TaxTMI 
TaxTMI 
2010 (4) TMI 1139
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.... in the manufacturing and assembling of engineering components and products. The assessee filed its return of income for the assessment year 2005-06 declaring the total income at nil. The assessee's case was selected for scrutiny and the assessment was completed u/s 143(3). The assessee had declared total sales of Rs. 69,66,212/- and declared the net profit of Rs. 4,71,652/-. During the course of assessment proceedings, to verify the genuineness of the business transactions of the assessee, the AO issued enquiry letters u/s 133(6) of the I T Act to the following 29 parties: 1) M/s Indo German Industries 2) M/s Coussinet Engineers 3) M/s Instruments & Controls 4) M/s Ashok Leather & Rubber Co 5) M....
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....5,141/-. The AO, therefore, made addition of the entire aggregate purchases mentioned by him in the assessment order of Rs. 99,35,141/- treating the same to be unproved purchases u/s 69 of the I T Act. 3.2 The AO also made addition in respect of further two parties i.e. Instruments & Controls and Western Mfg. Co that was to the extent of Rs. 6,17,487/- and further addition in respect of M/s Air-O-pack for the alleged discrepancy of Rs. 33,203/-; therefore, made the total addition of Rs. 1,05,85,831/-. The assessee challenged the said addition before the ld CIT(A), who deleted the entire addition by giving the following reasons: "2.3 I have considered the assessment order and the submissions of the appellant. As I find, the main ....
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....nt. These evidences cannot be summarily rejected without any specific adverse findings. Also, without any specific adverse findings, it cannot also be said that the appellant was not able to discharge its onus. As I see, whereas it is true that merely filing of confirmations by the assessee or payment through bank channels do not make transactions sacrosanct, at the same time, it is also true that in order to reject them ultimate inference is to be based on true appreciation of facts drawn from the confirmations and explanations and preponderance of the probability of such explanations. In this context, I find that merely by stating that parties have not been produced an inference cannot be drawn that purchases were bogus, particularly when....
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.... AO. It is argued that even the majority of the parties have filed their confirmations letter before the AO confirming that the transactions with the assessee were bonafide and genuine transactions. The ld. counsel argued that as per P& L account, the total purchases declared by the assessee was at Rs. 45,58,061/-(Page 1 of the paper book) and AO made the addition of Rs. 1,05,85,831/-. He, therefore, pleaded that there is a serious discrepancy in the assessment order in respect of the amount of the purchases. The ld. counsel further argued that even each and every transaction were entered into by the assessee as purchases but, the AO totally disregarded the confirmation given by the concerned parties. It is further argued that the books of ....
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....d. CIT(A), who deleted the addition; we accordingly, confirm the same. 7 Next issue is in respect of disallowance of Rs. 34,453/- out of miscellaneous expenses, conveyance, staff welfare and travelling expenses. Etc. 8 We have heard the parties. The AO made ad hoc disallowance at 20% out of the following expenses; i) Misc. expenses Rs.27,948/- ii) Conveyance Rs.10,780/- iii)Staff Welfare Rs.31,813/- iv) Travelling Rs.1,01,725/- Total Rs.1,72266/- and made the addition of Rs. 34,453/-. The only reason given by the AO is that the above expenses were not properly vouched in the correct sense. The assessee carried the issue before the ld CIT(A), who deleted the addition. 9. We have perused t....