2014 (5) TMI 620

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....the business of manufacture and sale of engineering goods, mainly the railway break system and components thereof, for Indian Railways and wagon builders. All the sales were made to Government agencies such as Indian Railways and coach factories. The GP rate was better in comparison to that in the immediately preceding assessment year. 3. In order to verify the purchases made by the assessee, notices u/s 133 (6) of the IT Act were issued to, inter alia, Laxmi Enterprises, New Delhi, AL Metal & Methods Pvt. Ltd., Faridabad and Komal Forging, Delhi. Purchases of Rs. 48,93,397/-, Rs. 20,95,153/- and Rs. 6,50,903/- were stated to have been made by the assessee from these parties, as available from the assessment order. However, all these thr....

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....lish the identity of the person or the genuineness of the transaction; that proving of the identity of the person was the first requirement to claim such expenses; that however, the identity itself was in doubt; that if the purchases were genuine and the parties were existing at the addresses given, there was no reason why the notice and subsequent reminders remained uncomplied with; that despite the assessee having been asked to do so, the parties were not produced for verification, nor any new address was provided to enable verification; that the expenses had not been proved to have been actually incurred for the assessee's purpose of business; that in the absence of the genuineness and any evidence about the existence of the parties, it ....

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....d strong reliance on the impugned order. 10. The ld. CIT (A) has observed that the GP rate of the assessee firm for the year under consideration was better in comparison to the immediately preceding assessment year; that as such, the purchases made by the assessee ought not to have been doubted by the AO; and that if at all, the amounts outstanding to the credit of the three parties in the assessee's books of account could have been disallowed u/s 41 (1) of the IT Act. It was in this manner that the ld. CIT (A) restricted the disallowance to a sum of Rs. 28,87,305/-, on account of cessation of liability of credit balance outstanding in the name of the three parties in the assessee's books. 11. The facts remains that the purchases made....