IT-I : Where assessee purchased old jewellery from customers on a condition that in turn they would buy new jewellery from assessee, in such a case provisions of section 40A(3) were not attracted in respect of payment of differential purchase amount in cash

IT-II : Where purchases were duly recorded in assessee's books of account and they were also shown in stock, addition under section 69C could not be made merely because assessee failed to provide complete address of vendors in respect of those purchases

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[2012] 27 taxmann.com 341 (Chennai - Trib.)

IN THE ITAT CHENNAI BENCH 'A'

Deputy Commissioner of Income-tax, Company Circle I(3)

v.

Kirtilal Kalidas Jewellers (P.) Ltd.*

ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

AND V. DURGA RAO, JUDICIAL MEMBER

IT APPEAL NO. 564 (MDS.) OF 2012

C.O. NO. 70 (MDS.) OF 2012

[ASSESSMENT YEAR 2008-09]

SEPTEMBER 5, 2012

I. Section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962 - Business disallowance - Cash payment exceeding prescribed limits - Gold jewellery - Assessment year 2008-09 - Assessee company was manufacturing gold jewellery through one of its sister concerns - Insofar as purchases of old ornaments effected from its own customers, explanation of assessee was that such purchases were effected on a condition that they purchased new jewellery from assessee - As per assessee, though such purchases were treated as cash purchases in its cash book, there was no payment in cash ever made, but, these were adjusted against sales effected to such parties by  assessee - Assessing Officer finding that payments effected in cash against a number of purchases exceeded Rs. 20,000, disallowed those purchases under section 40A(3) - Whether since payments were effected to customers on account of adjustment resulting out of an exchange of old jewellery with new jewellery, assessee's case got covered under clause (d) of rule 6DD - Held, yes - Whether even otherwise, since it was a case of only credit purchase and at time of effecting sales, entries were made in a reverse manner for adjusting against credit, such transactions could not be considered as violative of section 40A(3), just for a reason that contra entries appeared in cash book - Held, yes - Whether, therefore, impugned disallowance made by Assessing Officer was to be deleted - Held, yes [Para 13] [In favour of assessee]

II. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure - Purchases - Assessment year 2007-08 - During assessment proceedings, Assessing Officer noted that for some of purchases effected by assessee, no details or address of vendors were available in purchase vouchers - He, therefore, considered such purchases to be non-genuine and an addition was made on that account - Whether since purchases were recorded in books of account of assessee and were also shown in its stock, in such circumstances merely because those purchases did not carry full addresses of vendors, could not be a reason to treat said purchases as unexplained - Held, yes - Whether therefore, impugned addition made by Assessing Officer was to be deleted - Held, yes  [Para 14] [In favour of assessee]