INCOME TAX ACT, 1961

Section 32

Depreciation - Non-genuine purchases merely relying upon the information received from Sales Tax Department - CIT(A) reduced purchase value by 50% - Allowability

Assessee was carrying on business of manufacturing, trading and export of aroma Chemicals. AO received information from the DGIT (Inv.), that purchases made by assessee was not genuine as concerned selling dealer was identified as a hawala operator by Sales Tax Department. During assessment proceedings, AO called upon assessee to prove genuineness of purchases by furnishing various details, such as, purchase bills, payment details, lorry receipt, inspection note, bank statement, etc. From the details furnished, AO found that purchases effected is towards capital goods viz. glass lined reactor. Thus, ultimately, AO concluded that purchases claimed to have been made by assessee was not genuine. Since, the purchase effected was for a capital good on which assessee had claimed depreciation @ 15%, AO disallowed assessee's claim of depreciation. Held: Merely relying upon the information received from the Sales Tax Department and considering the fact that notice issued under section 133(6) returned back unserved, AO had disallowed assessee's claim of depreciation. Whereas, CIT(A) without any justifiable reason had reduced the purchase value by 50% and allowed depreciation thereon. It was not forthcoming from the order of CIT(A) on what basis he had reduced 50% of the purchase value. When assessee had furnished certain documentary evidences demonstrating purchase of goods from the declared source and delivery of such goods at its premises, without bringing any contrary material to falsify such evidences, assessee's claim cannot be rejected on presumption and surmises. Therefore, assessee was entitled to claim depreciation on the entire purchase.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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