Violation u/s. 40A(3) of the Earnings Tax Act, 1961 is not going to be attracted when money cost is made for the purchases exceeds the prescribed restrict, the Kolkata Bench of the Earnings Tax Appellate Tribunal ( ITAT ) has quashed the revisional order.

Radheyshyam Gupta, the assessee appealed in opposition to the order handed u/s 263 of the Earnings Tax Act, 1961 (“Act”) by Pr. Commissioner of Earnings-tax-9, Kolkata [“PCIT”] dated 21.03.2022 which is arising out of the evaluation order framed u/s 143(3) of the Act dated 29.11.2019.

The assessee is a person carrying on his enterprise within the title of Radheysham Jewellers. Earnings at Rs.97,63,350/- declared within the e-return for the AY 2017-18 filed on 21-09-2017. The revenue was decided as assessed revenue at Rs.97,63,350/- vide evaluation order dt. 29-11-2019 framed u/s. 143(3) of the I.T Act, 1961.

It was contended earlier than the Tribunal that as per buy via banking channel is worried provisions of part 40A(3) of the Act should not attracted. As regards the remaining buy of Rs.2,10,38,492/- no money cost has been made to make such buy and the identical is the worth of jewelry exchanged for making new jewelry for the shoppers. It was additionally submitted that when a buyer approaches the assessee for the acquisition of latest jewelry some outdated jewelry is introduced by the shopper and the identical is given to the vendor to regulate the value of such exchanged jewelry in opposition to the brand new jewelry buy.

The PCIT rejected the submissions made by the assessee and concluded that the AO has handed the evaluation order with out making/conducting enquiries/verifications, which ought to have been made by him earlier than framing the evaluation order u/s. 143(3) of the Earnings Tax Act.

It was noticed that the assessee is in the middle of its enterprise of promoting outdated gold jewelry and infrequently receives oldgold jewelry in trade from the shoppers. The worth of such outdated gold jewelry is calculated by the assessee as per charges of the gold/silver/diamond or different treasured stones as on the date of the transaction and the identical is diminished from the sale worth of latest jewelry bought by such clients. 

A Coram of Sri Rajpal Yadav, vice chairman & Sri Manish Borad, accountant member noticed that the assessee has not made any purchases in money in alleged transactions and solely internet consideration and the assessee falls underneath the exception supplied in Rule 6DD(d) of the Earnings Tax Guidelines, 1962.

“There is no such thing as a violation of provisions of part 40A(3) of the Earnings Tax Act within the case of the assessee as alleged by PCIT within the impugned order, as there was no precise transaction of cost of money for making purchases exceeding the restrict as prescribed u/s. 40A(3) of the Act”, noticed the bench. The Tribunal held that the order handed u/s. 143(3) dt. 29-11-2019 is neither faulty nor prejudicial to the curiosity of the income and the identical was restored. 

Sh. S.Ok. Tulsiyan, Adv. & Smt. Puja Somani, CA, appeared on behalf of the Assessee and Md. Ghayas Uddin appeared on behalf of the Income.

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Radheyshyam Gupta vs PCIT-9

Counsel for Appellant:   Sh. S.Ok. Tulsiyan, & Smt. Puja Somani,

Counsel for Respondent:   Md. Ghayas Uddin

CITATION:   2022 TAXSACN (ITAT) 1564