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Case Law Details

Case Name : Meru Imp ex Vs. ACIT (ITAT Mumbai)
Appeal Number : ITA No. 2660/Mum/2017
Date of Judgement/Order : 01/11/2017
Related Assessment Year : 2007-08
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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.

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