2015 (4) TMI 499 - AT - Income Tax

Rejection of books of account - Disallowance of purchases - Held that - Following decision of Shri Anuj Kumar Varshney & Ors. Vs. ITO & Ors. 2015 (4) TMI 533 - ITAT JAIPUR - No merit in the written submission of the assessee to restrict the disallowance to 15%, rejection of books of account is upheld. Thus we hold that the addition qua these unverified purchases shall be restricted to 15%, accordingly, we direct the Assessing Officer to work out the disallowance. - Apropos the remaining expenditures i.e. telephone, travelling and conveyance, we find no infirmity in the orders of lower authorities, which are supported by the above mentioned judicial precedents. Except oral contention assessee could not demonstrate absence of personal element in these expenditures besides the books of account of the assessee remained rejected - Decided partly in favour of assessee.

Issues:
1. Ex parte order by CIT(A) without providing an opportunity to be heard.
2. Non-acceptance of book results by CIT(A).
3. Disallowance of purchases at 25% and sustaining addition.
4. Failure to follow direct decisions of Hon'ble Jaipur Bench.
5. Sustaining disallowances of specific expenses.
6. Application of precedent in the case of Shri Anuj Kumar Varshney.
7. Upholding disallowance of unverified purchases at 15%.
8. Justification of telephone, travelling, and conveyance expenses.

Analysis:

1. The appeal was filed against an order by CIT(A) for A.Y. 2007-08. The assessee contended that the order was passed ex parte without a hearing opportunity. However, as no one appeared on behalf of the assessee, written submissions were considered by the ITAT.

2. The CIT(A) did not accept the book results of the assessee, leading to a dispute. The written submissions referred to a recent decision in the case of Shri Anuj Kumar Varshney, suggesting a 15% sustenance of unverifiable purchases of semi-precious stones.

3. The dispute over the disallowance of purchases at 25% and the subsequent addition of a specific amount was addressed by referring to the decision in the case of Shri Anuj Kumar Varshney. The ITAT upheld a 15% disallowance for unverifiable purchases, restricting the addition accordingly.

4. The failure to follow direct decisions of the Hon'ble Jaipur Bench was raised as an issue. The ITAT considered the facts and circumstances of the case, applying the precedent in the case of Shri Anuj Kumar Varshney to justify the restriction of disallowance to 15%.

5. The CIT(A) sustained disallowances of specific expenses like telephone, travelling, and conveyance. The ITAT upheld these disallowances, supported by various judicial precedents, including decisions from the Hon'ble Gujarat High Court and Hon'ble Delhi High Court.

6. The ITAT applied the precedent set in the case of Shri Anuj Kumar Varshney to restrict the disallowance of unverified purchases to 15%, upholding the rejection of the books of account. The decision was based on the similarity of facts and circumstances with the referenced case.

7. Regarding telephone, travelling, and conveyance expenses, the ITAT found no infirmity in the lower authorities' orders. The estimate made by the lower authorities was upheld, as the assessee failed to demonstrate the absence of a personal element in these expenditures, especially since the books of account were rejected.

8. In conclusion, the ITAT partly allowed the assessee's appeal, directing the Assessing Officer to work out the disallowance for unverified purchases at 15% while upholding the disallowances of specific expenses based on judicial precedents and the rejection of books of account.

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