High Court affirms ITAT's 10% addition restriction under Section 69C. Assessee's evidence deemed sufficient. Revenue's arguments lack merit.

The High Court upheld the ITAT's decision to restrict the addition under Section 69C to 10% of the accommodation entries. The Assessee provided evidence of payments through account payee cheques, bills, and delivery challans, which the CIT(A) deemed sufficient to discharge the onus. The Revenue's arguments lacked concrete evidence to rebut the Assessee's claims. The Court found no fault in the Tribunal's decision, dismissing the appeal as no substantial question of law was raised.

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Issues Involved:
1. Whether the Tribunal was right in upholding the CIT(A)'s order restricting the addition under Section 69C to 10% of the accommodation entries.
2. Whether the Tribunal was justified in ignoring the lack of evidence provided by the Assessee to prove the genuineness of the purchases.
3. Whether the AO is compelled to accept book or bank entries in the absence of evidence regarding the genuine nature of the purchases.
4. Whether corresponding sales indicate that accommodation bills, despite evidence of non-genuineness, can be allowed as a deduction.

Detailed Analysis:

Issue 1: Restriction of Addition under Section 69C
The Revenue appealed against the ITAT's decision to uphold the CIT(A)'s restriction of addition under Section 69C to 10% of the accommodation entries. The Assessing Officer (AO) had initially added Rs. 3,15,72,840/- as unexplained expenditure under Section 69C, presuming that the purchases were made in cash from the market and sale bills were obtained from hawala dealers. The CIT(A) observed that the Assessee had made payments through account payee cheques, furnished bills, and delivery challans, and reflected all purchases in the stock reconciliation. The CIT(A) concluded that the Assessee had discharged his onus and that the AO's addition was based on mere presumption without concrete evidence. The CIT(A) restricted the disallowance to 10% of the alleged bogus purchases, amounting to Rs. 31,57,284/-, which the ITAT upheld.

Issue 2: Evidence of Genuine Purchases
The Revenue argued that the Assessee failed to provide concrete evidence of having made purchases against the accounted bills. The AO's investigation revealed that the suppliers were hawala operators issuing bogus bills without actual delivery of goods. Notices under Section 133(6) were issued to the suppliers, but they did not respond. The Assessee provided ledger accounts and bank statements but did not produce the parties for cross-verification. The CIT(A) and ITAT found that the Assessee had produced sufficient evidence, including delivery challans and purchase bills, and made payments through banking channels. The Tribunal held that the AO did not bring any evidence to rebut the Assessee's evidence.

Issue 3: Acceptance of Book or Bank Entries
The Revenue contended that in the absence of evidence regarding the genuine nature of the purchases, the AO should not be compelled to accept book or bank entries. The AO suspected that the Assessee had received cash back from the suppliers after making cheque payments. The CIT(A) and ITAT found no evidence of money flowing back to the Assessee and concluded that the AO's addition was based on presumption. The Tribunal held that the Assessee had discharged the initial burden of proof, and the AO did not provide evidence to the contrary.

Issue 4: Corresponding Sales and Accommodation Bills
The Revenue argued that the existence of corresponding sales should not justify the deduction of accommodation bills that were non-genuine. The CIT(A) and ITAT found that the AO had accepted the book results and sales shown by the Assessee. The payments were made through banking channels, and the Assessee provided delivery challans and purchase bills. The Tribunal concluded that the Assessee had discharged his onus, and the AO did not bring any evidence to rebut the Assessee's evidence. The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 10% of the purchases.

Conclusion:
The High Court found no error or perversity in the ITAT's order. The Assessee had discharged his onus by providing sufficient evidence, and the AO's addition was based on mere presumption without concrete evidence. The Tribunal's decision to uphold the CIT(A)'s restriction of the addition to 10% of the purchases was a possible view and could not be faulted. The appeal was dismissed, and no substantial question of law was raised.

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