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2017 (4) TMI 1404 - AT - Income TaxAddition of unexplained expenditure - AO had held that purchases made by the assessee from seven (7) parties were mere accommodation entries - Held that - In the case of Karsan Nandu (2017 (2) TMI 75 - ITAT MUMBAI) the Tribunal has dealt with the identical issue to hold the transactions as mere accommodation entries and not real purchases is quite different from saying that the sources of expenditure for the purchases from the 7 parties in question have not been explained in the context of Sec. 69C of the Act. Therefore invoking of Sec. 69C of the Act in the present case to treat the purchases stated to have been made from the 7 parties in question is on a wrong footing. - Decided in favour of assessee. Allowing the VAT expenses - Held that - AO had made the disallowance without any valid reason that the assessee had made the VAT payment for the year under consideration are the challans evidencing the payment of VAT on various dates.In these circumstances, we are of the opinion that order of the FAA does not suffer from any infimity. So confirming the same we decide second effective Ground against the AO.- Decided in favour of assessee.
Issues involved:
1. Addition of unexplained expenditure of Rs. 1.24 crore. 2. Allowing VAT expenses of Rs. 61.41 lakhs. Issue 1: Addition of unexplained expenditure of Rs. 1.24 crore: The Assessing Officer (AO) challenged the order of the CIT(A)-44, Mumbai, regarding the deletion of the addition of unexplained expenditure of Rs. 1.24 crore. The AO directed the assessee to provide a list of persons from whom purchases were made, including parties listed as suspicious dealers issuing bogus bills. Notices to these parties were returned unserved. The AO held that the purchases were bogus, and the expenditure had to be treated as unexplained under section 69 of the Act. The First Appellate Authority (FAA) allowed the appeal, citing similar favorable decisions in the past. The Tribunal referred to a similar case where the AO's invocation of Sec. 69C was deemed suspect, emphasizing the importance of explaining the source of expenditure. The Tribunal concluded that the AO's treatment of the purchases as unexplained was incorrect. Relying on this and other relevant cases, the Tribunal decided in favor of the assessee on this ground. Issue 2: Allowing VAT expenses of Rs. 61.41 lakhs: The AO disallowed VAT expenses of Rs. 61.41 lakhs, claiming they pertained to an earlier year and were not allowable for the current year. The FAA, however, found that the payments were made during the year under appeal and allowed the deduction based on section 43B of the Act. The AR argued that the deduction was allowable on a payment basis and referred to supporting evidence. The Tribunal noted that the AO's disallowance lacked valid reasons and confirmed the FAA's decision, as evidenced by challans showing VAT payments made during the relevant year. Consequently, the second effective ground against the AO was decided in favor of the assessee, resulting in the dismissal of the AO's appeal. In conclusion, the Appellate Tribunal ITAT Mumbai upheld the decisions of the FAA regarding both issues, ruling in favor of the assessee and dismissing the appeal filed by the Assessing Officer. The judgment provides a detailed analysis of the grounds for each issue, emphasizing the importance of explaining expenditures and allowing deductions based on relevant provisions of the Income Tax Act.
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