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TMI Blog2015 (9) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... t been controverted by the department. That being the case, following the decisions cited by ld. AR as referred to by ld. CIT(A), no disallowance u/s 40(a)(ia) can be made. In view of the above, we uphold the decision of ld. CIT(A) on this issue - Decided against revenue. Bogus purchases - Outstanding closing balance in respect of three creditors - CIT(A) deleted the addition - Held that:- When AO accepts purchases as well as payments made by assessee to the concerned parties, he cannot treat the outstanding closing balance of the concerned creditors as bogus. If at all he had an doubt with regard to the transactions affected by assessee with the concerned parties, he should have treated the entire transactions as bogus and not part of it. Moreover, it is seen from the observations made by AO that he accepts the fact that bills/vouchers submitted by assessee to certain extent proves the genuineness of the transaction between parties. That being the case, in our view, AO cannot treat the outstanding balance due to the creditors as bogus purchases of the assessee on purely conjectures and surmises. In the aforesaid view of the matter, having not found any infirmity in the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). 5. Before ld. CIT(A), it was submitted by assessee that both the organizations payment to which were considered for disallowance by AO are covered under proviso (iii) to section 194A(3), hence, there is no requirement for assessee to deduct tax on interest payments to them. Alternatively, it was also submitted by assessee that provision of section 40(a)(ia) could not be applied as the entire financial charges were paid during the relevant PY and nothing remained outstanding at the end of the PY. In support of such contention, assessee relied upon the decision of the ITAT in case of Merlyin Shipping Transport vs. Add. CIT, 136 ITD 58 (Vizag), judgment of the Hon ble Allahabad High Court dated 09/07/13 in case of CIT Vs. Vector Shipping Pvt. Ltd. and decision of the Chennai ITAT Bench in case of ITO Vs. Theekathir Press, ITA No. 2076/Mad/12, dated 18/09/13. 6. Ld. CIT(A) after considering the submissions of assessee concluded that organsations to whom assessee has made payments are within the purview of section 194A(3)(iii) of the Act, hence, there is no requirement for assessee to deduct tax at source on the payments made to them. On that basis, ld. CIT(A) deleted the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 M/s KSL Constructions 2,97,500 AO observed, when enquiry was conducted through an Inspector, it was found that Syed Sadiq Mohiuddin was not found in the address given by assessee. Even the PAN of Shri Syed Sadiq Mohiuddin given by assessee was is not existing. AO noted that assessee has entered into transactions with Shri Syed Sadiq Mohiuddin in April and May 08 and after initial payments from assessee for ₹ 13,50,000 on 08/04/08, no other transactions happened till January 09, which is surprising since no labour contractor will wait for his payment for more than 8 months. He also observed that Shri Syed Sadiq Mohiuddin even failed to respond to the summons issued u/s 131. AO observed, though, assessee has furnished bills certified by Shri Syed Sadiq Mohiuddin acknowledging the payment, and such vouchers indicating payments made through bank prove to certain extent payment made to Shri Syed Sadiq Mohiuddin, but, the outstanding liability shown against him is not proved. He, therefore, treated the closing balance of outstanding liability as unexplained credit and added it to the income of assessee. Similarly in case of Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g balance outstanding of ₹ 23,64,500 as on 31/03/09. Therefore, when AO does not dispute the purchases or the payments made by assessee to the concerned party, he cannot doubt the closing balance. Similar arguments were also advanced in respect of the closing balance shown in the name of M/s KSL Constructions Pvt. Ltd. It was further submitted by assessee that all the creditors are assessees of the department and assessee has furnished not only their PAN but addresses also. Since there was considerable lapse of time when AO conducted enquiry, summons could not be responded by the concerned parties as they may not be available in the given addresses. 11. Ld. CIT(A) after considering the submissions of assessee, deleted the addition by observing as under: 7.3 I have seen carefully the facts and evidence. With respect to each of the three creditors, the assessing officer has accepted the genuineness of the payments. The assessing officer has held that each of the three persons were suppliers of the appellant with respect to stone and metal. The purchases have been accepted as genuine and the payments made have been accepted as genuine. For example in the case of Mis KSL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that concerned parties are suppliers to assessee as the material on record indicate that assessee was purchasing materials from the concerned parties from the earlier AYs. This fact is proved from the opening balance of outstanding due to the concerned creditors as reflected in the accounts as on 01/04/08. Similarly, it is found from record that during the relevant PY assessee also has effected purchases from the concerned parties and also made part payments. These facts have not been disputed by AO. The only doubt AO is having is with regard to outstanding closing balance in respect of three creditors. In our view, when AO accepts purchases as well as payments made by assessee to the concerned parties, he cannot treat the outstanding closing balance of the concerned creditors as bogus. If at all he had an doubt with regard to the transactions affected by assessee with the concerned parties, he should have treated the entire transactions as bogus and not part of it. Moreover, it is seen from the observations made by AO that he accepts the fact that bills/vouchers submitted by assessee to certain extent proves the genuineness of the transaction between parties. That being the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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