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2017 (2) TMI 635 - ITAT AHMEDABAD

2017 (2) TMI 635 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - addition made on account of alleged undervaluation of closing stock - Held that:- The assessee who is dealing into the business of diamond having a wide range of varieties and there is uncertainty about correct valuation of such items even then assessee had properly maintained quantitative records, proper books of account duly audited, consistent adoption of method of valuation at “cost price or at market price whichever is less” .....

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d with penalty u/s. 271(1)(c) of the Act. We accordingly delete the penalty u/s 271(1)(c) - Decided in favour of assessee - ITA No. 1227/Ahd/2013 - Dated:- 6-2-2017 - Shri S. S. Godara, JM and Shri Manish Borad, AM. For The Appellant by Shri S. N. Soparkar, with Parin Shah, AR For The Respondent by Shri James Kurien, Sr.DR ORDER PER Manish Borad, Accountant Member. This appeal of assessee for Asst. Year 2007-08 is directed against the order of ld. CIT(A)-II, Surat, dated 05/02/2013 vide appeal N .....

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refore, prayed that the above penalty confirmed by the learned Commissioner of Income Tax (Appeals) may please be deleted. 3) The Appellant prays for granting such other relief as may be deemed just and proper by your Honours considering the factual and legal aspects of the case of the appellant. 4) The Appellant craves leave to add, amend, alter, delete, substitute or modify any or all of the Grounds of Grounds of Appeal. 2. Briefly stated facts as culled out from the records are that assessee .....

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the assessee to furnish necessary details and the same were filed during the course of assessment proceedings and were duly verified on record. In the course of assessment proceedings ld. Assessing Officer observed that assessee is constently following method of valuing closing stock at cost or market value whichever is less . Ld. Assessing Officer also observed that in order to value the closing stock assessee was consistently following the system in which the stock which was lying as on 31.3. .....

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closing stock by taking the instances of lower sale prices at his own discretion with the intention to suppress the profits and accordingly rejected the books of account u/s 145 of the Act and calculated the closing stock on cost basis by applying the average cost of 9405.61 per carat on the total closing stock of polished diamonds of 13345.87 carat which resulted in valuation of closing stock at ₹ 13,27,06,527/- as against disclosed closing stock in the books at ₹ 10,30,98,508/-. Th .....

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enalty order dated 20.09.2011 imposed penalty of ₹ 99,66,060/- being 100% of the tax sought to be evaded by observing as under :- 6.1 In the instant case, the detection of suppression and concealment of income and wrongful claims clearly satisfies that some circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. Further, the establishment of suppression of income and subsequent failure in the penalty proceedings to adduce any evidence in .....

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Thus second condition as laid down by the Hon'ble High Court is also satisfied. Thus, the following points emerge as regards to the penalty proceedings: (i) The assessee has failed to give any justification or acceptable explanation for charge of concealment; (ii) The assessee has willfully furnished return of lower income in order to evade taxes by established under-reporting of income by way of unlawful claims; The jurisdictional Tribunal in the case of DCIT Vs. Smt. Jayshree M. Pethani, .....

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undisclosed income and defraud revenue. (c) Action with willful intention: There is action with willful intention and plan, as evident from the failure to support claims and erroneous explanations. (d) Deliberate action in defiance of law:- There is defiance of law by way of holding back actual income. (e) Conduct contumacious or dishonest or action in conscious disregard of legal obliqation-.- There is action in dishonest manner by way of earning and possession of unaccounted cash. The rat/o a .....

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of animus is blatant in assessee's evasive replies. The Explanation 1 to section 271 reads as under "[Explanation I.-Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the 28[Assessing] Officer or the [Commissioner (Appeals)] [or the Commissioner] to be false, or ' : , , , . (B) such person offers an explanation which he is not able to su .....

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ation 1 of section 271 and is liable for levy of penalty u/s271(l)(c) of the I.T. Act, 1961 Further, logically and inescapably, this case falls within the mischief of section 271(l)(c). The case of the assessee clearly attracts the penal provision of section 271(l)(c) and on the facts of the case, satisfied that the assessee is at fault in regards to the provision of Section 271(l)(c) of the Income-tax Act, 1961. 6.2 Therefore, I am satisfied that there is an element of concealment of income by .....

