This document provides a detailed review of the Income Tax Appellate Tribunal’s (ITAT) decision in the case between NKG Infrastructure Ltd and JCIT, Central Circle-27, New Delhi, for the assessment year 2014-15. The case centers around the legitimacy of certain purchases and commission expenses claimed by the company.
The dispute arose from an order issued by the Commissioner of Income Tax (Appeals) which led to NKG Infrastructure Ltd. appealing to the ITAT. The main issue under consideration was the disallowance made by the Assessing Officer on account of bogus purchases and the additional commission expenses estimated by the department.
The initial assessment accepted the company’s declared income, but subsequent investigations triggered by reports from the Directorate of Income Tax (Investigation) brought to light certain discrepancies. These centered on purchases made from entities controlled by a known provider of accommodation entries, leading to reassessment under section 147 of the Income Tax Act.
The ITAT, after examining the details and evidence provided, including the failure of certain parties to respond to notices and the acknowledgment of accommodation entries by suppliers, supported some of the reassessment’s conclusions but also provided relief to the appellant on certain points. The tribunal’s decision elaborately discusses the nature of the transactions and the appropriate tax treatment for them.
The ITAT’s decision offered a nuanced view on the handling of bogus purchases and associated commission payments. While it upheld some of the additions made by the AO, it also directed a more reasoned approach in calculating the tax liabilities, leading to a partial relief for NKG Infrastructure Ltd.
This case highlights the complexities involved in dealing with accommodation entries in tax assessments and the need for thorough investigation and judicious application of law by the tax authorities and the appellate tribunal.
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