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2020 (1) TMI 399 - AT - Income TaxValuation of stock of jewellery - addition u/s.69C by treating the purchases of 823.57 carats of diamonds made during the year as unexplained expenditure - HELD THAT:- There is no need to treat the opening balance of diamonds of 278.04 carats as unaccounted stock or make any addition thereon on account of valuation difference. It is not in dispute that the opening balance as on 01/04/2004 of 278.04 carats of diamonds have been duly reflected in the books of accounts of the assessee with proper valuation and part of it were also found as stock on the date of survey. The total stock found during the survey was subjected to valuation by the departmental valuer and difference in valuation was attributed for the opening stock quantity also. We hold that since the opening balance of diamonds have already been duly reflected in the books of accounts and duly accounted by the assessee, there cannot be any addition in the sum being the valuation difference on the same. Hence, we hold that the ld. CIT(A) had rightly deleted the said addition. AO in the second round of proceedings had made an addition u/s.69C by treating the purchases of 823.57 carats of diamonds made during the year as unexplained expenditure. It would be pertinent to note that the second round of proceedings had emanated out of the directions given by the Tribunal as reproduced supra. Admittedly, in the first round of proceedings, there was no addition made u/s.69C by the revenue. AO could not have made any addition u/s.69C in the second round of proceedings. Even otherwise, we find that the assessee had duly offered to tax in the return of income, the value of purchase of 823.57 carats of diamonds in consonance with the declaration made by him at the time of survey and hence there is no need to make any further addition thereon. We find that the revenue had raised an additional ground challenging the deletion of addition u/s.69C. No arguments were advanced by the ld. DR at the time of hearing before us in this regard. We find that even the written submissions filed by the ld. DR, does not make any mention about the addition made u/s.69C of the Act. We hold that the ld. CIT(A) had rightly deleted the addition made u/s.69C of the Act in the sum of ₹ 1,59,53,910/- on which, we do not find any infirmity. Addition made on account of value of 823.57 carats of diamonds purchased during the year - HELD THAT:- We find that the ld. CIT(A) had erred in holding that ₹ 33,49,991/- being the difference in value of diamonds purchased during the year would go to increase the purchase cost thereon and consequently to be allowed as deduction, thereby making it revenue neutral. In this regard, it is pertinent to note that this finding of ld. CIT(A) is misconceived in as much as the difference of ₹ 33,49,991/- , being the valuation difference in respect of purchase of 823.57 carats of diamonds during the year, could be added only u/s.69C of the Act as unexplained expenditure and as per the proviso to Section 69C of the Act, the addition made thereof cannot be allowed as deduction. The argument of the ld. AR that this sum of ₹ 33,49,991/- to the extent proportionately included in closing stock as on 31/03/2005 should be allowed to be carried forward and allowed as deduction as and when they are sold, is devoid of merit and against the provisions of the Act. Hence, the said argument of the ld. AR is hereby rejected. Accordingly, the original grounds and the additional grounds raised by the revenue are disposed in the aforesaid manner.
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