Revenue's Appeal Dismissed by ITAT on Disallowance Case for AY 2011-12

The appeal by Revenue against the order of Ld. CIT(A) granting partial relief to the assessee on disallowance u/s. 37(1) for A.Y. 2011-12 was dismissed by the ITAT. The ITAT upheld Ld. CIT(A)'s decision that the assessee's documentary evidence was not disproved, and estimated addition of 12.5% against the suspicious purchases was reasonable. The ITAT found no fault in the order and concluded that the appeal lacked merit, ultimately dismissing it on 5th July 2021.

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Issues:
Appeal against order of Ld. CIT(A) granting partial relief on disallowance u/s. 37(1) for A.Y. 2011-12.

Analysis:
1. The appeal by Revenue contested the order of Ld. CIT(A) granting partial relief to the assessee on account of disallowance made by Ld. AO u/s. 37(1) for Rs. 7.60 Lacs for the assessment year 2011-12.

2. During the hearing, no one appeared for the assessee, but the material on record was deemed sufficient for the disposal of the appeal. The Ld. DR pleaded for the restoration of the assessment as framed by Ld. AO u/s. 143(3) r.w.s. 147 on 19/09/2016.

3. The assessment revealed suspicious purchases of Rs. 7.60 Lacs from M/s. Shulabh Trading Company, where wrist watches were claimed as sales promotion expenses under section 37(1). The assessee provided ledger extracts, bills, bank statements, and confirmation details, but the supplier could not be traced, leading to the disallowance of the expenditure.

4. Ld. CIT(A) noted that the documentary evidence provided by the assessee was not disproved, and the actual purchases were likely made from the open market while bills were obtained from the supplier. Consequently, an estimated addition of 12.5% against these purchases was deemed reasonable. The revenue, aggrieved by this decision, filed a further appeal.

5. The ITAT concurred with Ld. CIT(A)'s decision that the receipt and utilization of wrist watches could not be disregarded. Considering that the assessee may have saved money by purchasing goods from the open market, an estimated addition of 12.5% against the purchases was justified. Finding no fault in the impugned order, the appeal was dismissed.

6. The appeal was ultimately dismissed, with the order pronounced on 5th July 2021.

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