TaxTMI 
TaxTMI 
2016 (4) TMI 1057
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....he assessee is a firm, engaged in the running of rice mill, sale of rice and by-products, filed its return of income by declaring total income of Rs. 13,09,830/-. The return filed by the assessee was processed 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 Rs. 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 Rs. 6,73,02,934/-. The A.O. had called for the confirmation letters from the credit balances, which the assessee failed to furnish. The A.O. find that credits are unverifiable for ....
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....e 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 Rs. 8,61,07,393 during the months of January to March, 2009 and the closing stock of paddy as on 31st March, 2009 was Rs. 9,05,68,400 apart from sundry debtors of Rs. 3,30,29,952. The assessing officer, while agreeing that the paddy creditors are bound to exist and also agreeing that these creditors stood repaid in the subsequent year resorted to an ad-hoc disallowance of Rs. 33,65,147 being 5% of the total creditors as on 31st March, 2013. The assessing officer took support fo....
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....ting 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 relevant portion of the order is extracted as under: "4.3 The AR contended that adhoc disallowance of credits is unjustified and not warranted when the AO has not doubted the purchases. It was submitted that the documents such as the price invoice, the waybill for the good purchased, the entry in the stock register and payment vouchers were produced before the AO which were not questioned by the AO. A sample set of such documents were also produced for my verification....
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....wed". 4. On being aggrieved, revenue is in appeal before us. The Ld. D.R. has supported the order passed by the A.O. 5. The Ld. Counsel has supported the order passed by the CIT(A). 6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. has disallowed on account of purchases made by the assessee of Rs. 33,65,147/- on the ground that the assessee has not produced confirmation letters from the paddy farmers. However, the 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 be....