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2013 (9) TMI 198 - ITAT AHMEDABADDisallowance(100%) on the ground of being a bogus purchase - In respect of purchases from M/s. Vishal Traders, 100% disallowance was made by the A.O. by holding that the entire purchase is bogus purchase – Held that:- assessee has furnished quantitative tally of the purchases and sales and no defect has been pointed out by the A.O. in the same and the A.O. has accepted the sales made by the assessee. Yield reported by the assessee in the present year is better than the preceding year and the same is almost 100% and, therefore, it cannot be said that any extra quantity of purchase has been declared by the assessee for which deduction has been claimed by the assessee is not justified – Action taken by A.O. regarding 100% disallowance is not sustainable – Decided in favor of Assessee. Part disallowance is justified or not – Held that:- In view of various conflicting statements of Mr. Dharampal J Pandya, Mr. Madanlal R Chandak and Shri Piyushbhai B Acharya, this is not beyond doubt that there may be some over invoicing in the present case. But this is very important fact that the sale price as per the bills of Vishal Traders is comparable with other suppliers - Assessee has maintained quantitative details in which no defect is pointed out by the assessing officer and the yield percentage of the present year is better than the preceding year - GP and NP rate of the present year are better than the previous year - Only a token disallowance will meet the ends of justice in the facts of the present case as noted above - 5% disallowance out of purchase from Vishal Traders will meet the ends of justice in the facts of the present case – Partly decided in favor of Assessee. Disallowance on the applicability of section 40A(3) of the Income Tax Act - Reliance placed by the Ld. D.R. on the judgement of Hon'ble Gujarat High court rendered in the case of Hynoup Food and Oil (P) Ltd. [2005 (2) TMI 99 - GUJARAT High Court], on this contention that the provisions of Section 40A(3) are to be invoked in the present case and disallowance has to be made of the entire amount – Held that:- Facts of the present case are different from the abovementioned case - As per the facts of that case, the assessee was engaged in an illegal business and the transactions were not reflected in its regular books of account maintained by the assessee. It was also found that assessee has paid Rs.43.36 lacs in cash in respect of purchases made in relation to the said business. Under these facts, it was held by Hon'ble Gujarat High court that the provisions of Section 40A (3) are applicable and exceptions carved out in Rule 6DDJ were not available to the assessee and disallowance was confirmed - In the present case, the facts are different. As per the books of accounts of the assessee, entire purchases from Vishal Traders are accounted for and the payments were made by way of a/c payee cheques. Hence, it becomes clear that the payments in respect of purchases from Vishal Traders was not made in cash and, therefore, there is no occasion to even consider the applicability of provisions of Section 40A(3) in the present case – Decided in favor of Assessee. Disallowance of speculation loss - section 43(5) - Held that:- Revenue could not establish that the transaction undertaken by the assessee is not hedging transaction and, therefore, this issue is squarely covered in favour of the assessee by this judgement of Hon'ble Gujarat High court rendered in the case of Pankaj Oil Mills (1976 (5) TMI 3 - GUJARAT High Court)
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