Case Law Details
Ashok Popatbhai Chaudhari Vs ITO (ITAT Mumbai)
The Income Tax Officer in this case has made 100% addition on account of bogus purchase resulting in disallowance of Rs. 56,085/-. Upon assessee’s appeal ld. CIT(A) confirmed the same.
It is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported form Hon’ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in Writ Petition No. 2860, order dated 18.06.2014). In this case the Hon’ble High Court has upheld 100% disallowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency.
In the present case the facts of the 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 expenses of the exchequer. As regards the quantification of the profit element embedded in making of such bogus/unsubstantiated purchases by the assessee, I find that 12.5% disallowance should serve the end of justice.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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