2018 (6) TMI 1799 - AT - Income Tax

Estimation of Income - Bogus purchases - CIT-A Restrict disallowance @ 12.5% of total purchase - HELD THAT - So far as the genuineness of the transaction is concerned, we are satisfied upon the method and manner applied by the Ld. CIT(A) in coming to the conclusion on the basis of the content of the remand report, other evidences and specially on the bank statement of the suppliers which was, in fact, obtained by the AO himself and we thus declined to interfere with the same. The appeal preferred by the Revenue on this ground is dismissed. As relying on GUJARAT AMBUJA EXPORT LTD VERSUS ASSTT COMMISSIONER OF INCOME TAX 2013 (9) TMI 198 - ITAT AHMEDABAD we think it fit to modify the order passed by the Ld. CIT(A) by disallowing 5% from 12.5% as made. Appeal of assessee is partly allowed.

Summary

Issues:
1. Disallowance of expenses claimed as bogus purchases by the Assessing Officer.
2. Appeal against deletion of addition made by the AO.
3. Cross-objection filed by the assessee regarding the disallowance percentage.

Analysis:
1. The appellant, engaged in construction business, made payments for materials through account payee cheques. The Assessing Officer (AO) issued notices u/s.133(6) to suppliers for verification, but failed to establish genuineness. Despite providing details and documents, the AO disallowed purchases of ?1,63,27,255 as bogus. In the appellate proceedings, the CIT(A) found evidence supporting the existence of suppliers and disagreed with the AO's 100% disallowance, limiting it to ?20,40,905 (12.5% of total purchase). The Revenue appealed against the deletion of ?1,42,86,350 addition, alleging non-genuine purchases to evade tax.

2. The assessee filed a cross-objection, arguing the disallowance should be restricted to 5% based on a previous Tribunal decision. During the hearing, the Department and the assessee's representatives referenced the AO's order and the Tribunal's decision in Gujarat Ambuja Exports Ltd. vs. ACIT. The Tribunal, after reviewing the evidence and bank statements provided by suppliers, upheld the CIT(A)'s decision regarding genuineness, dismissing the Revenue's appeal.

3. The Tribunal justified the 5% disallowance in the cross-objection, citing the Gujarat Ambuja Exports Ltd. case. It noted inconsistencies in statements related to a specific supplier, justifying a token disallowance. The Tribunal found the current case similar to the precedent and modified the CIT(A)'s order, allowing a 5% disallowance of ?8,16,362 out of the total purchase. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection was partly allowed.

This detailed analysis of the judgment highlights the issues of disallowance of expenses, appeal against deletion of addition, and the cross-objection regarding the disallowance percentage, providing a comprehensive understanding of the legal proceedings and decisions made by the Tribunal.