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2013 (11) TMI 1605 - AT - Income TaxAddition made on account of unexplained/unproved purchases in all the four years under consideration. Disallowance u/s 14A - Held that - Disallowance made by the A.O. in A.Y. 2007-08 on the basis given in Rule 8-D is quite reasonable having regard to all the facts and circumstances of the case and nothing has been brought on record before us to dispute or controvert this position. We, therefore, uphold the impugned orders of the ld. CIT(A) confirming the disallowance made by the A.O. u/s 14A of the Act for both the years under consideration i.e assessment years 2007- 08 & 2008-09.
Issues Involved:
1. Additions made by the Assessing Officer (A.O.) on account of unexplained/unproved purchases. 2. Disallowance under Section 14A read with Rule 8-D of the Income Tax Act. Detailed Analysis: 1. Additions on Account of Unexplained/Unproved Purchases: The primary issue in these appeals pertains to the additions made by the A.O. on account of unexplained/unproved purchases for the assessment years 2005-06, 2006-07, 2007-08, and 2008-09. The assessee, a partnership firm dealing in cloth materials, had its purchases disputed due to a survey conducted on one of its suppliers, Shri Rakesh Kumar Gupta, who initially stated that he provided accommodation sales bills. This statement was later retracted through affidavits. The assessee provided evidence of payments made by account payee cheques and quantitative statements showing the tally of purchases and sales with the books of accounts. The A.O. did not accept the genuineness of the purchases and made significant additions under Section 69 of the Income Tax Act, treating them as unexplained investment. The assessee challenged these additions before the Commissioner of Income Tax (Appeals) [CIT(A)], who partially sustained the additions but restricted them to 10% of the disputed purchases, considering the facts and circumstances. The Tribunal, after considering the arguments and material on record, observed that similar issues had been decided in favor of the assessee in previous cases like Jeetendra Harshadkumar Textiles and M/s Pramit Textiles. The Tribunal noted that the purchases were recorded in the books, payments were made by cheques, and the sales were not disputed. Therefore, the entire addition made by the A.O. was deleted, and the assessee's appeals for the relevant years were allowed, while the Revenue's appeals were dismissed. 2. Disallowance under Section 14A read with Rule 8-D: For the assessment years 2007-08 and 2008-09, the assessee had received exempt income but did not disallow any expenditure incurred in relation to this income as required by Section 14A of the Act. The A.O. computed the expenses under Rule 8-D and made disallowances of Rs. 66,715/- and Rs. 1,28,413/- for the respective years, which were confirmed by the CIT(A). The Tribunal upheld the CIT(A)'s order for A.Y. 2008-09, noting that Rule 8-D is applicable prospectively from A.Y. 2008-09 as held by the jurisdictional High Court in the case of Godrej Boyce Mfg. Co. Ltd. For A.Y. 2007-08, the Tribunal agreed with the CIT(A) that the disallowance made by the A.O. was reasonable and upheld the orders confirming the disallowance under Section 14A for both years. Conclusion: The appeals of the assessee for A.Y. 2005-06 and 2006-07 were allowed, appeals for A.Y. 2007-08 and 2008-09 were partly allowed, and the appeals of the Revenue for A.Y. 2006-07, 2007-08, and 2008-09 were dismissed.
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