Smt. Chandra Moolchand Jain Vs. The Income Tax Officer, Ward 6(2)(4), Bangalore

Parties Involved

Facts Summary

The assessee, Smt. Chandra Moolchand Jain, is an individual deriving income from business, house property, and other sources. She is also involved in wholesale dealing in gold and silver bullion. She filed her return of income on 30.9.2015 declaring income of Rs.8,82,840. This return was selected for scrutiny under CASS and notices u/s. 143(2) & 142(1) were issued. During the assessment proceedings, the assessee was issued a show cause notice proposing for addition of Rs.1,09,13,444 being purchases through cash payment u/s. 40A(3) of the Act. The assessee submitted details of purchase ledger where cash payments along with bills and proof of repayment of loan and acceptance of loan was submitted. It was found that the assessee herself disallowed cash purchases of gold & silver for sum of Rs.1,09,13,144 through cash payments exceeding Rs.20,000 in the return of income. The AO show caused the assessee why cash payment exceeding Rs.20,000 should not be disallowed u/s. 40A(3) of the Act and Rule 6DD of the I.T. Rules. The assessee failed to substantiate with proof for claim of applicability of section 40A(3) of the Act. Accordingly, the entire amount was disallowed as the assessee did not come forward with documentary proof in support of exceptions covered under Rule 6DD of the I.T. Rules.…

Legal Issues

• 1. Whether the cash purchases made by the assessee are in violation of section 40A(3) of the Income-tax Act, 1961.
• 2. Whether the disallowance of cash purchases can be justified under Rule 6DD of the Income Tax Rules.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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