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TMI Blog2012 (8) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... dit balance stands unproved. In present case, there were no trade credit balances at all. In view of aforesaid, dis-allowance stands deleted. Addition u/s 40A(3) - Held that:- There is no finding by the A.O. that payment made to Shri Annadurai was for any purchase at all. If Section 40A(3) has to be applied, there should be a finding that the payment was in relation to an expenditure. As long as this finding is not there, application of said Section is not called for at all. Interest dis-allowance - Held that:- As long as the credits were not questioned, interest alone could not have been disallowed. Just for a reason that partners’ current account was showing a debit balance, interest expenses could not have been disallowed. Dis-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Uma Shankar, Arumbakkam Rs. 17,12,500 (5) Kannan, Ponneri Rs. 1,60,000 (6) Munusamy Naidu, Chengalpattu Rs. 1,70,000 (7) Murugan, Madurantakam Rs. 1,60,000 (8) Muthukumar, Arani Rs. 1,45,000 Rs. 28,27,500 As per the A.O., assessee could only furnish self-made vouchers in respect of the above purchases and payments made to these parties were in cash. A.O. required the assessee to prove the identity, and creditworthiness of the parties and genuineness of the transactions. As per the A.O., assessee was unable to furnish the address of the concerned persons. She thus disallowed the above purchases. 3. From the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness of concerned creditors. Insofar as disallowance of Cooly and Delivery charges was concerned, CIT(Appeals) was of the opinion that the A.O. was liberal in restricting the disallowance to 25%. In this view of the matter, he confirmed the order of the A.O. 7. Now before us, learned A.R., strongly assailing the orders of authorities below, submitted that assessee, being a grain merchant, had purchases only from agriculturists. Therefore, it was constrained to effect cash payments. Copies of ledger accounts in respect of such parties, from whom trade purchases were made, were also produced before the A.O. According to him, there was no reason to make a disallowance. Assessee could not procure bills from agriculturists for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowances were made disbelieving the purchases and not because any trade credit balance stood unproved. Application of Section 68 is called for only where any credit balance stands unproved. Here, all the amounts due to the said parties, stood paid before the end of the relevant previous year. There were no trade credit balances at all. CIT(Appeals) went off tangent when he considered that credits were not proved by the assessee and confirming the addition under Section 68 of the Act, when the addition itself was made by disallowing a part of the purchases. In our opinion, such disallowances were not called for considering in the nature of trade of the assessee. 10. Insofar as payment made to Shri Annadurai was concerned, for which Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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