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2022 (11) TMI 12 - AT - Income TaxDisallowances of bogus purchases - Addition applying the ratio of 5.46% - HELD THAT:- Neither the purchases are bogus nor there is any evidence available with AO that the five parties from whom the purchases have been made are tainted. Out of the five parties, 133(6) notices were not replied by four parties and was not received by one party - AR has categorically stated that the finding of the learned AO of the assessment order that assessee was asked to produce the Principal Officer of the purchase party which was not applied. In fact the paper book shows that the assessee has submitted in the appellate proceedings ledger accounts, confirmation, bills, challans, weightment slips and Permanent Account Number of such creditors. CIT (A) did not mention these facts - AR also stated that the assessee is dealing with these parties on year-to-year basis prior to this assessment year and subsequent to this assessment year wherein assessments have been passed under Section 143(3) and purchases from These parties have been accepted as genuine. We do not find any reason to uphold the addition - On this ground, the orders of the lower authorities are reversed and grounds no.1(a) and 2 and 3 of the appeal are allowed. Addition u/s 68 - We find that assessee has submitted the confirmation, the copy of the return of income as well as the bank account wherever ₹ 8,80,000/- are received. Such bank account is the joint account of Mr. Rohit Sawhney with his wife. The learned lower authorities therefore made an addition to that extent. We find that source of the funds are clearly established by the assessee in that bank account. Assessee has clearly shown that in that bank account was received out of maturity policy of Insurance and ₹ 6 lacs is maturity of IDBI bank fixed deposits - according to us, assessee has clearly established the identity, creditworthiness and genuineness of the transaction of the lender - Assessee has paid an interest to Mr. Rohit Sawhney, which was also allowed by the AO as deduction. Accordingly, the addition u/s 68 deserves to be deleted and hence, reversing the orders of the lower authorities, same is deleted. Cash credit addition from Moiz Hasan Ali Tapia - Assessee has submitted the confirmation and bank statement during the course of assessment proceedings. The return of income was produced during the course of appellate proceedings. Accordingly, assessee has discharged initial onus cast upon it u/s 68 - only reason for which the learned Assessing Officer made the addition is non production of income tax return of the lender. Same was produced before the appellate authority. Despite this, the appellate authority confirmed the addition refusing to accept the return of income. We find that this is unjustified. Accordingly, the addition u/s 68 is deleted. Accordingly, ground no.1 (b), 4 and 5 of the appeal are allowed. Adhoc disallowance being 15% of the total expenditure - We find that assessee has submitted month wise details of this expenditure before the learned CIT (A). There is no allegation that these expenditure are personal in nature. However, we find that as the assessee has failed to produce the details completely, accordingly, the lower authorities are not completely unjustified in disallowing the portion of this expenditure. We find that the ratio of disallowance is on higher side. Looking to the facts and circumstances of the case, we direct the learned Assessing Officer to restrict the disallowance to ₹25,000/- only out of these expenses. However, it is also noted that assessee itself has made a disallowance of ₹35,620/- in its computation of total income of personal use of motor car etc. Therefore, no further disallowance is required to be made. Disallowance being 15% of the total expenditure made by the ld. AO - We find that assessee has submitted month wise details of this expenditure before the learned CIT (A). There is no allegation that these expenditure are personal in nature. However, we find that as the assessee has failed to produce the details completely, accordingly, the lower authorities are not completely unjustified in disallowing the portion of this expenditure - we find that the ratio of disallowance is on higher side. Looking to the facts and circumstances of the case, we direct the learned AO to restrict the disallowance to ₹25,000/- only out of these expenses. However, it is also noted that assessee itself has made a disallowance in its computation of total income of personal use of motor car etc. Therefore, no further disallowance is required to be made. Accordingly, ground of the appeal are allowed.
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