2017 (10) TMI 1462 - HC - Income Tax

Bogus purchases - disallowance of 15% of the purchases made from SKS - books of accounts of the appellant were not rejected u/s 145 - HELD THAT - Looking at the entirety of facts and circumstances i.e. the books of accounts being not rejected consumption of cotton having comparatively decreased, we are inclined to follow our judgment in the case of Anuj Kumar Varshney 2015 (4) TMI 533 - ITAT JAIPUR and direct to restrict the disallowance to 15% of purchases from SKS. Thus assessee s appeals are partly allowed - We are of the opinion that the 15% disallowance restricted by the tribunal is just and proper. No interference is called for. -Decided against assessee.

Summary

Issues:
Appeals challenging tribunal's judgment on disallowance of purchases made from SKS and trading addition without rejecting books of accounts under Income Tax Act, 1961.

Analysis:
1. The appeals involved a common question of law and facts, challenging the tribunal's decision partially allowing the appeal by the assessee regarding the disallowance of purchases made from SKS.

2. The substantial questions of law framed by the court pertained to the correctness of the tribunal's findings based on oral statements during a search operation and documentary evidence proving purchases made through banking channels with VAT payment and goods delivery.

3. The facts revealed that the assessee, a public limited company operating a hospital, underwent search operations under the Income Tax Act, 1961, resulting in assessments with additions for alleged bogus purchases and interest disallowance.

4. The tribunal's decision was based on the reliability of statements from various individuals, with the tribunal finding the MD and accountant's statements valid evidence, leading to a 15% disallowance of purchases from SKS.

5. The court considered the arguments presented by both parties, with the appellant's counsel urging confirmation of the AO's view upheld by the CIT(A).

6. Ultimately, the court upheld the tribunal's decision, deeming the 15% disallowance as just and proper, with no need for further interference in favor of the department against the assessee.

7. The judgment clarified that no prosecution would be initiated based on this assessment order, allowing the appellant to defend against any potential prosecution by citing the tribunal and court's decisions.

8. The court emphasized that the 15% disallowance was based on presumption, indicating that the case against the appellant did not meet the standard of proof beyond reasonable doubt, leading to the dismissal of the appeals.