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f the appellant. As regards of the appellant's plea that the Hon'ble Gujarat High Court has admitted the appeal of the appellant filed against the order of Hon'ble ITAT passed in the quantum appeal proceedings and the judgement of Tribunal including the Hon'ble Jurisdictional Bench of Ahmedabad that when the High Court admits substantial question of Jaw on an addition, the addition is certainly debatable and in such addition, penalty u/s.271(1)(c) cannot be levied, the Hon'bl .....

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indicates the Court's opinion that the issue presented before it required further consideration indication of the opinion of the High Court that there is a prima facie case made out and questions are required to be decided after admission. Mere admission of an appeal by the High Court cannot without there being anything be an indication that the issue is debatable one so as to delete the penalty under section 271(1)(c) of the Act and there are independent grounds and reasons to believe that .....

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ave heard Mr. J.P.Shah, the learned counsel assisted by Mr. M.J.Shah learned counsel for the appellant. Admit. We formulate the substantial question of law as under; "Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the closing stock of polished diamonds was undervalued to the extent of ₹ 2,96,08,019/-." 4.1 The Hon'ble Jurisdictional High Court in the case of CIT-I vs Prakash S.Vyas has clarified that mere admission of .....

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s under: "10. If we consider the entire details, it is obvious that the assessee has taken the inventory of the closing stock item wise, however, neither the cost nor the market value of each lot is given by the assessee. In the next year, the assessee continued its business of purchasing rough diamonds, its cutting and polishing and sale of polished diamonds. Sale of diamond was at different rates varying from ₹ 1212/- per carat to ₹ 44,076 per carat. The assessee has picked up .....

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by the assessee, we find that the sale value of the diamond varies from ₹ 1212/- per carat to ₹ 9900/- per carat. From the sale instances given by the A.O., we find that the sale of diamond was as high as ₹ 44,076.14 per carat. Therefore, on the basis of these details, the only inference that can be drawn is that the assessee has selected the sale bills where the diamond was sold at a lesser rate. At the cost of repetition, we may reiterate that the description and quantity gi .....

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osing stock was lower than the cost, burden would be upon the assessee to establish so by producing the documentary evidence. If the closing stock is of diamond, this burden would be even heavier because the assessee is claiming that the market value of 9405.61 carat of the closing stock of diamond out of the total closing stock of 13,345.87 carat was lower than the cost. No evidence is produced by the assessee to establish this contention. The sale bills produced by the assessee in respect of s .....

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re the sale rate of diamond was comparatively lower and ignored the sale bill where sale rate was substantially higher. Therefore, we hold that the assessee was unable to establish that market value of part of closing stock of polished diamond was lower than the cost. The A.O. has worked out the value of closing stock on "average cost method" basis. No discrepancy in the working of the A.O. is pointed out by the assessee. The learned counsel for the assessee also contended that the GP/ .....

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ppellant that complete details of opening stock of polished diamonds, manufacturing . expenses, purchases, sales and closing stock of diamond were provided during the course of assessment proceedings hence, it cannot be subject to levy of penalty u/s 271(1)(c) of the Act cannot be accepted as details provided for valuation of closing stock is not supported by any evidences as stated herein above and appellant has not adopted the average cost method just to reduce taxable income of current year a .....

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is a particular of income, whether the figure is one which is stated independently of anything else that appears in the return or the documents accompanying it or whether it is something derived from other figures elsewhere stated in such return or documents. False result may be produced by the falsity of one or more of the constituent items in the return. The words 'inaccurate particulars' would cover falsity in the final figure as also the constituent elements or items They simply wou .....

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ied on the addition made on valuation of closing stock. The Honorable high court in this case has noted that the assessee was a Government Corporation and its accounts were audited by the GAG and therefore there did not appear to be falsehood in the accounts. In the instant case Assessing Officer has proved falsehood on the valuation of closing stock as appellant has taken selected sales bills in subsequent months for valuation of closing stock as on 31.03.2007. Section 271(1)(c), to the extent .....

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false or he offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income, have been disclosed by him, then the amount added or disallowed in computing total income of such person as a result thereof shall, for the purpose of clause (c), be deemed to represent the income in respect of which particulars have been concealed. In the present case, the ex .....

