Tribunal Adjusts Purchase Disallowance & Commission Addition Under IT Act

The tribunal partly allowed the appeals against the ld. CIT(A)'s order for AY 2009-10, 2010-11, and 2011-12 under the IT Act. The disallowance of purchases was reduced from 25% to 5% by the tribunal, considering the VAT rate and the need for real income taxation. The tribunal also deleted the addition of 1% commission on purchases due to lack of substantiation. The rejection of books of account was partially sustained, with discussions on this ground being deemed academic. The principle of consistency guided the decisions for AY 2010-11 and 2011-12.

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Issues Involved:
Appeals against order of ld. CIT(A)-28 for AY 2009-10, 2010-11, and 2011-12 under IT Act, concerning disallowance of 25% of purchases and 1% commission on bogus purchases.

Analysis:

Issue 1: Reopening of Assessment and Disallowance of Purchases
The assessee's business involved trading in Iron and steel. The case was reopened under section 147 based on information from the Sales Tax Department regarding bogus purchase bills. The assessing officer disallowed 25% of total purchases and 1% commission on the assumption that purchases were made through brokers and not directly from parties. The assessee provided detailed evidence, but the AO rejected it, leading to the disallowances. The ld. CIT(A) upheld the AO's decision, emphasizing the onus on the assessee to prove genuineness. However, the tribunal found the disallowance excessive, considering the VAT rate, and restricted it to 5% of purchases, citing the need for real income taxation.

Issue 2: Disallowance of Commission
The disallowance of 1% commission on total purchases was based on assumptions without substantive evidence. The tribunal found the AO's action unsubstantiated and deleted the addition, as the AO failed to provide material to support the disallowance.

Issue 3: Rejection of Books of Account
The AO rejected the books of account due to alleged accommodation bills and lack of delivery proof. The tribunal partially sustained the addition but restricted the disallowance to 5% of purchases. Consequently, discussions on this ground became academic.

Conclusion
The tribunal partly allowed the appeals, considering the excessive disallowances and lack of concrete evidence supporting the AO's actions. The principle of consistency guided the decisions for AY 2010-11 and 2011-12. The disallowance of purchases was restricted to 5%, and the addition of commission was deleted due to lack of substantiation by the AO. The interest levy ground was deemed consequential. The rejection of books of account was partially sustained, with discussions becoming academic.

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