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2022 (5) TMI 1085 - AT - Income TaxBogus purchases of cloth - Addition made as invoices are self-made - CIT(A) upheld the addition to the extent of 50% , by taking view that the assessee failed to explained the mismatch in voucher numbers and their dates - HELD THAT:- Before us, the assessee in its written submission filed, contended that it is a clerical mistake and that the payment were made through cheque and assessee has also filed bank statement showing some purchase through cheques. It is settled law that in absence of corroborative evidence, the payment made through cheque is not sacrosanct. However, keeping in view this settled legal position that even if the purchase is found to be bogus only profit element embedded in such purchase is to be disallowed to avoid possibility of revenue leakage and not the substantial part of transaction. In our view, the disallowance @ 50% of purchase sustained by Ld. CIT(A) is on higher side. Considering the nature of trade, we deem it appropriate to restrict the disallowance @ 20% which in our view will be sufficient to avoid the possibility of revenue leakage. The Assessing Officer is directed to re-compute the same. In the result, ground No.1 is partly allowed. Disallowance of renovation expenses - CIT(A) confirmed the action of Assessing Officer by taking view that there is no debit balance in bank statement of assessee - HELD THAT:- We find that assessee has placed on record the invoice of Shri Hari Corporation, showing the payment of Rs.2,06,401/- vide cheque No.178 drawn in favour of Laxmi Vilas Bank. We find that assessee has also furnished invoice of cement confirmation. The assessee also filed the confirmation of work undertaking by Naklang Construction. We also find that payment of such repair works was made through account payee cheque on 05.12.2015 which is duly reflected in the account statement of assessee. In view of aforesaid facts, we find that assessee has substantiated the expense since the repairs of small modification carried out at the premises are small scale repair which cannot be classified with capital expenditure. Therefore, Ground No.2 of the assessee is allowed. The Assessing Officer is directed to re-compute the same.
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