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suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clearly disclosed in the return of income, penalty cannot be levied and merely because an amount is not allowed or taxed, it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Further, conscious concealment is necessary. Even if some deduction or benefit is claimed by the assessee wrongly but bona fide and no mala fide can .....

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naccurate particulars and penalty proceedings would be justified" It has been held by Hon'ble Madras High Court in the case of Shree Nithyabaiyani Textile Ltd vs DCIT (Mad.) 282 1TR 154 that under valuation of closing stock attracts penalty u/s.271(1)(c) of the I.T. Act. Accordingly, the penalty of ₹ 99,66,060/- levied u/s 271(1)(c) of IT. Act by the Assessing Officer for furnishing inaccurate particulars of income is confirmed . 6. Aggrieved, assessee is now in appeal before the .....

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y audited and there is consistent increase in gross profit rates. Also during the course of assessment proceedings apart from issue of valuation of closing stock no other evidence or observation has been detected by the Revenue authorities which can prove that assessee has filed inaccurate particulars or concealed particulars of income. 7. As regards valuation of closing stock is concerned ld. AR further submitted that we have been consistently following the method of valuing closing stock at co .....

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n record the basis of valuation at cost or market price whichever is less. Cost of the goods is already on record but for the purpose of finding out reasonable basis of sale price assessee is following consistent system in which the sales after the close of the year i.e. from April till August are taken as a basis and as there are proper quantitative records with the help of which closing stock at the end of the year can be matched to the sales made in the following months and in case the sale p .....

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ng authority. It is true that assessee has lost both before ld. CIT(A) as well as the Tribunal. However, quantum appeal of the assessee has been admitted by Hon. Gujarat High Court vide appeal No.834 of 2011 vide order dtd.14/09/2012 on the substantial question of law :- Whether on the facts and circumstances of the case the Tribunal was right in law in holding that the closing stock of polished diamonds was undervalued to the extent of ₹ 2,96,08,019/-? 9. Ld. AR further strongly objected .....

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diamonds appearing in the closing stock sheets is matching with the sales bills and sample of such bills are at pages 76 and 77 of the paper book. Further ld. Assessing Officer after disregarding the valuation of closing stock made by assessee has adopted a new method of valuation of closing stock i.e. at cost by taking the figures from the books of assessee itself and calculating the average cost at ₹ 9943.64 per carat. This shows that assessee has furnished correct particulars of income .....

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iculars of income of furnishing of inaccurate particulars of income u/s 271(1)(c) of the Act. Ld. AR referred and relied on the following judgments/decision :- 1. Judgement of Hon. Gujarat High Court in the case of Valimkbhai H. Patel 280 ITR 487. 2. Judgment of Hon. Himachal Pradesh High Court in the case of H.P. State Forest Corporation Ltd. 340 ITR 204 3. Judgment of Hon. Punjab & Haryana High Court in the case of SSP (P) Ltd. 302 ITR 43. 4. Judgment of Hon. Punjab & Haryana High Cour .....

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udgment in the case of CIT vs. Pawan Kumar Dalmia (1987) 168 ITR 1 (Ker) 11. Judgment of ITAT, Agra in the case of Addl.CIT, Range-2, Farukabad vs. Kishan Sahakari Chini Mills Ltd. ITA No.6 (Agra) of 2011 12. Order in the case of DCIT vs. Saraya Industries Ltd., in ITA No. 1886/Del/2003 13. Order in the case of ACIR vs. Malhotra Mukesh Satpal in ITA No. 183/Pn/2003 [(2008) 113 TTJ (Pune) 401] 14. Order in the case of Durga Traders vs. ITO in ITA No.120/Chd/2003 [(2004) 90 TTJ (Chd) 767] 15. Orde .....

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correct valuation of closing stock. 11. We have heard the rival contentions and perused the record placed before us and also gone through the judgments/decisions referred and relied on by the ld. AR. The solitary issue of assessee in this appeal revolves round the action of ld. CIT(A) confirming the penalty u/s 271(1)(c) of the Act imposed by ld. Assessing Officer at ₹ 99,66,060/- in respect of addition on account of alleged undervaluation of closing stock of ₹ 2,96,08,019/-. 11.1 W .....

