TMI Blog2008 (4) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has no evidence in his possession to show that the assessee had contracted at a lower rates with related concerns, the addition cannot be made to the gross profit shown by the assessee. 4. The order of the Commissioner of Income-tax (Appeals) confirming the addition of Rs. 11,78,918 is bad in law and without jurisdiction." Mr. B. V. Jhaveri, learned counsel appeared for the assessee and Mr.Mohit Jain, the Departmental representative appeared for the Revenue and put forward their contentions. The only issue in the present case is against the addition of Rs. 11,78,918 made on account of sale to related concerns made by invoking the provisions of section 92 of the Income-tax Act. The brief facts of the case are that during the year under consideration, the assessee has shown sales of imported rough diamonds amounting to Rs.11,76,46,591. The Assessing Officer during the course of the assessment proceedings noted that the cost of the said items after considering the opening and closing stock but not taking into consideration the foreign exchange difference and other overheads works out to Rs. 11,26,88,439. Thus, the gross profit works out to Rs. 49,58,152 and the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct on the ground that the assessee had made 100 percent purchases of rough diamonds by imports either from the sister concerns or from the companies with whom it had close connections and as the gross profit and net profit ratios were low and hence the addition of 1 percent of sales of imported rough diamonds were made. The learned authorised representative furnished the details of imports made by the assessee including the value in statement filed with the Deputy Commissioner, Customs, which reveals that during the period commencing from February 1, 2000, and ending on January 8, 2001, the assessee-company had sold rough diamonds weighing 45,162.30 cts. valued at Rs. 7,55,09,640 and the cost of the same after including the 1 percent landing charges to the assessee was Rs. 7,44,90,000. Thus, the assessee had made value addition of Rs. 10,19,640 on the sale of rough diamonds weighing 45,162.30 cts. The learned authorised representative also furnished the copies of the receipt register and the issue register prescribed under the Customs Act to the Commissioner of Income-tax (Appeals) which provided exhaustive details maintained and furnished to the customs officials at periodical int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has furnished on record the detailed documentation in respect of the import and export of the rough diamonds dealt in by the assessee. The learned authorised representative for the assessee claimed that it is keeping its goods in private bonded warehouse and was maintaining extensive details like bond number parcel-wise and on perusal of the abovesaid record would reveal that the purchases and sales shown by the assessee are backed by proper vouchers. It was clarified by the learned authorised representative for the assessee that during the years 1997-2002, Import and Export Policy, 1997-2002 was announced wherein rough diamonds could be imported without paying the customs duty but the same had to be kept in bonded warehouse. Once the buyer is found in respect of those rough diamonds purchased then the customs authorities have to be informed and the diamonds have to be transferred on its release from the bonded warehouse. The Policy further provided that in case rough diamonds were sold within one year, then no customs duty is to be paid. In case the rough diamonds were not sold within the period of one year, then the assessee was bound to pay the customs duty. Our atten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act, which is a special provision on the statute. The learned Departmental representative further pointed out that the assessee had made purchases from sister concern and the rates at which the said imports were made is challenged. We have heard the rival submissions and perused the records. The assessee is engaged in the business of importing rough diamonds and as per the announced Import and Export Policy 1997-2002 formulated by the customs authorities, the assessee is given the exemption of paying the customs duty on import of rough diamonds in case the diamonds so imported are kept in bonded warehouse and once the buyer is traced the customs authorities have to be informed for the release of the said rough diamonds and sales accounted for. The exemption from customs duty is available to the assessee for the period of one year from its import and if the said items are not sold within the period then the customs duty has to be paid. The assessee has maintained the details of its import and also its export of sale of rough diamonds carried out during the year under consideration. The details are claimed to have been maintained in compliance with the Regulations issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced at page 51 of the paper book. Similar details are to be furnished in respect of issues, i.e., the sales undertaken by the assessee. The details to be furnished to the authorities include the date of receipt of goods in warehouse, quantity in cts., its description, value of goods in US dollars, rate of duty, amount of duty on its sale, the value of goods to be exported along with the amount of duty in rupees and the receiver' s name and address. The proforma of stack cards to be maintained by the licensee for each stack is as per annexure III placed at page 53 of the paper book. The summary of periodical statement furnished by the assessee in respect of the period February, 2000 to March, 2001 is placed at page 74 of the paper book and the cost-wise sales analysis for the period is placed at pages 75, 76 and 77 of the paper book. On perusal of the abovesaid details would reveal that the assessee had mentioned the break-up of lot number, item number including its weight in ct. and worked out the total sale value of the items sold by it. The purchases made by the assessee are backed by the invoice bill issued by the persons from whom purchases have been made, which in turn has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order. The international transactions of the assessee was looked into and it was found that the arm' s length price of the transactions computed by the assessee is same as the transactional value recorded in the books of account. After considering the details filed by the assessee and the economic analysis carried out by it, it was held that the arm' s length price of the international transaction was to be taken up as the transaction value recorded in the books of account. The order under section 92CA(3) of the Act is placed at page 134 of the paper book. While completing the assessment under section 143(3) of the Act relating to the assessment year 2002-03, the sales and purchases shown by the assessee were accepted and no addition was made on account of the trading activities carried on by the assessee. The basis for making the addition in the year under consideration was the trading results shown by M/s. Hindustan Diamond Co. Ltd., which is a Government of India enterprise having similar business of rough diamonds. It is an established principle that there is no merit in estimating the trading results of a particular year based on the trading results shown in preceding o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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