TMI Blog2003 (9) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... learned AO accepted the fact that the items mentioned in Invoice No. 223 were recorded in the stock register and Karigar manufacturing register. However, it was observed that it was not believable that the cost of goods, whose declared value was Rs. 30,97,000, would be as low as Rs. 19.38 lakhs. Keeping these factors into consideration, he made an addition of Rs. 11,58,883, being the difference in two values as unexplained investment under s. 69B. At this juncture it would be prudent to note that a search in this case under s. 132 was conducted on 2nd Aug.,1996 and the block assessment under s. 158BC was framed. In appeal the Tribunal in ITA No. 39/Jp/1997 in the block assessment order of the assessee held that the stock was to be valued at cost. It was further observed that the AO was free to scrutinize the books of account, manufacturing register, pocket diary and price of stock-in-hand in the regular assessment for the asst. yr. 1997-98. 4. Pursuant to the regular assessment, the learned CIT(A) on this issue observed that the AO had not brought any material on record which could suggest or establish beyond reasonable doubt that the cost recorded in the books of account was lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms were kept at Delhi for showing to some party and the vehicle carrying the goods which was intercepted by the police, had 116 items plus 3 other different items found in the pocket of Shri Dinesh Kumar, an employee of the assessee, who was travelling in the same vehicle. On a query raised from the Bench, it was stated that all the 125 items were shown in the closing stock of the assessee and the present status was also stated to be the same i.e. those goods were still appearing in the stock and were unsold. It was stated that the AO had considered the value declared for export purposes, as the investment made by the assessee in these goods, which was not correct. It was further pointed out that the learned CIT(A) too accepted that the value declared for custom purpose could not be treated as the cost of the goods to the assessee. He was stated to have, however, reduced the over-all gross profit rate of 25.86 per cent to determine the cost of the goods which was not correct. It was pointed out that the numerous items included in the stock of the assessee had different profit rates. A chart was placed on record showing gross profit rate in various items of stock, ranging from 24 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material placed before us. There is no dispute about the fact that 125 number of items of jewellery were sent by the assessee on approval to M/s Om Shanti Sons, its sister concern and the stock register maintained by the assessee clearly evidenced the manufacture and issuance of these items. The only dispute in this case centres around the question of determination of the value of such items to be considered for the purposes of assessment. At this juncture, it is important to note that the block assessment in this case was framed and the Tribunal had also disposed of the appeal of the assessee, in which it was held that only the cost price could be considered. However, in the present appeal, we are concerned with the regular assessment, subsequently, made, which is certainly different from the block assessment. The Tax Audit Report, filed by the assessee, clearly shows that the assessee was following the method of valuation of its closing stock at cost or market price, whichever is less . There is no quarrel about the proposition that 125 number of goods, which were sent on approval to M/s Om Shanti Sons did form part of the closing stock of the assessee as is evident from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the cost of these 125 items declared by the assessee and accepted by the AO cannot be disbelieved and no amount more than that can be included in the value of the closing stock. In our considered opinion, the assessee had rightly declared the value and the AO as well as the learned CIT(A) were not justified in interfering with this value. The ground raised by the assessee is allowed and that by the Revenue is dismissed. 9. The next grievance of the assessee is mentioned in ground No. 3 which relates to the confirmation of the addition of Rs. 17,50,420 under s. 69B on account of unexplained investment in ring, which is still in the custody of the IT Department. A search was conducted on 2nd Aug., 1996, at the business premises of the assessee from where one ring consisting of ruby was found. On the same day three Departmental Valuers, namely Shri Vijendra Kankaria, Shri Kamal Kasliwal and Shri Keshav Dev Soni have valued the said ring in the presence of Shri Narendra Singh and Shri J. Sudhir Kumar, who are the employees of the assessee, but both of them were having expertise in valuation of stone and jewellery. This panel estimated the value of the ring at 6 P.M. on the day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative submitted that the valuation is extremely on higher side. The ring was made with the available material in the stock. The total cost comes to Rs. 59,580, as per the details given at p. 75 of the paper book. The learned Departmental Representative submitted that the AO in para 5.7 of his order has accepted that the ring is reflected in the stock register, manufacturing register and books of account. The learned counsel for the assessee further submitted that the assessee has objected to the valuation of this ring even in the course of search. He was not a party to the valuation made on 2nd Aug., 1996, and when the partner Shri Devendra Khandelwal reached, the valuation was already made. He has drawn our attention to various papers in the paper book from where he tried to prove that the assessee, from the very beginning was raising the objection about the high valuation of the said ring. The learned counsel for the assessee continued to argue that it is the general practice of the Department that at the time of search the valuation is made on extremely higher side which reduced further. For this purpose, he relied on a number of case laws decided by the Bench as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit rate being disclosed by the assessee. The learned Departmental Representative suggested that a larger panel may be constituted for valuation of the said ring. 13. After hearing the lengthy submissions of both the sides and on perusal of the bulky material, it appears that the ring, still in the custody of the IT Department, was seized on 2nd Aug., 1996 by the search party and immediately after that the valuation was made at Rs. 18.10 lakhs. From the first very day, the assessee was objecting the higher valuation of the said ring and demanding for re-valuation by various letters as mentioned above. Ultimately, the re-valuation was made. An attempt was also made to auction the said ring by giving the advertisement in the news paper but perhaps only one bidder offered Rs. 3 lakhs which was not accepted by the Department. In other words, the auction has failed. It may be mentioned that the valuation by the expert is nothing but an opinion about the item. For diamond and stones, the vital factors are clarity, colour, cuttings and weight. We have examined the certificate issued by M/s Gem Testing Laboratory dated 8th March, 2002 in this regard. The said institution is recognise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experts. The highest value of Rs. 18 lakhs is also not acceptable, for the reason that the said valuation was made in the closed room under the artificial light. Later the same experts have rebutted this value at the time of re-valuation. Thus keeping in mind the doctrine of equity, consciousness and justice, we estimate the value of the ring at Rs. 3 lakhs (three lakhs) only. Thus this ground of the assessee is partly allowed. 18. The next grievance of the assessee is regarding the addition of Rs. 20,000 on account of trading addition. The AO made the addition of Rs. 20,000 by holding that the purchases were made from the unregistered valuer and the same were not fully vouched. The same was confirmed by the learned CIT(A). 19. After hearing the parties and perusing the material on record, it appears that the books of account of the assessee were prepared later on and the purchases were made from the unregistered dealers. The statement of few registered dealers were also recorded. The AO estimated the trading addition of Rs. 20,000, which appears to be reasonable in the facts and circumstances of the case. Hence we do not interfere with the orders of the lower authorities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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