2015 (9) TMI 692 - AT - Income Tax

Disallowance of purchases made by the assessee company - Held that - We observe that the revenue authorities failed to appreciate the rectification and reconciliation given by the seller M/s Jindal Polyfilms Ltd. regarding revised sale amount of September 2004 in a proper and judicious manner. Thus, we are of the considered opinion that the quantification of amount of purchases of the assessee during F.Y. 2004-05 requires proper and detailed verification and examination at the end of AO and, therefore, the issue is restored to the file of AO with a direction that the AO shall examine and verify the amount of purchases of the assessee emerged from books of accounts, confirmation and bank statement etc., providing opportunity of being heard for the assessee and without being prejudiced with the earlier assessment order and impugned order. Accordingly, sole ground of assessee is deemed to be allowed for statistical purposes.

Summary

Issues Involved:
Appeal against CIT(A) order for AY 2005-06 regarding disallowance of purchase amount.

Detailed Analysis:

Issue 1: Disallowance of Purchase Amount
- The appeal was filed against the CIT(A) order confirming the disallowance of Rs. 66,01,449 on account of purchases made by the assessee company.
- The AO held that the assessee inflated purchases without providing evidence or confirmation from the seller, resulting in the disallowance.
- The assessee contended that the sales underreporting by the seller was rectified and confirmed by the seller, but this was not considered by the authorities.
- The main controversy was whether the assessee inflated purchases and if the explanation provided was an afterthought.
- The CIT(A) rejected the explanation, stating that the assessee failed to establish through bank statements the payment to the seller, which would support the claim.
- The Tribunal observed that the authorities did not properly consider the rectification and reconciliation provided by the seller regarding revised sales amount.
- The Tribunal directed the AO to verify the purchase amount from books, confirmation, and bank statements, giving the assessee an opportunity to be heard.
- The appeal was partly dismissed and partly allowed for statistical purposes based on the above findings.

This detailed analysis covers the main issue of the disallowance of purchase amount and the arguments presented by both the assessee and the revenue authorities, leading to the Tribunal's decision to remand the issue back to the AO for proper verification.