TMI Blog2018 (11) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... bank and has discharged its liability / obligation. Since the payment was directly made to the bank on behalf of the farmers it should be construed as the payment made to the bank, but not to the individual farmers., the interest payment made to the bank does not attract the TDS as per section 194A. Accordingly, we uphold the order of the CIT(A) and hold that no disallowance is called for u/s 40(a)(ia) and dismiss the appeal of the revenue. Addition made towards sundry creditors - Held that:- The advance money, in the present case before us, is adjusted the sale price of the motor cycle and sale is disclosed in the return of income i.e. the trading account of the assessee. Accordingly, we find no ambiguity in the system followed by the assessee. From the details filed before us, DR could not point out the discrepancy in the same because these advances were adjusted against sales. When this was pointed out to Ld. Sr. DR, he stated that the assessee is unable to produce the PANs, names and addresses of the parties. He was specifically shown a tax/retail invoice wherein complete details were given except thePAN/Voter I. Card. In our view, PAN/Voter Identity Card is a KYC norm, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2] 136 ITD 23/20 taxmann.com 244 (Vishakhapatnam) dated 09.04.2012. 4. Aggrieved by the order of the Ld.CIT(A), the revenue carried the matter to the Tribunal. Appearing for the revenue, the Ld.DR argued that Kotak Mahindra Bank has sanctioned loans to the farmers in a tie up arrangement and it is the obligation on the part of the assessee to make the payment of interest to the bank through farmers and required to deduct tax at source. Since the assessee failed to deduct the tax at source, the AO has rightly made the addition u/s 40(a)(ia) of the act. The D.R further submitted that the assessee failed to produce any evidence to show that the loan was granted to the assessee and there was no agreement whatsoever. The assessee s contention of repayment of loan, utilization of loan by the company and its entry in the books of accounts is not acceptable because the assessee does not have any agreement with the individuals and the bank for substantiating tie up arrangement, thus, argued that the first recipient of the loan was the individual that too directly from the bank but not the assessee company. Therefore, payment of interest to the bank directly is not acceptable and the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed by the AO under the wrong impression, therefore requested to confirm the order of the Ld.CIT(A). 6. We have heard both the parties and perused the material placed on record. As per the Ld.CIT(A) s order, the AO has disallowed a sum of ₹ 2,74,49,637/- representing the interest payment made to Kotak Mahindra Bank u/s 40(a)(ia) of the Act. The Ld.CIT(A) has verified the balance sheet, profit and loss account and observed that the sum of ₹ 2,74,49,637/- consists of the bank interest on agricultural loans representing a sum of ₹ 2,05,47,873/- and interest on working capital for a sum of ₹ 69,01,764/-, the assessee has taken two types of loans from Kotak Mahindra Bank i.e Overdraft facility of ₹ 5 crores for working capital and agricultural loans of ₹ 20 crores. The Ld.CIT(A) observed that there is no tie up arrangement with the farmers in respect of the overdraft facility, hence, the interest on overdraft is clearly allowable in the hands of the assessee. Though the department has filed the appeal against the order of the Ld.CIT(A), no evidence is brought on record to show that the interest of ₹ 69,01,764 was not on working capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance is called for u/s 40(a)(ia) of the Act and dismiss the appeal of the revenue. 7. In the result, the appeal of the revenue is dismissed. I.T.A.No.480/Viz/2016 Assessee s Appeal 8. The assessee s appeal is related to the addition of ₹ 38,50,000/- made towards sundry creditors. The AO found that the assessee has shown the amount of ₹ 38,50,000/- as liability to sundry creditor. The AO also sought confirmation from sundry creditors and the assessee replied that the sum of ₹ 38,50,000/- was advance received from Sri K.Nagendra Kumar which was outstanding as on 31.03.2011 in connection with the trading activity which was subsequently adjusted in the year 2012-13 with the sale of agricultural commodities. The assessee also enclosed the copy of account statement for the subsequent year 2012-13. Since the party was not in touch with the assessee, the assessee could not furnish the confirmation letters. The AO made the addition for the assessee s failure to prove the credit worthiness of the creditor and the genuineness of transaction. 9. