SCRUBEX ABRASIVES,MUMBAI vs. ITO 24(3)(4), MUMBAI

I have heard both the counsel and perused the records. I find that hundred percent disallowance of bogus purchase has been made in this case on account of information that the suppliers were providing bogus purchase bills. I note that the sales have not been doubted. It is settled law that when the sales have not been doubted the M/s. Scrubex Abrasives corresponding purchase cannot be held to be in entirely bogus. Such practices indicate purchasing through the grey market which entails savings to the assessee on account of saving in taxes and others at the expense of the exchequer. In similar circumstances honourable Gujarat High Court in the case of Sumit P Sheth has upheld disallowance of 12.5% of the bogus purchases. Learned counsel of the assessee fairly agreed for a disallowance of 12.5% of the bogus purchases.

Accordingly in the background of aforesaid discussion I modify the order of learned CIT-A. I hold that 12.5% disallowance from the bogus purchases would meet the end of justice.

In the result these appeal by the assessee stand partly allowed.