarayana Raju

Date of hearing 17-05-2017 Date of pronouncement 06- 06-2017 O R D E R This is an appeal by the assessee wherein the assessee is aggrieved by the order of the learned CIT-A wherein hundred percent disallowance on account of bogus purchase has been sustained amounting to Rs.12,41,102.

I have heard both the counsels 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 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 2 M/s Sigma Printers Pvt Ltd 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.

SIGMA PRINTERS P.LTD,MUMBAI vs. ITO 8(2)(2), MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

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