Appeal partially allowed, expenses remanded, unexplained purchases upheld, relief granted to avoid double taxation.

The Tribunal partly allowed the appeal, remanding the disallowance of 5% expenses for fresh consideration. The addition of Rs. 9,68,628/- on unexplained purchases was upheld. The Revenue was directed to verify and grant relief for the amount of Rs. 2,52,001/- written back in AY 2013-14 to avoid double taxation.

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Issues Involved:
1. Disallowance of 5% of financial and administrative expenses.
2. Addition of Rs. 9,68,628/- on account of purchases treated as unexplained expenditure.
3. Non-consideration of Rs. 2,52,001/- declared as income in the assessment year 2013-14 on account of unpaid liability written off.

Detailed Analysis:

Issue 1: Disallowance of 5% of Financial and Administrative Expenses
The assessee agreed to a disallowance of 5% of the total expenses under the head 'Financial and Administrative Expenses' amounting to Rs. 56,42,384/-. The AO made a disallowance of Rs. 2,82,119/-, which was upheld by the CIT(A) as the assessee did not press this ground. The Tribunal observed that the matter should be reconsidered by the CIT(A) on merits, allowing the assessee to present evidence, especially concerning statutory dues included in the disallowed expenses. The Tribunal remanded the matter back to the CIT(A) for a fresh adjudication.

Issue 2: Addition of Rs. 9,68,628/- on Account of Unexplained Purchases
The AO received information from the Sales Tax Department and DGIT(Inv.) that certain parties were issuing accommodation entries without actual delivery of goods. The AO identified three such purchases by the assessee, amounting to Rs. 9,68,628/-, from parties deemed to be issuing bogus bills. Notices issued to these parties under section 133(6) remained uncomplied with. The assessee failed to provide transportation memos, delivery challans, or any corroborative documents. The AO concluded that the purchases were unexplained and made an addition under section 69C. The CIT(A) upheld this addition, noting the absence of a stock register and failure to substantiate the consumption or sale of the goods. The Tribunal agreed with the CIT(A), emphasizing the lack of quantitative reconciliation and evidence of material consumption, thereby confirming the addition.

Issue 3: Non-Consideration of Rs. 2,52,001/- Declared as Income in AY 2013-14
The assessee argued that the amount of Rs. 2,52,001/- from Blue Cross Networks, written back as income in AY 2013-14 due to non-payment, should not be added in AY 2011-12. The CIT(A) dismissed this argument, as the amount was debited in the Profit and Loss Account for the relevant year. The Tribunal held that the genuineness of the purchase needed to be proved for AY 2011-12, which the assessee failed to do. However, to avoid double jeopardy, the Tribunal directed the Revenue to grant appropriate relief in AY 2013-14 after verifying the claim.

Conclusion:
The Tribunal partly allowed the appeal. The issue of disallowance of 5% expenses was remanded back to the CIT(A) for fresh consideration. The addition of Rs. 9,68,628/- on account of unexplained purchases was upheld. The Tribunal directed the Revenue to verify and grant relief for the amount of Rs. 2,52,001/- written back in AY 2013-14 to avoid double taxation.

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