The Hyderabad bench of Income Tax Appellate Tribunal ( ITAT ) in Dy. Commissioner of Income Tax, Hyderabad v. Kalanikethan Silks Private Limited ruled that, Deduction allowable on Purchase of Old Gold from Customers against Purchase of New Ornaments
The Tribunal bench comprising of Judicial Member P. Madhavi Devi and Accountant Member S.Rifaur Rahman heard an appeal filed by the revenue against the order of CIT(A). It considered whether it’s correct in law deleting the addition made by the assessee even if proper bills and vouchers are not produced.
In the instant case, assessee is a company trading in textiles and jewellery. It filed return declaring total income for the A.Y 2013-14. During the assessment proceedings under Section 143(3), he was asked to produce books of account. On verification of the same, the A.O observed that for incentive on sales and generator maintenance bills/vouchers were not properly maintained. Observing inflation expenses cannot be ruled out, A.O disallowed 10% of it and brought it to tax. A.O also noted that during the year assessee had made several purchases without proper bills/vouchers. He had purchased old gold from customers without proper bills/vouchers. Observing that genuineness of such expenses cannot be verified and inflation of such expenses cannot be ruled out, he disallowed 15% of such expenses and brought it to tax. Aggrieved by the A.O’s decision, assessee approached CIT(A). The CIT(A) allowed the claims made by assessee. Aggrieved by the same, revenue approached ITAT.
After hearing the contentions of both parties, got satisfied by the assessee’s expenditure in generator maintenance and incentive on sales. With regard to the purchase of old gold, assessee had filed copies of vouchers which were properly bound and preserved and he submitted that it was normal practice of the customers to bring old gold and buy new ornaments and in that process, value of old gold would be reduced from the entire cost of new ornaments. It was further submitted that in such transactions, there was no cash payment but only an adjustment of old gold ornaments against the purchase of new ornaments. The CIT(A) had concluded that disallowance of 10% cash payments towards incentive to staff and generator maintenance and 15% of payments towards purchase of gold to be deleted.
Dismissing the appeal, ITAT held that revenue has not been able to rebut the findings of CIT(A), except that assessee has not filed bills and vouchers.