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of <h1>ITAT allows appeal, orders fresh assessment on disallowed purchases, overturns disallowance under section 80G, and deletes interest expense disallowance.</h1> <h3>M/s. Electrolab, Mumbai Versus Joint Commissioner of Income Tax, Circle 16 (1), Mumbai</h3> M/s. Electrolab, Mumbai Versus Joint Commissioner of Income Tax, Circle 16 (1), Mumbai - TMI Issues Involved:1. Disallowance of &8377; 34,59,518 on account of bogus purchases.2. Disallowance of claim under section 80G of &8377; 30 lakhs.3. Disallowance of &8377; 60,000 on account of interest paid to partner.Analysis:Issue 1: Disallowance of &8377; 34,59,518 on account of bogus purchasesThe appellant contested the disallowance of &8377; 34,59,518 for alleged bogus purchases, providing invoices, delivery challans, and vendor confirmation letters. The AO relied on Sales Tax Department data to disallow the purchases. The CIT(A) upheld the disallowance without considering the evidence. The ITAT admitted additional evidence and remanded the issue to the AO for fresh consideration, emphasizing the need for a fair hearing.Issue 2: Disallowance of claim under section 80G of &8377; 30 lakhsThe appellant made a voluntary donation of &8377; 30 lakhs to an approved institution, supported by valid certificates. The AO disallowed the claim, suspecting it was for personal benefit. The CIT(A) upheld the disallowance, alleging the donation was to evade taxes. The ITAT overturned the disallowance, finding the donation genuine and made within the scope of section 80G, emphasizing the lack of statutory grounds for disentitlement.Issue 3: Disallowance of &8377; 60,000 on account of interest paid to partnerThe AO disallowed interest expenses of &8377; 60,000, linking it to the disallowed donation. The CIT(A) upheld the disallowance based on the earlier disallowed amount. The ITAT reversed the disallowance, noting the allowance of the donation claim and ruling the interest expenses were legitimate business expenses, thereby allowing the appeal.In conclusion, the ITAT allowed the appeal, directing a fresh assessment on the disallowed purchases issue, overturning the disallowance under section 80G, and deleting the disallowance of interest expenses paid to a partner.
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