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the assessee was ₹ 10,30,98,508/-. He therefore worked out the difference of ₹ 2,96,08,019/-. The working given by the AO at page no.4 of the assessment order reads as under: Total production of polished diamond (Z) 52894.75 Carat Total cost of consumption of rough diamond (A) ₹ 47,63,19,661 Total manufacturing cost (B) ₹ 4,96,46,473 Total cost for production of polished diamond C=A+B ₹ 52,59,66,134 Average cost of polished diamond D=C/Z 9943.64 per carat Closing s .....

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fore when the value of the closing stock is worked as per the assessee's method of valuation of closing ITA No.3010/Ahd/2010 stock i.e. "cost or market value whichever is lower", the value of the closing stock works out to ₹ 10,30,98,508/-. The assessee has given the details of lot- wise physical stock of the closing stock of polished diamonds. The same is at page no.30 and 31 of the assessee's paper book which is reproduced below for ready reference: Sr.No. Description o .....

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02.06 16 Cut & Polished Diamond 74.22 17 White D/C ND PK2 52.35 18 White D/C ND PK3 11.52 19 White Prince PK1 33.05 20 F/C White VS1 48.60 21 F/C White S11 20.44 22 F/C White VS1 113.04 23 F/C White S11 35.71 24 Cut & Polished Diamond 1072.85 25 White Tappers S1 100.00 26 White Tappers PK 4 78.00 27 White Buggets PK 4 116.00 28 White BuggetsS1 3 48.00 29 Cut & Polished Diamond 187.36 30 Cut & Polished Diamond 45.89 31 Cut & Polished Diamond 250.15 32 White BGTS PK 2 (PL) 185. .....

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TLC PK 1 2 50.00 51 PRN TTLC S1 1 2 106.34 52 D Cut TTLB PK 1 2 177.33 53 TAP + BUG TTLB S1 1 2 36.84 54 D CUT TTLC PK 1 2 55.74 55 TAP + BUG TTLB PK 1 2 140.00 56 TAP + BUG TLB PK 1 2 20.26 57 D Cut TTLB PK 1 2 236.25 58 D.Cut White PK 172.17 59 Cut & Polished Diamond 1445.20 60 D/Cut White White PK 3 382.00 61 D/C 12 TTLCs 45.98 62 F/CutTop TTLB Vs 190.42 63 F/Cut White I2 268.58 64 F/Cut White PK 30.01 65 F/Cut White PK 2 30.00 66 F/Cut White PK 3 21.51 67 White Fullcut PK 2 19.07 68 Whit .....

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. While valuing the closing stock, the assessee has claimed that 9405.61 carat of the diamonds was having less value than the cost. The working given by the assessee at page no.36 and 37 reads as under: VALUATION SHEET FOR COSTING DONE AT MARKET VALUE BECAUSE THE SAME IS LOWER THAN COST OF ₹ 9,943/- PER CARAT. Sr. No. Description Supporting Sale Bill No. Market value for carat as on 31.03.07 Quantity (in carats) Amount (Rs.) 1 CUT & POLISHED DIAMONDS 2 9,000.00 277.56 2,498,041 2 CUT & .....

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.05 185.55 1,675,340 12 WHITE BGTS PK -2 (PL) 8 9,029.05 11.96 107,987 13 D/C TL8 NTS SI-I (PL) 8 9,119.00 2.03 18,512 14 D/C TLB NTS PK-1 (PL) 8 8,704.05 0.54 4,700 15 CUT & POLISHED DIAMONDS 23 9,900.00 505.35 5,002,965 16 CUT & POLISHED DIAMONDS 8 8,729.43 231.32 2,019,292 17 WH BUG 1-3 12 7,150.80 0.14 1,001 18 Ml TAP BUG 1- 3 12 6,270.08 132.88 833,168 19 D/CUT TTLB PK- 12 13 569,640.00 42.97 244,774 20 D/CUT TTLB VS - 12 13 8,362.80 47.38 396,229 21 TAP/BUG TTLB PK - 12 13 3,555.20 .....

