ITAT Pune partially allows appeal, overturns depreciation disallowance, restricts inflated purchase addition.

The ITAT Pune partially allowed the assessee's appeal. The disallowance of depreciation was overturned after the assessee submitted additional evidence of fixed assets purchased. The ITAT directed the Assessing Officer to verify and allow depreciation. In terms of the addition on account of inflated purchases, the ITAT restricted the addition and instructed applying a GP rate of 10% on the goods purchased. The appeal was partly allowed, with the ITAT issuing the order on June 7, 2017.

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Issues:
1. Disallowance of depreciation.
2. Addition on account of inflated purchases.

Analysis:
1. Disallowance of Depreciation:
The assessee filed an appeal against the order of the Assessing Officer regarding the non-allowance of depreciation amounting to Rs. 4,25,181. The CIT(A) upheld the Assessing Officer's decision as the assessee failed to provide necessary details and bills for the purchase of assets. The CIT(A) rejected the claim of depreciation due to the unavailability of purchase bills and incomplete information regarding the mode of payment for the assets. The appeal was dismissed, and the order of the Assessing Officer was upheld.

2. Addition on Account of Inflated Purchases:
The second issue pertained to the addition of Rs. 5,05,908 on account of alleged inflated purchases made by the assessee. The Assessing Officer made the addition based on suspicions of purchases from hawala dealers. The CIT(A) upheld the addition as the assessee failed to provide sufficient evidence to prove the legitimacy of the purchases. The assessee claimed that despite making payments through banking channels, the lack of concrete evidence of delivery of goods led to the addition being upheld. The appeal against this addition was also dismissed by the CIT(A).

Judgment:
The ITAT Pune heard the appeal on both issues. Regarding the disallowance of depreciation, the assessee submitted additional evidence detailing fixed assets purchased during the year. The ITAT admitted the additional evidence and directed the Assessing Officer to verify the same and allow depreciation as per law. For the inflated purchases issue, the ITAT restricted the addition in the hands of the assessee and directed the Assessing Officer to apply a GP rate of 10% on the goods purchased. Consequently, the appeal of the assessee was partly allowed, with the ITAT pronouncing the order on June 7, 2017.

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