Business expenditure: Section 37: A. Y. 2006- 07: Tribunal noticing assessee’s books of account as well as sales tax records of seller and finding purchase genuine transaction: No rejection of books of account: Deletion of addition on account of purchase transactions justified:

For the A. Y. 2006-07, the assessee had claimed deduction of Rs. 43,34,496/- towards the purchases from S. On the basis of the statement of a director of the assessee in the course of survey that the amount represented a non-existent or bogus transaction, the Assessing Officer disallowed the claim for deduction and made the addition. The Tribunal took note of the statement of the director and the retraction of that statement on 21st February, 2008. The Tribunal noticed that the statement was recorded in the course of survey u/s. 133A and did not have any evidentiary value. The Tribunal also took note of the fact that no copy of the statement was given to the assessee to enable it to cross-examine the director and accordingly deleted the addition.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The Tribunal could not be faulted in its approach in rendering the findings of fact. Although the Revenue endeavoured to submit that the Tribunal fell into error in overlooking and discounting the statement of the director on the ground that it was retracted, the discussion in the order of the Tribunal would show that the Tribunal took note of the materials before the Assessing Officer and the Commissioner (Appeals), which included the assessee’s books of account as well as the sales tax records of S. This established firmly and conclusively that the claim of the assessee that it had purchased goods from S were borne out.

ii) The Tribunal also noted that the Income-tax Authorities had not even rejected the books of the assessee even while finding the claim bogus.

iii) The impugned order of the Tribunal does not disclose any error, warranting framing of substantial questions of law.”