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2015 (7) TMI 203 - AT - Income TaxUnaccounted purchases - Held that - We have heard the rival contentions of both the parties and perused the material available on the record. Similar line of cases, this Bench has decided in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other cases 2015 (4) TMI 533 - ITAT JAIPUR wherein 15% disallowances has been held reasonable on considering the detail discussion on facts and legal position on unverifiable purchases/bogus purchases. Accordingly, we also apply 15% disallowances on unverifiable purchases in this case also. The Assessing Officer is directed to recalculate the income as per above direction. - Decided partly in favour of assessee.
Issues Involved:
1. Verifiability of purchases amounting to Rs. 1,00,40,088. 2. Rejection of books of accounts under Section 145(3) of the IT Act, 1961. 3. Addition of Rs. 25,100 on account of alleged commission paid on unverifiable purchases. 4. Disallowance of Rs. 93,347 being 1/5 of depreciation and insurance of car on account of alleged personal use. Issue-wise Detailed Analysis: 1. Verifiability of Purchases: The primary issue was whether the purchases amounting to Rs. 1,00,40,088 made by the appellant were verifiable. The Assessing Officer (AO) observed that the appellant failed to furnish a stock register and provide quantitative and qualitative details of stock and basis of valuation of closing stock. The AO found that the purchases were made from bogus entry providers and issued show cause notices to produce these parties for verification, which the appellant failed to do. The AO concluded that the purchases were unverifiable and disallowed 30% of the unverifiable purchases, adding Rs. 30,12,026 to the appellant's income. The CIT(A) upheld the disallowance but reduced it to 25%, resulting in an addition of Rs. 25,10,022. The Tribunal, considering similar cases, found 15% disallowance reasonable and directed the AO to recalculate the income accordingly. 2. Rejection of Books of Accounts: The AO rejected the appellant's books of accounts under Section 145(3) of the IT Act, 1961, due to the failure to provide supporting evidence for the stock and purchases. The AO relied on various case laws to justify the rejection, including M/s Kanchwala Gems Vs. JCIT and CIT Vs. Precision Finance P Ltd. The CIT(A) upheld the rejection, noting discrepancies in the yield of precious stones and inflated purchases from unverifiable parties. The Tribunal did not specifically address the rejection of books but implicitly upheld it by addressing the disallowance of unverifiable purchases. 3. Addition on Account of Commission: The AO observed that the parties providing bogus purchase bills charged a commission of 0.20% to 0.25%, resulting in an alleged commission payment of Rs. 25,100 on the total bogus purchases of Rs. 1,00,40,088. The appellant failed to furnish documentary evidence for this commission payment, leading the AO to add it to the appellant's income. The CIT(A) upheld this addition, and the Tribunal found no reason to intervene, thereby upholding the CIT(A)'s order. 4. Disallowance of Depreciation and Insurance: The AO disallowed 1/5 of the depreciation and insurance expenses on cars, amounting to Rs. 93,347, due to the alleged personal use of the vehicles. The appellant had already added Rs. 70,516 on account of vehicle expenses considered personal. The CIT(A) upheld the AO's disallowance, stating that proportionate disallowance of depreciation and insurance was justified. The Tribunal agreed with the CIT(A)'s detailed findings and upheld the disallowance. Conclusion: The Tribunal partly allowed the appellant's appeal by reducing the disallowance on unverifiable purchases to 15%, directing the AO to recalculate the income. The Tribunal upheld the CIT(A)'s decisions regarding the commission payment and disallowance of depreciation and insurance expenses. The order was pronounced in the open court on 19/06/2015.
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