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3,127 32 TAP+BUG TTLB SI-12 15 6,464.00 36.84 238,134 33 0 CUT TTLC PK-12 15 7,999.20 55.74 445,875 34 TAP+BUG TTLB PK-12 15 5,252.00 140.00 735,280 35 TAP+BUG TLB PK-12 15 4,444.00 20.26 90.035 36 D CUT TTLB PK-12 15 3,636.00 236.25 859,005 37 D.CUT WHITE PK 18 7,272.00 172.17 1,252,020 38 CUT & POLISHED DIAMONDS 4 7,271.00 1445.20 10,608,049 39 D/CUT WHITE PK-3 19 8,515.50 382.00 3,252,921 40 D/C 12 TTLC DIAMONDS 23 8,312.75 45.98 382,220 41 F/CUT TOP TTLB VS 25 8,718.25 190.42 1,660,129 4 .....

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0 137.12 282,817 53 F/C BLACK DIA 31 3,007.50 155.67 167,428 54 F/C BLACK DIA 31 2,606.50 161.52 160,352 55 F/C BLACK DIA 31 2,406.00 65.76 158,219 56 F/C BLACK DIA 31 2,205.50 35.94 79,266 57 F/C BLACK DIA 31 2,205.50 51.98 114,642 58 F/C BLACK DIA 31 2,005.00 66.19 132,711 59 F/C BLACK DIA 31 1,604.00 88.00 141,152 60 BUG WH PK -3 31 2,406.00 50.90 122,465 61 BUG WH PK -2 31 2,807.00 60.00 168,420 62 CUT&POLISHED DIAMONDS 44 9,600.00 528.27 5,071,392 63 F CUT TTLC VS 2 33 8,621.50 32.35 27 .....

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7.87 carrat of the closing stock, the market value of 9,405.61 carrat was less than the cost and therefore the assessee adopted market value while for the remaining stock of 3940.26 carrat market value was more than the cost, therefore, the assessee adopted cost price. He has also claimed that the assessee has a right of following "cost or market value whichever is lower" as its method of accounting for valuation of closing stock and such method is being consistently followed by the as .....

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y the learned counsel that the assessee has taken the lot-wise stock inventory as on 31-3-2007 physically. The detail of which is given at page no.30 and 31 of the assessee's paper book and has also been reproduced by us above in para-6 for ready reference. From the perusal of the above details, we find that the assessee has bifurcated the closing stock of 13,345.87 carrat into 86 lots. However, he has not given either cost or market value of each lot. Unless the assessee gives cost and mark .....

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of the 9405.61 carrat of the diamonds was lower than the cost. This contention of the assessee is based upon the sale of the diamonds in the subsequent year. The AO has recorded the finding that the sale bills are for ITA No.3010/Ahd/2010 five months in the next year. The details of these sale bills are given by the assessee and are reproduced by us above in para no.7. When we compared the details of the closing stock, which is given in para no.6, with the details of sales bill, which is given i .....

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e diamond was lower. Moreover, the AO at page no.11 and 12 of his order has given the various sales instances during April to August, 2007 where the sale value of the diamond was as high as ₹ 44,076/- per carrat. These details are reproduced below: DATE BILL NO. Rate per carat In Indian Rs. 05.04.07 1 12810.68 16.04.07 2 12735.89 17.04.07 3 32108.06 10.05.07 5 12416.43 18.05.07 6 25765.22 21.05.07 7 23871.60 21.05.07 8 10346.96 25.05.07 9 11174.62 28.05.07 10 12435.00 29.05.07 11 25536.67 .....

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he inventory of the closing stock lot-wise, however, neither the cost nor the market value of each lot is given by the assessee. In the next year, the assessee continued its business of purchasing rough diamond, its cutting and polishing and sale of polished diamond. Sale of diamond was at different rates varying from ₹ 1212/- per carat to ₹ 44,076/- per carat. The assessee has picked up the sale instances where the diamonds were sold at a price below the cost price and ignored the s .....

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o ₹ 9900/- per carrat. From the sale instances given by the AO, we find that the sale of diamond was as high as ₹ 44,076.14 per carrat. Therefore, on the basis of these details, the only inference that can be drawn is that the assessee has selected the sale bills where the diamond was sold at a lesser rate. At the cost of repetition, we may reiterate that the description and quantity given in the ITA No.3010/Ahd/2010 sale instances does not tally with the description and quantity giv .....

