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TMI Blog2021 (11) TMI 1073X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts maintained by the assessee and has not made any adverse comments on purchases debited into P L account. Under these circumstances, we are unable to subscribe to the reasons given by the AO to make adhoc disallowance on purchases CIT(A), after considering relevant facts and also taken note of fact that there is a decline in gross profit declared by the assessee for the impugned assessment year compared to earlier financial year, has directed the AO to restrict the disallowance on purchases to the extent of 2.5%, fall in rate of gross profit on total turnover for the year. The said findings recorded by the Ld. CIT(A) appears to be logical and on the basis of estimation of gross profit. Therefore, we are of the considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has sought time to file details in support of purchases, but subsequently expressed its inability to furnish necessary details in support of purchases. Therefore, the AO opined that the assessee is not able to produce details pertaining to purchases, and hence, made estimated disallowance of 10% on total purchases and made additions at Rs. 3,55,57,472/-. The relevant findings of the AO are under: 2. Disallowances of Purchases for want of details 2.1 During the previous year corresponding to the assessment year 2014-15, the assessee had incurred a total expense of Rs. 35,55,74,723/-. During the course of the proceedings, the assessee was asked to file details of the same specifying the details of the parties and quantity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 10% is to be disallowed for want of proper details for verification. The said disallowance amounts to Rs. 3,55,57,472/~ and is added back to the total income of the assessee. 3. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed detailed written submission on the issue which has been reproduced at para 4.1 of page 3 and 4 of CIT(A) order. The sum and substance of arguments of the assessee before the Ld. CIT(A) are that books of accounts maintained by the assessee for the relevant assessment year is supported by necessary bills and vouchers and further was audited by an Accountant as required u/s. 44AB of the Act. He further submitted that due to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72/-, a sum of Rs. 1,32,85,764/- has been sustained and balance addition of Rs. 2,22,71,708/- has been deleted. Aggrieved by the Ld. CIT(A) order, the assessee as well as the Revenue are in appeal before us. 5. The Ld. AR for the assessee submitted that the Ld. CIT(A) has erred in directing the AO to restrict the additions to difference in rate of gross profit declared by the assessee when compared to previous financial year, without appreciating fact that the books of accounts of the assessee was audited by an Accountant as per provisions of section 44AB of the Act and further as per the report of the auditor, there is no adverse comments on books of accounts as well as supporting evidences for various expenses including purchases debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orting evidences, then the AO is having every right to dispute expenses debited into P L account. At the same time, the AO had made adhoc disallowance on purchases without recording any adverse comments on books of accounts maintained by the assessee for the relevant assessment year. Further, the AO has not disputed pleading of the assessee that the auditor has given clean chit to the books of accounts maintained by the assessee and has not made any adverse comments on purchases debited into P L account. Under these circumstances, we are unable to subscribe to the reasons given by the AO to make adhoc disallowance on purchases. The Ld CIT(A), after considering relevant facts and also taken note of fact that there is a decline in gross profi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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