2016 (4) TMI 1057 - AT - Income Tax

Disallowance of purchases - disallowance on the ground that the assessee has not produced confirmation letters from the paddy farmers - Held that - Assessee has submitted quantitative details of purchases of paddy along with registers maintained by him and VAT returns and Cess levied by Agricultural Market Committee in respect of paddy purchased. He made a detailed submission before the Ld. CIT(A). The Ld. CIT(A) again asked the assessee to produce the documents maintained by the assessee in respect of purchases and corresponding credits in respect of the transactions. The same were produced before the Commissioner on 26.7.2013. The Ld. CIT(A) after considering the details submitted by the assessee, he gave a categorical finding that no discrepancy has been found in the purchases made by the assessee and for want of confirmations, adhoc disallowance cannot be made. We find that the assessee has submitted all the details before the A.O. even before the Ld. CIT(A). Only on account of non-filing of the confirmations from the farmers who sold the paddy to the assessee, adhoc disallowance cannot be made. In view of the above, we find no reason to interfere with the order passed by Ld. CIT(A). - Decided against revenue.

Summary

Issues:
Assessment of disallowance on paddy purchases for the assessment year 2009-10.

Analysis:
The appeal was filed by the revenue against the order of CIT(A) for the assessment year 2009-10, involving the disallowance of paddy purchases. The assessing officer disallowed a specific amount on paddy purchases due to unverifiable credits from farmers and sundry creditors. The appellant, a rice mill firm, explained the customary credit transactions with farmers and provided detailed breakdowns of purchases and repayments. The assessing officer made an ad-hoc disallowance based on the absence of confirmation letters from creditors. The appellant contested this disallowance by presenting statutory registers, VAT returns, and other supporting documents. The CIT(A) deleted the disallowance after reviewing the submissions, citing no discrepancies in purchases or payments. The revenue appealed this decision, but both the CIT(A) and the appellant stood by their positions.

The A.O. disallowed the amount due to the absence of confirmation letters from paddy farmers, while the appellant provided extensive documentation to support the transactions. The CIT(A) found no discrepancies in the purchases or payments and deemed the ad-hoc disallowance unjustified. The Tribunal upheld the CIT(A)'s decision, emphasizing that the appellant had provided all necessary details and that the absence of confirmation letters alone was insufficient to justify the disallowance. The appeal by the revenue was dismissed, and the cross objection by the appellant was also dismissed as infructuous.