IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI AMARJIT SINGH, JM ITA Nos.4704, 4705 & 4706/Mum/2018 (Assessment Years: 2011-12, 2010-11 & 2009-10) Raju G. Dewani ITO-Ward-22(3)(1) 11-Pandurang Vilas, Mumbai 367- Linking Road, Khar (W), Vs. Mumbai-400 052 PAN/GIR No. AABPD 0826 C (Appellant) : (Respondent) Appellant by : Shri Amit C. Jhaveri Respondent by : Shri Chaitanya Anjaria Date of Hearing : 28.08.2019 Date of Pronouncement : 11.09.2019 ORDER Per Shamim Yahya, A. M.: These are appeals by assessee wherein assessee is aggrieved that order of learned Commissioner of Income Tax (Appeals) ( ld. CIT-A for short) has erred in sustaining 12.5% disallowance on account of bogus purchase by common order dated 21.05.2018 for concerned Assessment Year. 2. Brief facts of case are that assessee is engaged in business of Inkjet & Solvent Printing. information was received from Sales Tax Department that assessee is making bogus purchases. assessment was accordingly reopened. 3. Assessing Officer ( A.O. for short) in this case has made average gross profit on account of bogus purchase as under: 2 I TA No s.4 7 0 4 , 4 7 0 5 & 4 7 0 6 /Mu m/2 0 1 8 Raju G. Dewani A.Y. 2009-10 Rs.10,66,810 A.Y. 2010-11 Rs.3,32,760 A.Y. 2011-12 Rs.3,82,630 Upon assessee s appeal, ld. CIT(A) restricted same to 12.5% of purchases. 4. Against above order, assessee is in appeal before us. 5. We have heard both counsel and perused records. 6. Upon careful consideration we find that assessee has provided documentary evidence for purchase. Adverse inference has been drawn due to inability of assessee to produce suppliers. We find that in this case sales have not been doubted. It is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. rationale being no sales is possible without actual purchases. This proposition is supported from Hon'ble jurisdictional High Court decision in case of Nikunj Eximp Enterprises (in writ petition no 2860, order dt. 18.6.2014). In this case, Hon ble High Court has upheld 100% allowance for purchases said to be bogus when sales are not doubted. However, in that case all supplies were to government agency. 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 3 I TA No s.4 7 0 4 , 4 7 0 5 & 4 7 0 6 /Mu m/2 0 1 8 Raju G. Dewani 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. Upon careful consideration, we find considerable cogency in submission of learned counsel of assessee, as otherwise it will be double jeopardy to assessee. Accordingly, we modify order of learned CIT-A 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. ld. Counsel of assessee fairly accepted to this proposition. 8. In result, appeals filed by assessee are partly allowed. Order pronounced in open court on 11.09.2019 Sd/- Sd/- (Amarjit Singh) (Shamim Yahya) Judicial Member Accountant Member Mumbai; Dated : 11.09.2019 Roshani, Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Raju G. Dewani v. ITO-Ward-22(3)(1), Mumbai