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2016 (4) TMI 1057 - ITAT VISAKHAPATNAM

2016 (4) TMI 1057 - ITAT VISAKHAPATNAM - TMI - 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 .....

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n 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. - I.T.A.No.618/Vizag/2013, C.O. No.136/Vizag/2013 - Dated:- 18-3-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.K. Sethi, DR For The Respondent : Shri G.V. .....

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ocessed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). Thereafter, assessment was completed u/s 143(3) of the Act by disallowing paddy purchases of ₹ 33,65,147/-. In the assessment order, the A.O. has noted that the assessee has made a purchase from farmers and the sundry creditors as on 31.3.2009 on account of such purchase was ₹ 6,73,02,934/-. The A.O. had called for the confirmation letters from the credit balances, which the assessee failed to f .....

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). The relevant portion of the written submission made by the assessee is as under: "The appellant being a rice mill, purchases paddy from farmers and converts the same into Rice. It is the custom and practice of this business that the farmers sell paddy on credit at the time of harvest and later the miller repays the amount within a period of 2 to 3 months. January and February being the months of harvesting, huge amount of paddy is purchased in these months and the repayment of this amoun .....

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d amount was furnished to the assessing officer and also the details of subsequent repayment of the above said amount in the subsequent year were also furnished. The appellant placed in the paper book all the relevant details relating to paddy creditors. The appellant explained that it purchased paddy worth ₹ 8,61,07,393 during the months of January to March, 2009 and the closing stock of paddy as on 31st March, 2009 was ₹ 9,05,68,400 apart from sundry debtors of ₹ 3,30,29,952. .....

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-hoc disallowance for the following:- 1. The quantitative details of purchase of paddy is supported by statutory registers maintained i.e. B Register. 2. The total value of purchases is cross verifiable with the VAT returns and the assessing officer did not notice any discrepancies between the VAT returns and the books of account. 3. Further, the appellant incurred Cess levied by Agricultural Market Committee in respect of all its purchases. 4. All the credits emanating in the accounts of the pa .....

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the earlier years. The appellant places reliance in this regard in the case of Surya Earth Moving wherein the Hon ble ITAT, Visakhapatnam in their order dated 25th October, 2010 in ITA No.316/Vizag/2009 held that sundry creditors emanating from a journal entry cannot be considered for addition when the expenditure in respect of the sundry creditors is allowed. 3. The Ld. CIT(A), after considering the detailed submissions made by the assessee, he has deleted the disallowance made by the A.O. The .....

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by the AMC was also produced to explain that there is no discrepancy in the value of purchases or quantum purchased. It was represented that obtaining confirmation letters from the farmers were very difficult. It was also submitted that specific address is not there as they live in villages. However the name of the village is mentioned in the waybill and also invoice. It was further contended that merely because confirmation letters could not be produced, because of the transaction with farmers, .....

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epancy in the purchasers. For want of confirmation letters, an adhoc disallowance has been made, which in my view is not legally tenable. From the sample verification made by me, no discrepancy was noticed with regard to the purchases or as to the payment for the purchase made. Under such factual circumstances, I am of the view that the impugned addition by way of adhoc disallowance is not justified. Accordingly, the addition is deleted. This ground of appeal is allowed . 4. On being aggrieved, .....

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