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to establish so by producing the documentary evidences. If the closing stock is of diamond, this burden would be even heavier because the assessee is claiming that the market value of 9405.61 carrat of the closing stock of diamond out of the total closing stock of 13,345.87 carrat was lower than the cost. No evidence is produced by the assessee to establish this contention. The sale bills produced by the assessee in respect of sale of diamonds from April, 2007 onwards cannot be said to be the ev .....

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ale bill where sale rate was substantially higher. Therefore, we hold that the assessee was unable to establish that market value of part of closing stock of polished diamond was lower than the cost. The AO has worked out the value of closing stock on "average cost method" basis. No discrepancy in the working of the AO is pointed out by the assessee. The learned counsel for the assessee also contended that the GP/NP for the year under consideration is better than earlier years, therefo .....

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this contention, he has relied upon the several decisions, which are reproduced by us in para-3 above. In our opinion, in this case, the AO has not modified the method of accounting for valuation of the closing stock. The method of assessee for valuing the closing stock at "cost or market value whichever is lower" is not disturbed by AO. What is disturbed by the AO is the working by the assessee with regard to the market value of the closing stock. As we have already mentioned, in sup .....

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t to determine the value of stock at "cost". Therefore, we hold that the AO has not rejected or disturbed the method for valuation of closing stock followed by the assessee. He has only made correct valuation of closing stock as per method followed by the assessee. Since the AO has not disturbed the method of valuation of the closing stock of the assessee, the question of revaluation of the opening stock as per the changed method does not arise. It is not a case of either the Revenue o .....

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that assessee s appeal against the quantum addition confirmed by the Tribunal has been admitted by Hon. Jurusdictional High Court vide appeal No.834 of 2011 vide order dated 14/09/2012 on the substantial question of law - Whether on the facts and circumstances of the case the Tribunal was right in law in holding that the closing stock of polished diamonds was undervalued to the extent of ₹ 2,96,08,019/-? 13. In this appeal we are dealing with the validity of imposition of penalty u/s 271(1 .....

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c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** *- (iii) in the cases referred to in Clause (c) or Clause (d). in addition to tax if any, payable by him, a sum which, shall not be less than, but which shall not exceed three tunes, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishin .....

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the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing rho total income- of such person as a result thereof shall, for the purposes of Clause (c) of this sub-Section, be deemed to represent the income ,n respect of which particulars have been concealed. 14. A bare perusal of this section would reveal that for visiting any assessee with penalty, ld. Assessing Officer or ld. CIT(A) during the .....

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77; 1,00,000/- per carat or even more. In the case of assessee also there is a wide range of diamonds ranging between ₹ 5,000/- per carat to ₹ 50,000/- per carat. Assessee has been consistently adopting the method of valuation of closing stock at cost price or market price whichever is less. It is well known that the burden to prove that whether cost price or market price which one is less lies on the assessee and it has to be substantiated with a proper proof. Assessee has been cons .....

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le price with the cost price and if sale price was less than the cost price then such sale price was applied on the particular portion of closing stock. By way of this system assessee was having a copy of actual sale bill to prove the value of closing stock at market price which was less than the cost price. During the course of hearing ld. AR referred pages 76 & 77 of the paper book wherein sale was effected on 5th April, 2007 wherein 277.56 carat of cut and polished diamond were sold @  .....

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ued at market price because of the sale value taken by the assessee and the ld. Assessing Officer was not convinced with the method so adopted and accordingly he applied the average cost of ₹ 9943/- on the overall closing stock of the assessee as on 31.3.2007. Now looking to these facts with an angle of adjudicating that whether assessee has furnished inaccurate particulars of income or concealed particulars of income, we find that even the Co-ordinate Bench vide its order in quantum appea .....

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proved gross profit. The only issue remained in question was the rates taken by the assessee for valuing some portion of closing stock at sale price. For this issue assessee has given copies of certain bills to prove its consistent method adopted for last so many years accepted by the Revenue but the same has been disregarded for the year under appeal by the Revenue authorities and addition confirmed by ld.CIT(A) and the Tribunal however, the quantum issue has been admitted by Hon. Jurisdictiona .....

