Meru Imp ex Vs. ACIT (ITAT Mumbai)
In this case the sales have not been doubted. It is settled law that when sales are not doubted, 100% dis allowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon’ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (supra). In this case, the Hon’ble High Court has upheld 100% 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, 12.5% dis allowance out of the bogus purchases meets the end of justice. Accordingly we direct dis allowance of 12.% of the bogus purchases.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This Appeal by the assessee is directed against the Order by the Commissioner (Appeals)-28, Mumbai (‘Commissioner (Appeals)’ for short) dated 19-1-2017 and pertains to the assessment year (assessment year) 2007-08.
2. The issue raised is that the learned Commissioner (Appeals) erred in sustaining dis allowance of 10% of bogus purchase amounting to Rs. 4,99,55,341.
3. The grounds of appeal read as under :–
(1) On the facts and circumstances of the case, the learned Commissioner (Appeals) erred in confirming the action of the assessing officer by sustaining the addition of Rs. 4,99,55,341. The order of the learned Commissioner (Appeals) is bad in law, against the principle of natural justice, void ab initio and the sustaining of the re-opened assessment is also liable to be quashed.
(2) On the facts and circumstances of the case, the learned Commissioner (Appeals) erred in confirming the addition of alleged purchases from bogus hawala parties amounting to Rs. 4,99,55,341. The appellant did not enter into any transaction with the bogus hawala parties at all and therefore the said addition of Rs. 4,99,55,341 is liable to be deleted.
4. In this case addition was made by the assessing officer for bogus purchases on the basis of information received from Sales Tax Department as well his own inquiry as under :–
Information was received in office of DGIT (Inv.), Mumbai and subsequently, from the Sales Tax Department, Mumbai, regarding suspicious parties who are only providing accommodation entries without doing any actual business.
On going through the aforesaid list, it was found that the following party/parties are appearing in the list of bogus parties from whom the assessee is shown to have made purchases.
