TaxTMI 
TaxTMI 
2026 (6) TMI 149
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....e cause from filing the present appeal within the prescribed period of limitation. Accordingly, the delay of 04 days in filing the appeal is condoned and the appeal is admitted for adjudication. 5. Since common issues are involved in both the appeals, therefore, the same were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. 6. Brief facts of the case are that the assessee, an individual engaged in the business of trading of iron and steel under the name and style of M/s Sharma Enterprises, filed his return of income declaring total income of Rs. 4,90,540/-. The case was selected for scrutiny under CASS on the issue of "Business Purchase", as it was noticed from the trading account and GST data that the assessee had made substantial purchases from certain suppliers who were non-filers or whose turnover reflected in GSTR-1 was disproportionately low. Notices under sections 143(2) and 142(1) of the Income Tax Act were issued from time to time and the assessee furnished certain details including GST returns, invoices, e-way bills and bank statements. 6.1 During the course of assessment proceedings, the Assessing Offic....
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....garding genuineness of purchases could not be completely ruled out considering the status of the suppliers as non-filers and the deficiencies pointed out by the Assessing Officer. Accordingly, instead of sustaining the entire addition made by the Assessing Officer at 20% of the purchases, the Ld. CIT(A) restricted the disallowance to 8% of the impugned purchases, thereby granting partial relief to the assessee. 8. The Revenue is in appeal against the relief granted by the Ld. CIT(A), whereas the assessee is in appeal challenging sustenance of disallowance at 8% and also challenging rejection of books of account and alleged violation of principles of natural justice. 9. During the course of hearing, the Ld. DR strongly relied upon the assessment order and submitted that the Assessing Officer had made detailed enquiries during the course of assessment proceedings and had categorically found that the assessee had made huge purchases from various parties who were non-filers as per departmental database. It was contended that the assessee failed to establish the identity, genuineness and creditworthiness of such parties and merely furnishing invoices, e-way bills and bank statemen....
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....dences placed before us. We find that the Assessing Officer made the impugned addition primarily on the ground that the assessee had effected purchases from certain suppliers who were allegedly non-filers as per the departmental database; therefore, according to the Assessing Officer, the genuineness and credibility of such purchases remained unverified. The Assessing Officer further observed that certain bank transactions reflected immediate credits and debits within short intervals and also noted deficiencies in transporter details mentioned in e-way bills. On the basis of such observations, the Assessing Officer rejected the books of account under section 145(3) and proceeded to make an estimated disallowance @20% of the purchases amounting to Rs. 3,28,20,031/-. 11.1 We further find from the record that the assessee had placed on record various documentary evidences including audited books of account, quantitative stock tally, GST returns, purchase invoices, ledger accounts, e-way bills, transport receipts and bank statements in support of the purchases. The assessee had also consistently contended before the lower authorities that the sales declared by the assessee had been ....
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....y certain parties, and minor discrepancies in the e-way bills and supporting documentation. Such gaps create a situation where a complete acceptance of the purchases without any disallowance would not be appropriate. Taking a balanced and pragmatic approach, it is necessary to recognize and give due weight to the evidence furnished by the assessee while also taking into account the shortfalls and limitations identified by the AO during the assessment proceedings. Considering the relatively low profit margin declared by the assessee on the purchases, it is reasonable to reduce the disallowance from the 20% applied by the AO to 8% of the total claimed purchases. This approach ensures that the disallowance is proportionate to the actual risk of unverified purchases while acknowledging the genuineness of the bulk of the transactions. Accordingly, the appellant authority finds it just and equitable to partly allow the grounds 6 and 8 of the appeal, by restricting the disallowance to 8% of the purchases instead of the 20% determined by the AO. The AO's action, in making a proportionate disallowance based on verifiable deficiencies and discrepancies, is upheld as legally....