TMI Blog2013 (10) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... esult, which has not been found place in the assessment order - Further, in case of M/s. Dhami Brothers vs. ACIT [2010 (8) TMI 817 - ITAT AHMEDABAD], that there is no requirement of law to maintain qualitative details of each peace of diamond for computing the income. - Decided against the revenue. - ITA No. 3054/Ahd/2009 - - - Dated:- 4-10-2013 - Shri Mukul Kr. Shrawat And Shri T. R. Meena,JJ. For the Petitioner : Shri J. P. Jhangid, Sr. D. R. For the Respondent : Shri S. N. Soparkar, Sr. Adv. with Smt. Urvashi Sodhan, A.R. ORDER Per : Shri T. R. Meena, Accountant Member This is an appeal at the behest of the Revenue which has emanated from the order of CIT(A)-I, Surat, dated 10.09.2009 for A.Y. 2006- 07against deleting the addition made by the A.O. of Rs. 56,53,959/- made on account of low GP. 2. The assessee is engaged in the business of import and export of diamond and manufacturing of jewellery. The assessee has shown GP @ 12.52% during the year under consideration on turn over of Rs. 22.79 crore. The assessee had maintained quantitative inventory of closing stock, but failed to maintain the qualitative details of closing stock. It did not furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onds depend upon 4C i.e. Cut, Colour, Clarity and Carat. He further observed that in absence of quality stock, the assessee would not have sold lots of diamond at different prices as is evident from the export packing slip. He also reproduced one of the packing slip on page 10 11. He reproduced the packing slip to demonstrate that assessee is maintaining qualitative details but not producing before him on page 10 11. The A.O. further held that as per Section 44AA, the assessee has to maintain such books of account and other documents as may enable the Assessing Officer to compute the assessee's total income in accordance with the provisions of the IT Act. The purpose and intention of legislature in inserting the provisions of Section 44AA of the Act is to put an obligation on the assessee to maintain and keep primary record on the basis of which the tax authorities are able to ascertain and compute the correct income. The assessee did not maintain the books of account and documents on the basis of which the income declared in the return could be ascertained. If the primary records were maintained by the assessee they were not produced for examination to compute the correct inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant has also relied on the decision of the Jodhpur ITAT in the case of Shree Gautam Textiles (supra) wherein the Hon'ble I.T.A.T. has stated that rejection of book result was not justified when there were practical difficulties in maintaining process-wise stock register and when all the necessary details in respect of opening inventory and closing inventory was verifiable. The appellant relied on the decision of the Hon'ble ITAT, Ahmedabad in the case of LMP Tractors Pvt. Ltd. (supra) wherein the Hon'ble ITAT has held that non-maintenance of quantity details as per specification could not be a ground for rejection of books of account. The appellant relied on the decision of the Hon'ble ITAT, Ahmedabad in the case of Bhagwati Emporium (supra) wherein the Hon'ble ITAT stated that the G.P. addition cannot be made because of non-maintenance of stock book and no other entry of books of account was found erroneous. The Punjab ITAT in the case of Gajanand Traders (supra) held that fall in G.P. cannot be basis for rejection of books of account. This is not mandatory as per the provisions of Section 145 and hence the books of account cannot be rejected for these two reasons. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, importing and trading of the diamond but also manufacturing and fabricating of gold jewellery and diamond ornaments and jewellery. If the assessee is not maintaining qualitative stock of the finished diamond, the A.O. cannot adduce the correct income of the assessee as entire sale nor the opening and closing stock is verifiable from the bills and books. Ld. A.O. , therefore, is reasonable to apply GP rate @ 15%. He further relied upon in case of ACIT vs. Hansal Diam, in ITA No. 3089/Ahd/2007 ITA No. 2585/Ahd/2009 for A.Y. 2004-05 2005-06, wherein Co-ordinate 'C' Bench, ITAT, Ahmadabad, had allowed the Revenue's appeal by following the ITAT, Mumbai Bench decision in case of DCIT vs. Samir Diamonds Export Pvt. Ltd. (1999) 71 ITD 75, where Co- ordinate Bench decided this issue in favour of the Revenue. Ld. CIT(A) had deleted the addition on the basis of production of quantitative details by the assessee before the A.O. and no specific defect had been pointed out by him. The cases referred by the A.O. in assessment order are not comparable at all to it. The A.O. has to establish the incorrectness in the sale and purchase or specified any defect in the books of account. The bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , had decided identical issue in favour of the assessee and dismissed the appeal of the Revenue by observing that there was no specific defect had been pointed out by the A.O. in the books of account for rejection of book result u/s. 145(3) of the IT Act. The books result in preceding year has been accepted by the A.O. Therefore, on the basis of rejection of account book on the basis of no qualitative details of diamond, is not justified. After relying various decisions, it was held by the Co-ordinate Bench that burden to prove entry shown in the books of account are not real state of affairs lies on the Revenue. ii. ACIT vs. Pankaj Diamond in ITA No. 2529/Ahd/2008 for A.Y. 05-06, wherein identical additions were made on the basis of GP by rejecting the books of account on the basis of not maintaining qualitative record of the finished diamond. The Co-ordinate 'D' Bench, Ahmedabad, decided this issue in favour of the assessee by following the decision of M/s. Dhami Brothers vs. ACIT in ITA No. 2309/Ahd/2008 for A.Y. 04-05, dated 06.08.2010, wherein it was opined that the qualitative details of each price of diamond in not necessary for computation of the income of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be computed from the books of accounts maintained by the assessee. In our opinion, the qualitative details of each piece of diamond is not necessary for computation of the income of the assessee. Income of the assessee can be very well computed on the basis of accounts already maintained by the assessee. In view of the above, we are unable to agree with the AO that there is defect in the system of method of accounting of the assessee which requires rejection of the book results under Section 145(3) of the Act and estimation of the GP." The Revenue is relied upon in case of M/s. Hansal Diam, wherein GP was heavily down in A.Y. 04-05 by Rs. 6.91% compared to preceding year. Further, assessee was maintaining qualitywise and quantitywise details of stock but the same were not produced before the A.O. But in case of assessee, it produced the quantitative details and was not maintaining qualitative details of each peace of diamond. This is the main distinction from the case cited by the Revenue. We make it clear that we have decided the issue in the light of peculiar facts and circumstances of the case and it shall not become a precedence for all the cases. 6. In the result, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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