Tribunal upholds CIT(A) decisions on disallowance & addition under Income Tax Act

The tribunal upheld the decisions of the Ld. CIT(A) in a case involving disallowance under section 14A of the Income Tax Act and addition on account of alleged bogus purchases. The tribunal dismissed the revenue's appeal, affirming the deletion of interest disallowance under Rule 8D(2)(ii) and the estimation of the addition at 12.5% for alleged bogus purchases. The tribunal found the decisions of the Ld. CIT(A) reasonable and in line with precedents, ultimately upholding them.

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Issues:
1. Disallowance under section 14A of the Income Tax Act
2. Addition on account of alleged bogus purchases

Disallowance under section 14A:
The appeal involved a disallowance under section 14A of the Income Tax Act. The appellant, the revenue, contested the deletion of certain disallowances under Rule 8D(2)(ii) by the Ld. CIT(A). The Ld. AO had made a disallowance based on Rule 8D, which was contested by the appellant. The Ld. CIT(A) deleted the interest disallowance after considering the availability of interest-free funds with the assessee. The tribunal upheld the Ld. CIT(A)'s decision, citing the precedent set by the Hon'ble Bombay High Court in CIT V/s Reliance Utilities and Power Ltd. The tribunal found no fault in the Ld. CIT(A)'s order and dismissed the ground raised by the revenue.

Addition on account of alleged bogus purchases:
The second issue in the appeal pertained to an addition on account of alleged bogus purchases. The appellant was aggrieved by the Ld. CIT(A)'s decision to estimate the addition at 12.5% based on the Hon'ble Gujarat High Court's decision. The tribunal observed that the assessee, engaged in civil construction, provided documentary evidence of purchases through banking channels and material consumption for business activity. The tribunal found the estimation of 12.5% by the Ld. CIT(A) fair and reasonable given the factual matrix. Consequently, the tribunal dismissed the ground raised by the revenue and upheld the Ld. CIT(A)'s decision.

In conclusion, the tribunal dismissed the appeal, upholding the decisions made by the Ld. CIT(A) regarding the disallowance under section 14A and the addition on account of alleged bogus purchases. The order was pronounced on 6th September 2021.

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