Tax Tribunal Upholds Reduction of Disallowance on Non-Genuine Purchases to 12.5% for Assessment Years 2009-10 and 2010-11.

The ITAT upheld the decision of the Ld. CIT(A) to restrict the disallowance of non-genuine purchases to 12.5% for A.Ys. 2009-10 and 2010-11, dismissing the revenue's appeals. The AO's initial disallowance of 25% was reduced based on insufficient evidence of purchase genuineness and relevant legal precedents.

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Issues:
Appeals filed by revenue against common order of Ld.CIT(A) restricting addition to 12.5% of purchases as non-genuine by AO for A.Ys. 2009-10 & 2010-11.

Analysis:
The assessee, engaged in Trading and Manufacturing of Dyes and Chemicals, filed returns for A.Ys. 2009-10 and 2010-11. Assessments were reopened by AO based on information about accommodation entries received from DGIT (Inv.,) Mumbai. Assessee failed to prove genuineness of purchases made from various parties, leading to AO treating 25% of purchases as non-genuine. Ld.CIT(A) restricted disallowance to 12.5% based on submissions and evidence provided by assessee.

Analysis (Contd.):
During the appeal, no representation was made by the assessee. Ld. DR supported AO's orders, emphasizing the non-genuineness of purchases. Ld.CIT(A) extensively considered the matter, referring to judicial pronouncements, including the decision of Hon'ble Gujarat High Court in a specific case. The Ld.CIT(A) upheld the disallowance of 12.5% of non-genuine purchases, citing the inability to establish genuineness of purchases made from hawala dealers.

Analysis (Contd.):
The Ld.CIT(A) highlighted the necessity to prove the authenticity of purchases, emphasizing the importance of verifying transactions with parties involved. The Ld.CIT(A) noted the failure to provide essential details to establish the genuineness of purchases. Despite the AO's disallowance being upheld, the percentage was reduced from 25% to 12.5% based on relevant legal precedents and circumstances of the case.

Analysis (Contd.):
Upon careful review, the ITAT upheld Ld.CIT(A)'s decision, finding no fault in restricting the addition to 12.5% of purchases. The grounds raised by the revenue were dismissed, leading to the dismissal of the revenue's appeals. The ITAT pronounced the order in November 2020, in accordance with ITAT Rules.

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