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TMI Blog2010 (4) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... of engineering components and products. The assessee filed its return of income for the assessment year 2005-06 declaring the total income at nil. The assessee's case was selected for scrutiny and the assessment was completed u/s 143(3). The assessee had declared total sales of ₹ 69,66,212/- and declared the net profit of ₹ 4,71,652/-. During the course of assessment proceedings, to verify the genuineness of the business transactions of the assessee, the AO issued enquiry letters u/s 133(6) of the I T Act to the following 29 parties: 1) M/s Indo German Industries 2) M/s Coussinet Engineers 3) M/s Instruments & Controls 4) M/s Ashok Leather & Rubber Co 5) M/s Supreme Industrial Work. 6_ M/s Investment and Precision C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition in respect of further two parties i.e. Instruments & Controls and Western Mfg. Co that was to the extent of ₹ 6,17,487/- and further addition in respect of M/s Air-O-pack for the alleged discrepancy of ₹ 33,203/-; therefore, made the total addition of ₹ 1,05,85,831/-. The assessee challenged the said addition before the ld CIT(A), who deleted the entire addition by giving the following reasons: "2.3 I have considered the assessment order and the submissions of the appellant. As I find, the main plank of the addition is the fact that the AO did not consider filing of confirmations by the appellant as sufficient to substantiate the transactions. Looking into this premise of the addition, the process of enquiry and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I see, whereas it is true that merely filing of confirmations by the assessee or payment through bank channels do not make transactions sacrosanct, at the same time, it is also true that in order to reject them ultimate inference is to be based on true appreciation of facts drawn from the confirmations and explanations and preponderance of the probability of such explanations. In this context, I find that merely by stating that parties have not been produced an inference cannot be drawn that purchases were bogus, particularly when the confirmations and the appellant's explanation otherwise substantiate the purchases. I further find that the confirmations/information from the purchasers had been submitted before the completion of the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that as per P& L account, the total purchases declared by the assessee was at ₹ 45,58,061/-(Page 1 of the paper book) and AO made the addition of ₹ 1,05,85,831/-. He, therefore, pleaded that there is a serious discrepancy in the assessment order in respect of the amount of the purchases. The ld. counsel further argued that even each and every transaction were entered into by the assessee as purchases but, the AO totally disregarded the confirmation given by the concerned parties. It is further argued that the books of account were not rejected. 5.1 We find force in the argument of the ld. counsel. In fact, as rightly argued by the ld. counsel of the assessee that there is serious anomaly in the addition made by the AO to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses. Etc. 8 We have heard the parties. The AO made ad hoc disallowance at 20% out of the following expenses; i) Misc. expenses Rs.27,948/- ii) Conveyance Rs.10,780/- iii)Staff Welfare Rs.31,813/- iv) Travelling Rs.1,01,725/- Total Rs.1,72266/- and made the addition of ₹ 34,453/-. The only reason given by the AO is that the above expenses were not properly vouched in the correct sense. The assessee carried the issue before the ld CIT(A), who deleted the addition. 9. We have perused the reasons given by the AO for making the disallowance. We fail to understand what the AO was contemplated in the phrase 'correct sense.' Once the expenses are claimed by the assessee, then for making disallowance fully or partly of the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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