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2014 (5) TMI 318 - DELHI HIGH COURTBogus purchases made - Disallowance of only 10% of purchases – books of accounts and other material had been seized by the Excise authorities - Held that:- The Tribunal noted here that though the AO was aware of the search and seizure operations, he made no attempt to obtain the books of accounts from the Excise authorities - The failure of the Revenue could not oblige the assessee’s disadvantage - The findings of the Settlement Commission were based upon assessment of the materials before that authority - it was satisfied that the inputs had been used to a large measure - the assessee was unable to pinpoint or ensure the presence of the vendors in the assessment proceedings could not have been sole ground for rejecting its entire books of accounts, particularly when there was relevant material suggesting that the inputs had been utilised and paid for - The suspicion that the cash withdrawn by the vendors directly might have found its way back to the assessee could not have led to the rejection of the books of accounts and the drastic consequences, which the AO in this case had directed by way of disallowance - the restriction of the disallowance amounts, both in terms of the number of vendors and to 10%, is neither unreasonable nor without justification – the order of the Tribunal is upheld – Decided against Revenue. Applicability of section 40(a)(ia) of the Act – Effect of amendment w.e.f. 01.04.2005 - Held that:- Section 40 directs a disallowance in the computation of profits and gains from business or profession in the case of any assessee where inter alia any amounts payable as interest, commission, brokerage, rent, royalty, fees for professional services or amounts payable to contractor or subcontractor, for carrying out any work on which tax is deductible at source under Chapter XVII-B - the assessee was not under obligation to deposit the TDS amount and could deduct addition of Section 40(ia) with its proviso as it existed then - This aspect appears to have been lost sight of the ITAT – the sum is directed to be given the benefit of deduction u/s 40(a) - the disallowance directed by the AO and as upheld by the CIT (A) are set aside - Decided in favour of Assessee.
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