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Issues involved: Appeal by department against order of ld. CIT (A) relating to assessment year 2007-08 regarding deletion of trading addition of Rs. 15,57,160/- being 25% of unverifiable purchases of Rs. 62,28,642/-.
Details of the judgment: Issue 1: Unverifiable purchases and rejection of books of account The AO rejected the books of account due to unverifiable purchases of Rs. 62,28,642 from eight parties, noting discrepancies in stock inventory and involvement of bogus suppliers. Despite filing confirmations, sales tax numbers, and PAN numbers, the AO was not satisfied, leading to reliance on previous decisions. The AO made a 25% disallowance on unverifiable purchases, which was contested before ld. CIT (A) citing primary onus discharge and distinctions from previous cases. Issue 2: Decision of ld. CIT (A) After reviewing submissions and material, ld. CIT (A) found the AO unjustified in making a 25% addition on unverifiable purchases but upheld the rejection of books of account. Considering the past history and increased turnover, ld. CIT (A) deleted the entire addition based on the declared gross profit rate and relevant court decisions. Issue 3: Tribunal's decision The department appealed before the Tribunal, with the ld. D/R supporting the AO's order and referencing a recent court decision. The assessee's counsel relied on ld. CIT (A)'s order and cited various case laws. The Tribunal acknowledged the correctness of book rejection for unverifiable purchases but deemed the 25% addition unjustified. Considering the increased turnover and improved gross profit rate, the Tribunal sustained a trading addition of Rs. 1,50,000/- to address potential revenue leakage, allowing the department's appeal in part. The judgment was pronounced on 24.06.2011 by the Appellate Tribunal ITAT Jaipur, with the department partially succeeding in its appeal.
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