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ITAT allows partial appeal, directs 15% disallowance on purchases. The ITAT allowed the appellant's appeal in part, directing a 15% disallowance out of the total impugned purchases to balance justice and industry norms. ...
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ITAT allows partial appeal, directs 15% disallowance on purchases.
The ITAT allowed the appellant's appeal in part, directing a 15% disallowance out of the total impugned purchases to balance justice and industry norms. The disallowance of purchases as bogus was overturned due to the impractical gross profit margin resulting from undisputed sales receipts. The second ground of appeal was dismissed, and the revenue's appeal was allowed for statistical purposes. The CIT-A's decision to uphold the disallowance was overturned in favor of the appellant.
Issues: Disallowance of purchases as bogus
Analysis: 1. The assessing officer disallowed purchases amounting to &8377; 73,84,489 based on information from the Sales Tax Department regarding entry providers for bogus purchase bills. 2. The managing director failed to provide evidence to substantiate the purchases during the assessment proceedings. 3. The CIT-A upheld the disallowance, stating that the information from the sales tax department had evidentiary value and the managing director's admission supported the addition under section 131 of the Income Tax Act. 4. The appellant argued that the disallowance would lead to an unrealistic gross profit margin of 56% and referred to industry standards and past performance to support this claim. 5. The ITAT observed that while the purchases were treated as bogus, the sales receipts were not disputed, leading to an impractical gross profit margin. 6. The ITAT agreed with the appellant's contention and directed a 15% disallowance out of the total impugned purchases to balance justice and industry norms. 7. The second ground of appeal was dismissed as not pressed by the appellant's counsel. 8. The appeal by the revenue was allowed for statistical purposes, and the order was pronounced on 15.03.2017.
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