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne trade credit. Copies of invoices in respect of sale of apples / potatoes / tamarind to Sri K.Nagendra Kumar were submitted during appeal proceedings for a sum of ₹ 38.50 lakhs (sale during 14.04.2011 to 10.12.2011). However, much reliance cannot be placed on them as such copies are appellant's self vouchers / invoices and stock records were not produced to substantiate the claim of sale of apples / tamarind / potatoes. Hence, the claim of sale cannot be accepted as genuine. 5.1.4. Hence, I am of the view that appellant did not satisfactorily explain before Assessing Officer as well as during appeal proceedings with all relevant supporting evidence its claim of trade credit in respect of ₹ 38.50 lakhs assessed by the Assessing Officer. Consequently addition of ₹ 38.50 lakhs is confirmed. 10. Aggrieved by the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld.AR argued that the assessee has received advance of ₹ 10,00,000/- during the financial year 2009-10 and the balance amount of ₹ 28,50,000/- during the financial year 2010-11. Therefore, submitted that without conceding, even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g time. Though suspicion appears to be strong, it should not lead to conclusion without establishing the fact. In the instant case, the advances were received through cheques, but not in cash. The assessee submitted that the said outstanding was adjusted out the sale of potatoes, tamarind etc. in the subsequent assessment year and also produced the invoices before the Ld.CIT(A) for the period 14.04.2011 to 10.12.2011. No evidence was brought on record to show that the sales for the subsequent assessment year were not accepted by the AO or false. For a query from the bench the Ld.AR submitted that the sales were accepted by the AO in the subsequent year and there was no addition or relief was given to the extent of the sales made to the trade creditor. The receipt of advances from customers is a starting point and conclusion of transaction is the relevant sales. Therefore, receipt of advances required to be examined along with sales made by the assessee with stock register. Advances from customers, purchases, stock register and sales account required to be examined together to verify the genuineness of the advances. No transaction can be isolated since all the transactions are inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable. As and when the same is received from Hero Motor Corporation Ltd. the same is delivered to customers after adjusting advance against full invoice price. The AO called for details viz., (a) Name full postal addresses of the person from whom advance was taken, (b) PAN of the person from whom advance was taken, (c) Voter Id. Card No. of the person from whom the advance was taken, (d) Chassis No. of the two wheeler supplied to the party, (e) Total price of the two wheeler (on road price) and (f) Amount received as advance from party with date. The Ld. Counsel for the assessee before us explained that the above particulars asked for by the AO like asking information under KYC norms, which is not compulsory in case of Sale of Goods Act i.e. for sale of motor cycles or scooters. Ld. Counsel for the assessee filed complete paper book consists of pages 1 to 213, wherein the relevant information at 51. No. 5 i.e. copies of money receipt issued to customers while booking and taking advance is given at pages 15 to 109, at Si. No. 6 party wise details to whom motor cycle was delivered against advance given at pages 110 to 130, at Sl. No. 7 copies of invoice issued to parties o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Due 7,510.00 Less Paid 7,510.00 7. We find that the assessee is following mercantile system of accounting, wherein it is receiving advance deposits from customers on account of sale of motor cycle being a dealer in automobile. Whenever the sale is taken place, within one to two months, these deposits are adjusted against sale price of the motor cycle. This fact is admitted by both the sides. The issue is whether the assessee is consistently following certain system of accounting which had been accepted by the department from the very beginning and even in future years. There is no change of system of accounting followed by the assessee. Allowing the department to adopt a different approach altogether in this assessment year in question would create an anomalous situation as far as the assessee is concerned. The issue that the dealer receiving advance money from customers where the item is in demand and there is scarcity of supply, it many a times happen that seller receives advance money from the purchaser and as and when supply is made the advance is adjusted against sale price. This i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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