SRI VARALAKSHMI COMPANY,SALEM vs. ACIT, SALEM

This appeal of the assessee is directed against the order of Commissioner of Income Tax (Appeals), Salem, dated 27.03.2015 and pertains to assessment year 2010-11.

Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee is a manufacturer and exporter of Tapioca and Sago products. The assessee has purchased Tapioca from the farmers and paid cash. According to the Ld. counsel, the assessee returned an income of `1,80,75,780/- on the sales turnover of `63.14 Crores. The assessee purchased Sago from M/s Sago Serve to the extent of `14,45,57,440/- and from others to the extent of `4,10,41,225/-. According to the Ld. counsel, the agriculturists, who cultivated Tapioca, did not have any printed voucher. In respect of the payment of `14,45,57,440/- made to M/s Sago Serve, the Assessing Officer allowed the claim of the assessee completely. The Assessing Officer doubted only on the payment made by the assessee directly to the farmers, in the absence of any printed vouchers maintained by the agriculturists. The assessee has no other alternative except to have note for purchase and payment made to them. The Assessing Officer found that the details available on the notes are not cross verifiable, therefore, he estimated the disallowance at `15 lakhs. However, the CIT(Appeals) restricted the same to `10 lakhs. On a query from the Bench whether the disallowance could be reasonably estimated, the Ld.counsel submitted that since the assessee was purchasing Tapioca directly from the farmers, maintaining proper vouchers was not practically possible and any estimate made by this Tribunal will be followed by the Assessing Officer for the rest of the years. Therefore, according to the Ld. counsel, that would affect the assessee adversely. Therefore, the Ld.counsel submitted that the entire addition of `15 lakhs may be deleted.

On the contrary, Shri A.B. Kohli, the Ld. Departmental Representative submitted that the assessee has not maintained any voucher for payment. Therefore, the Assessing Officer could not verify the payments said to be made by the assessee. In the absence of any material, the Assessing Officer reasonably estimated the disallowance at `15 lakhs. The CIT(Appeals), has however, restricted the same at `10 lakhs. Hence no interference is called for.

We have considered the rival submissions on either side and perused the relevant material on record. Admittedly, the assessee purchased Sago from M/s Sago Serve to the extent of `14,45,57,440/-. The Assessing Officer accepted this purchase and no disallowance was made. In respect of `4,10,41,225/-, the assessee’s claim was that this payment was made to farmers who cultivated Tapioca in their field. The contention of the assessee before the CIT(Appeals) appears to be that in the absence of any specific defect, discrepancy or inaccuracy found in the books of account, no disallowance is called for. But, the fact remains that the assessee paid cash to the farmers and the notes said to be prepared by them contain only names and signature. It did not contain any other particulars to verify the identity of the recipients. If the assessee had mentioned name of the recipients along with their village name in the notes that would have been an evidence by which the Assessing Officer might have made cross verification for the payments. In the absence of any other particulars other than the names of the farmers, this Tribunal is of the considered opinion that the assessee has not maintained the vouchers properly. Even though full address of the farmers living at villages may not be possible, there should not be any difficulty for the assessee in mentioning names of the farmers and the villages from where the said farmers are hailing. By the mention of names of the farmers and the villages from where they are hailing, one could easily identify the persons who supplied Tapioca to the assessee.

In the result, the appeal of the assessee is partly allowed.