The Surat Bench of Income Tax Appellate Tribunal(ITAT) reduced the disallowance of Rs. 25.85 lakh worth of purchases, originally made due to lack of documentation, to 12.5%.
Shamkant Gajmal Desale,appellant-assessee,filed his return for the assessment year 2008-09, declaring an income of Rs. 1,05,387. The Assessing Officer (AO) issued notices under sections 143(2) and 142(1), but the assessee did not respond.
A show cause notice was then issued, asking why the assessment should not be completed under section 144 and why the purchases should not be disallowed. Since the assessee failed to provide any details, the AO disallowed the total purchases of Rs. 25,85,747 and assessed the income at Rs. 26,91,130.
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The assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)] challenging the AO’s order. He claimed that he didn’t receive notices due to an incorrect address on the assessment order and argued that the full purchase amount of Rs. 25,87,747 should not have been added, as his purchases were linked to his sales in the textile business.
The CIT(A sent the submissions to the AO for a remand report, which supported the original assessment. The assessee admitted that the purchase details were no longer available. The CIT(A) rejected the claim for profit under section 44AD, noting the lack of supporting documents.
Relying on a previous case, the CIT(A) reduced the disallowance to 25% of the total purchases, upholding the addition of Rs. 6,46,440 and deleting the balance of Rs. 19,49,307.
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The assessee being aggrieved by the decision of the CIT(A) appealed before the tribunal.
The two member bench comprising Pawan Singh(Judicial Member) and Bijayananda Pruseth(Accountant Member) considered the case after hearing both parties. The AO had disallowed the entire purchase amount of Rs. 25,85,747, treating it as unaccounted. The CIT(A) reduced the disallowance to 25% since the assessee didn’t provide evidence for sales and purchases. It agreed that the assessee failed to justify the returned income with necessary proof.
As the assessee did not provide supporting evidence for claiming profit at 8%, the tribunal decided to reduce the disallowance to 12.5%. The addition of Rs. 3,23,220 was confirmed, and the remaining addition was deleted. The ground was partly allowed.
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