2008 (5) TMI 728 - AT - Income Tax

Summary

Issues involved: Determination of addition for bogus purchases and unexplained payments u/s 143(3) of the Income Tax Act, 1961.

Bogus Purchases:
The case involved the addition of Rs. 42,58,952/- for alleged bogus purchases made by the assessee from M/s.Girnar Sales Corporation and M/s.Shiv Metal Corporation. The Assessing Officer disallowed the purchases as bogus and added the payment made to these parties as unexplained. The CIT(A) upheld 30% of the total addition, relying on previous decisions. The assessee argued that despite being unable to prove the genuineness of the purchases, quantitative details were maintained and reflected in accounts. Citing precedents, the assessee proposed a reasonable disallowance. The ITAT, considering the factual findings and the assessee being a trader in iron and steel, sustained the disallowance at 12.5% of purchases from the two parties, following previous decisions and directing the Assessing Officer to adjust the disallowance accordingly.

Unexplained Payments:
Regarding the addition of Rs. 26,76,559/- as unexplained payment, the Assessing Officer's investigation revealed that all payments were made by cheque and duly recorded in the assessee's bank account. The ITAT found no justification for considering these payments as unexplained, as they were properly documented and accounted for. Therefore, the addition for unexplained payments was deemed unwarranted. The ITAT allowed the assessee's appeal in part and dismissed the Revenue's appeal, pronouncing the order in open court on 20th May, 2011.