2017 (3) TMI 885 - AT - Income Tax

Addition on account of bogus purchases - Held that - The report of AO was forwarded to the assessee for his reply / objections. The assessee filed its objection, in objection the assessee contended that no opportunity was given to the assessee to cross examine the vendors. The assessee further contended that he submitted a letter dated 21.01.14 and 22.01.14 and the AO overlooked the documents while furnishing the remand report. After considering the contention of the assessee and remand report the Ld. CIT (A) rejected the admission of additional evidence. Though the ld CIT(A) himself directed the assessee to file certain evidences. The ld CIT (A) not considered the evidences which was filed in compliance of his direction. We are of the considered opinion that ld CIT(A) wrongly rejected the admission of additional evidence. Hence, we admit the additional evidences filed by the assessee and remand this ground of appeal to the file of AO to consider the issue afresh and pass order in accordance with law. Disallowance under section 80G - Held that - We have seen the assessee s letter dated 29.01.10 while giving the cheque of donation. The assessee has clearly mentioned that the donation may be treated as donation to the corpus fund/interest. The donation was made during the validity of certificate under section 80G in favour of Dr. D.Y. Patil University. We have perused the provisions of section 80G of the Act. On perusal, we do not find any condition wherein the donor may be held disentitled for the benefit of section 80G in case his relative or dependent is getting education in the institution where the donation is made. In our view, the AO wrongly made his conclusion that expenses was made by partner for securing admission of his son and was claimed as a deduction by showing the amount as donation. Thus, we delete the disallowance made under section 80G of the Act - Decided in favour of assessee Disallowance of interest expenses paid to partner - Held that - AO disallowed the interest holding that payment of ₹ 30 lakhs paid on account of gift represents the personal expenses of partner as the same was disallowed by him. Since the amount of gift was disallowed, therefore the interest for two month on ₹ 30 lakhs which was worked out at ₹ 60,000/- was disallowed. The Ld. CIT(A) confirmed the disallowance of interest holding that the claim of 80G is sustained in appeal and thus it was not a personal drawing of the partner. As we have already allowed the claim of deduction under section 80G and reversed the finding of AO that drawing of ₹ 30 lakhs was not personal expenses of the partner, thus the disallowance of interest expenses is also deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Disallowance of &8377; 34,59,518 on account of bogus purchases.
2. Disallowance of claim under section 80G of &8377; 30 lakhs.
3. Disallowance of &8377; 60,000 on account of interest paid to partner.

Analysis:

Issue 1: Disallowance of &8377; 34,59,518 on account of bogus purchases
The appellant contested the disallowance of &8377; 34,59,518 for alleged bogus purchases, providing invoices, delivery challans, and vendor confirmation letters. The AO relied on Sales Tax Department data to disallow the purchases. The CIT(A) upheld the disallowance without considering the evidence. The ITAT admitted additional evidence and remanded the issue to the AO for fresh consideration, emphasizing the need for a fair hearing.

Issue 2: Disallowance of claim under section 80G of &8377; 30 lakhs
The appellant made a voluntary donation of &8377; 30 lakhs to an approved institution, supported by valid certificates. The AO disallowed the claim, suspecting it was for personal benefit. The CIT(A) upheld the disallowance, alleging the donation was to evade taxes. The ITAT overturned the disallowance, finding the donation genuine and made within the scope of section 80G, emphasizing the lack of statutory grounds for disentitlement.

Issue 3: Disallowance of &8377; 60,000 on account of interest paid to partner
The AO disallowed interest expenses of &8377; 60,000, linking it to the disallowed donation. The CIT(A) upheld the disallowance based on the earlier disallowed amount. The ITAT reversed the disallowance, noting the allowance of the donation claim and ruling the interest expenses were legitimate business expenses, thereby allowing the appeal.

In conclusion, the ITAT allowed the appeal, directing a fresh assessment on the disallowed purchases issue, overturning the disallowance under section 80G, and deleting the disallowance of interest expenses paid to a partner.