INCOME TAX APPELLATE TRIBUNAL SMC Bench, Mumbai Before Shri Shamim Yahya (AM) I.T.A. No. 4587/Mum/2018 (Assessment Year 2010-11) I.T.A. No. 4588/Mum/2018 (Assessment Year 2011-12) M/s. Premsons Bazaar ACIT 19(2) 63-A, Premsons House Vs. Mumbai. Bhulabhai Desai Road Breach Candy Mumbai-400 026. PAN : AAEFP5034H (Appellant) (Respondent) Assessee by Ms. Aasifa Khan Department by Shri Chaitanya Anjaria Date of Hearing 9.7.2019 Date of Pronouncement 20.8.2019 ORDER These are appeals by assessee wherein assessee is aggrieved that learned CIT-A has erred in sustaining 100% disallowance on account of bogus purchases, for A.Y. 2010-11 & 2011-12. 2. Brief facts of case are that assessee is engaged in business of garment trading. Information was received from sales tax Department that assessee has made bogus purchases. assessment was accordingly reopened. Assessing Officer in this case has made 100% addition on account of bogus purchases as under :- A.Y. 2010-11 Rs. 1,96,016/- A.Y. 2011-12 Rs. 22,061/- 3. Upon assessee s appeal Id CIT(A) confirmed same. 4. Against above order assessee is in appeal before ITAT. I have heard both counsel and perused records. 2 M /s . P r e ms o n s B az ar 5. Upon careful consideration I find that assessee has provided documentary evidence for purchase. Adverse inference has been drawn due to inability of assessee to produce suppliers. I find that in this case sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). In this case honourable High Court has upheld hundred percent allowance for purchases said to be bogus when sales are not doubted. However in that case all supplies were to government agency. 6. In present case facts of case indicate that assessee has made purchase from grey market. Making purchases through grey market gives assessee savings on account of non-payment of tax and others at expense of exchequer. In such situation in my considered opinion on facts and circumstances of case 12.5% disallowance out of bogus purchases meets end of justice. However, in this regard learned counsel of assessee has prayed that when only profits earned by assessee on these bogus purchase transaction is to be taxed gross profit already shown by assessee and offered to tax should be reduced from standard 12.5% being directed to be disallowed on account of bogus purchase. 7. Up on careful consideration I find considerable cogency in submission of learned counsel of assessee, as otherwise it will be double jeopardy to assessee. Accordingly I modify order of learned CIT- and direct that disallowance in this case be restricted to 12.5 % of bogus purchases as reduced by gross profit rate already declared by assessee on these transactions. Needless to add that if gross profit already shown is more than 12.5% no disallowance will be called for. Learned counsel of assessee fairly accepted this proposition. 3 M /s . Premsons Bazaar 8. In result this appeal filed by assessee stands partly allowed. Order has been pronounced in Court on 20.8.2019. Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 20/8/2019 Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, True Copy (Assistant Registrar) PS ITAT, Mumbai. Premsons Bazaar v. ACIT 19(2), Mumbai