ITAT adjusts bogus purchase addition, allows cash purchase appeal, deletes amounts, confirms purchase genuineness

The ITAT partially allowed the appeal regarding the addition of &8377; 7,21,803/- as bogus purchases, considering a GP of 5% instead of 3.5%. The ITAT fully allowed the appeal on the addition of &8377; 4,26,021/- for cash purchases, deleting the amount as the genuineness of the purchases was confirmed. The additions made by the AO and confirmed by the Ld. CIT(A) were thus deleted in both instances.

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Issues:
1. Addition of &8377; 7,21,803/- as bogus purchases
2. Addition of &8377; 4,26,021/- on account of cash purchases

Issue 1: Addition of &8377; 7,21,803/- as bogus purchases

The appeal was against the Ld. CIT(A)'s decision confirming the addition of &8377; 7,21,803/- as bogus purchases. The AO treated the sum as bogus under section 69C of the Act due to cash payments for purchases violating section 40A(3) and purchases made out of books. The ITAT noted that while the AO accepted the sales of eggs, he doubted the purchases. The AR argued that all purchases and sales were regularly recorded. The ITAT held that the entire purchase could not be added as the assessee had purchased eggs from some other party, even if not the ones shown in the books. Relying on previous court decisions, the ITAT allowed the appeal partly, considering a GP of 5% instead of 3.5%.

Issue 2: Addition of &8377; 4,26,021/- on account of cash purchases

The appeal challenged the Ld. CIT(A)'s decision confirming the addition of &8377; 4,26,021/- made by the AO on account of cash purchases. The AO found that the assessee had made cash payments to M/s. Paul Egg Centre in violation of sec. 40A(3) of the Act. The ITAT noted that the genuineness of the cash payment was not disputed, as confirmed by the owner of M/s. Paul Egg Centre. Relying on a Calcutta High Court decision, the ITAT held that since the genuineness of the purchases was not doubted, no disallowance was warranted. Consequently, the addition was deleted, and the appeal of the assessee was allowed.

In conclusion, the ITAT allowed the appeal partly in the first issue and fully in the second issue, deleting the additions made by the AO and confirmed by the Ld. CIT(A) in both cases.

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