Appeal partially allowed for partnership firm in tax case; addition restricted to 15% of unverifiable purchases

The appeal of the assessee, a partnership firm, was partly allowed in a case where the Assessing Officer (AO) rejected the books of account due to unverifiable purchases. The AO made an addition of Rs. 3,57,741, which was upheld by the ld. CIT(A). However, the Coordinate Bench restricted the addition to 15% of the unverifiable purchases, citing legal precedents and decisions in similar cases.

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Issues:
1. Rejection of books of account by the AO based on unverifiable purchases.
2. Trading addition made by the AO on account of alleged unverifiable purchases.

Issue 1: Rejection of books of account by the AO based on unverifiable purchases:
The assessee, a partnership firm, filed an appeal against the order of the ld. CIT(A) confirming the rejection of its books of account by the AO due to unverifiable purchases totaling to Rs. 14,30,963. The AO observed discrepancies in the sales and gross profit declared by the assessee for the assessment year 2009-10 compared to previous years. The purchases from two parties were flagged as unverifiable as they were previously declared as entry providers by the Income Tax Department. Despite the assessee's failure to produce these parties for examination, the AO rejected the books of account under section 145(3) of the Act and made an addition of Rs. 3,57,741. The ld. CIT(A) upheld the rejection of books of account and the addition based on precedents like the decision of the Hon'ble ITAT Jaipur Bench in similar cases.

Issue 2: Trading addition made by the AO on account of alleged unverifiable purchases:
The ld. CIT(A) dismissed the appeal of the assessee, emphasizing the rejection of books of account by the AO and the estimation of profit based on the gross profit rate discrepancies. The assessee argued that complete details of purchases were furnished, including supporting documents like purchase bills, confirmations, and payment proofs. The assessee contended that the AO doubted the creditworthiness of suppliers without verifying the transactions thoroughly. The assessee cited various legal decisions to support its case for deletion of the addition. The Coordinate Bench's decision in a similar case led to the restriction of the addition to 15% of unverifiable purchases, reducing the initial trading addition made by the AO.

In conclusion, the appeal of the assessee was partly allowed, restricting the addition to 15% of the unverifiable purchases as per the decision of the Coordinate Bench.

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