ITO 26 (2)(3), MUMBAI vs NISCHAL CHANDRASHEKHAR SHETTY, MUMBAI

THE INCOME TAX APPELLATE TRIBUNAL
“SMC-I” Bench, Mumbai
Shri Shamim Yahya (AM)

I.T.A. No. 1875/Mum/2019 (Assessment Year 2010-11)

ITO-26(2)(3) C-11, 7t h Floor Pratyakshakar Bhavan, BKC Bandra East Mumbai-400 051.
(Appellant) 

Vs.

Shri Nischal Chandrashekhar Shetty B-8, Ansa Industrial Estate, Saki Vihar Road,
Sakinaka Mumbai-400 072. PAN : ANDPS2885H
(Respondent)

Assessee by None
Department by Shri Kailash Gaikwad
Date of Hearing 13.10.2020
Date of Pronouncement 14.10.2020

O R D E R

This is an appeal by the revenue wherein the revenue is aggrieved that Learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] has reduced the addition for bogus purchase of Rs. 8,39,328/- done @ 100% by Assessing Officer by sustaining only 15%.

2. The assessee in this case is engaged into the business of manufacturing and injection in blow mould. The assessment was reopened upon information from sales tax department that assessee has made Rs. 8,39,328/- purchases from bogus dealers. The Assessing Officer made 100% addition of the bogus purchase.

3. Upon assessee's appeal learned CIT-A has noted that the sale has not been doubted. Accordingly placing reliance upon several case laws and up on the facts of the case he sustained 15% disallowance out of the bogus purchases.

4. Against above order revenue is in appeal before the ITAT. I have heard learned Departmental Representative and perused the record. I find that inthis 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. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt.18.6.2014). In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation in our considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases done by the learned CIT-A meets the end of justice.Accordingly I uphold the order of learned CIT-A.

To know more in details find the attachment file