No violation of rules in absence of cash payment for purchases exceeding prescribed limit : ITAT

No violation of rules in absence of cash payment for purchases exceeding prescribed limit : ITAT

The assessee had appealed against the erroneous order passed by the revenue department

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has quashed the revisional order maintaining that there is no violation under the Income Tax Act, 1961 if cash payment is not made for the purchase that exceeds the prescribed limit.

The assessee Radheyshyam Gupta, an individual, carries out his business in the name of Radheysham Jewellers. In the e-return for the Assessment Year 2017-2018, which he filed in September 2017, the income was declared at Rs.97,63,350. It was determined as assessed income vide the November 2019 assessment order under the IT Act.

The assessee appealed against the March 2022 order passed by the Pr. Commissioner of Income Tax (PCIT) that arose after the 2019 order.

The assessee contended before the tribunal that as per the purchase through the banking channel, the provisions of the IT Act were not attracted. As for the remaining purchase of Rs.2,10,38,492, no cash payment was made. It was the value of the jewelry exchanged for making new jewelry for the customers.

He further submitted that when a customer approaches him for purchasing new jewelry, they bring in some old jewelry, which is given to him to adjust the price of the exchanged jewelry against the purchase of the new items.

The PCIT had rejected the assessees' submissions and concluded that the assessing officer (AO) passed the assessment order without making inquiries. Though it should have been done by him before framing the assessment order.

It was observed that the assessee was in the business of selling gold jewelry and occasionally received old gold jewelry from the customers for exchange. The value of the items was calculated as per the rates of the gold/silver/diamond or other precious stones as on the date of the transaction. And it was deducted from the sale value of the new jewelry items.

The Coram of Rajpal Yadav (vice president) and Manish Borad (accountant member) observed that the assessee had not made any purchase in cash in the alleged transactions and the purchase falls under the exception provided under the Income Tax Rules, 1962.

The bench stated, "There is no violation of provisions of the Income Tax Act in the case of the assessee as alleged by PCIT in the impugned order. There was no actual transaction of payment of cash for making purchases exceeding the limit as prescribed under the Act."

Thus, the tribunal held that the order passed under the 2019 order was neither erroneous nor prejudicial to the interest of the revenue department.