Appeal partially allowed, reducing disallowance on non-genuine purchases, emphasizing evidence requirements.

The ITAT partially allowed the appeal by the revenue, reducing the disallowance on account of non genuine purchases from 16% to 3% of the alleged amount. The decision emphasized the necessity of providing satisfactory evidence to establish the genuineness of transactions and cited a previous Tribunal order for consistency in treatment of similar cases.

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Issues: Disallowance of non genuine purchases

Analysis:
The appeal by the revenue was against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2011-12, specifically challenging the disallowance made on account of non genuine purchases. The assessing officer, based on information regarding hawala transactions, reopened the assessment and called upon the assessee to prove the genuineness of purchases amounting to Rs. 28,95,516 from two parties. Despite the assessee's submissions and evidence, including banking channel payments and maintained books of accounts, the Assessing Officer concluded that the purchases were non genuine. Consequently, a disallowance of 16% of the alleged non genuine purchases, amounting to Rs. 4,63,286, was made and upheld by the Commissioner (Appeals).

The counsel for the assessee argued that purchases were made from genuine sources, with payments through banking channels, and sales were only to government agencies, establishing a correlation between purchases and sales. Referring to a previous Tribunal order limiting disallowance to 3% for purchases from the same parties in the assessment year 2010-11, the counsel requested a similar restriction for the current assessment year. On the other hand, the Departmental Representative supported the disallowance, emphasizing the lack of cogent evidence from the assessee to prove the genuineness of purchases.

Upon review of the submissions and evidence, it was noted that while the Assessing Officer found certain purchases to be non genuine based on information received, the evidence provided by the assessee was not satisfactory. However, considering the previous Tribunal decision limiting disallowance to 3% for similar purchases, the ITAT directed the assessing officer to restrict the disallowance to 3% of the alleged non genuine purchases for the current assessment year. The decision was based on the factual similarity with the previous case and the need for consistency in treatment. As a result, the appeal was partly allowed, and the disallowance was reduced accordingly.

In conclusion, the judgment addressed the issue of disallowance of non genuine purchases, emphasizing the importance of providing satisfactory evidence to prove the genuineness of transactions. The decision also highlighted the significance of consistency in treatment of similar cases, as evidenced by the reference to a previous Tribunal order.

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