Tribunal Limits Disallowance of Expenses, Upholds Decision on Non-Genuine Purchases

The CIT(A) limited the disallowance of claimed expenses to 12.5% of total purchases, reducing it from Rs. 1,63,27,255 to Rs. 20,40,905. The Tribunal upheld this decision, dismissing the Revenue's appeal against the deletion of Rs. 1,42,86,350 addition for alleged non-genuine purchases. The assessee's cross-objection for a 5% disallowance was partially allowed, resulting in a token disallowance of Rs. 8,16,362. The Tribunal referenced a previous case to justify the 5% disallowance, highlighting inconsistencies in supplier statements. Ultimately, the Revenue's appeal was dismissed, and the cross-objection was partly allowed.

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Issues:
1. Disallowance of expenses claimed as bogus purchases by the Assessing Officer.
2. Appeal against deletion of addition made by the AO.
3. Cross-objection filed by the assessee regarding the disallowance percentage.

Analysis:
1. The appellant, engaged in construction business, made payments for materials through account payee cheques. The Assessing Officer (AO) issued notices u/s.133(6) to suppliers for verification, but failed to establish genuineness. Despite providing details and documents, the AO disallowed purchases of Rs. 1,63,27,255 as bogus. In the appellate proceedings, the CIT(A) found evidence supporting the existence of suppliers and disagreed with the AO's 100% disallowance, limiting it to Rs. 20,40,905 (12.5% of total purchase). The Revenue appealed against the deletion of Rs. 1,42,86,350 addition, alleging non-genuine purchases to evade tax.

2. The assessee filed a cross-objection, arguing the disallowance should be restricted to 5% based on a previous Tribunal decision. During the hearing, the Department and the assessee's representatives referenced the AO's order and the Tribunal's decision in Gujarat Ambuja Exports Ltd. vs. ACIT. The Tribunal, after reviewing the evidence and bank statements provided by suppliers, upheld the CIT(A)'s decision regarding genuineness, dismissing the Revenue's appeal.

3. The Tribunal justified the 5% disallowance in the cross-objection, citing the Gujarat Ambuja Exports Ltd. case. It noted inconsistencies in statements related to a specific supplier, justifying a token disallowance. The Tribunal found the current case similar to the precedent and modified the CIT(A)'s order, allowing a 5% disallowance of Rs. 8,16,362 out of the total purchase. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection was partly allowed.

This detailed analysis of the judgment highlights the issues of disallowance of expenses, appeal against deletion of addition, and the cross-objection regarding the disallowance percentage, providing a comprehensive understanding of the legal proceedings and decisions made by the Tribunal.

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