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d in the would mean something which is not accurate not exact or not correct. Something which is untrue is in accurate. The same facts can be given two interpretations. If the interpretation given is plausible, though not accepted by the assessing authority, it cannot be said that the statement of particular is so inaccurate or erroneous as to invite imposition of penalty. Tue it is that mens rea is not required to be proved. When mens rea is proved it shows that the person had an intention of e .....

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not amount to furnishing of inaccurate particulars regarding the income of the assessee. In the instant case, the assessee was deducting certain amount on account of deterioration of old stock. That was being done on estimation on the basis of the reports made by various officers of the Corporation. That estimation was not accepted mainly on the ground that the reports were made and resolution was passed by the board after the assessment year was over and, therefore, they could not be given ret .....

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ts though the system of calculating the depreciation might have been improper. The assessee was a Government Corporation. Its accounts were duly audited and even the Comptroller and Auditor General had gone through and approved the accounts of the Corporation. In such circumstances, merely because the assessee had claimed depreciation which claim was not accepted by the revenue that by itself, would not attract penalty under section 271(1)(c). (para 22) 15. We further find that a similar issue h .....

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T(A) and deleted the penalty of ₹ 4,15,000. The operative part of the judgment of the Tribunal is reproduced as under : "We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. We find that the Assessing Officer observed that the assessee has not shown purchases of ₹ 5,71,360 in the closing stock and thereby concealed income to that extent. He further observed that the assessee has filed inaccurate particulars of .....

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nting to ₹ 7,18,851 and levied penalty of ₹ 4,15,000. We find that the return was filed by the assessee on 4-1-1994 whereas the decision of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. 67/7225 ITR 798 (SC) was rendered on 27-2-1997 holding fees payable to Registrar of Companies for increase in share capital as capital expenditure. Thus on the date of filing of the return the assessee did not have the benefit of the order of the Hon'ble Supreme Court. The .....

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of the assessee is zero as addition is made in one year whereas deduction is allowed in the subsequent year. Further the Assessing Officer as well as the CIT(A) has not allowed the deduction for payment of ₹ 25,000 to M/s. Proplus Management and ₹ 20,000 to Sh. K.K. Paul on the ground that evidence for rendering of services could not be filed. In these facts we are of the view that though the Assessing Officer was of the view that no services were rendered by the two persons - M/s. .....

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a particular item is not taxable, he would have to show it as forming part and pay tax upon it on the point of being held liable for penalty in case contention is ultimately found by the Court to be not acceptable. This surely could never have been intended by the Legislature. Hence, for the reasons given above, we arc of the view that the penalty levied cannot be sustained in law. Hence, we set aside the order of the CIT(A) and delete the penalty of ₹ 4,15,000. The grounds of appeal of th .....

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ng the record, we find no force in the contention raised by the counsel for the appellant. A perusal of the impugned order would show that the Tribunal has given a finding of fact to the effect that return was filed by the assessee on 4-1-1994 whereas the Apex Court in the case of Brooke Bond India Ltd. \. CIT[\.997] 225 ITR 798 ' rendered the decision on 27- 2-1997 holding fees payable to Registrar of Companies for increase in share capital as capital expenditure, thus, the penalty cannot b .....

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ccount. Similarly, the Tribunal has given a finding with regard to the claim of deduction tor payment of ₹ 25,000 to M/s. Proplus Management and ₹ 20,000 to Sh. K.K. Paul. It cannot be said that the assessee filed inaccurate particulars of income or concealed its income. The Hon'ble Supreme Court in the case of Cement Marketing Co. of India Ltd. v. Asstt. CST[\WQ} 124JTRJL52 has held that unless the filing of an inaccurate return is accompanied by a guilty mind, penalty cannot be .....

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es in the appeal and the same is dismissed in iimine. 16. Further we also observe that a similar issue came up before the Co-ordinate Bench, Ahmedabad in the case of D. Subhashchandra & Co. vs. ACIT in ITA No.2805/Ahd/2006 for AY 2003-04 wherein the issue has been decided by observing as under :- No doubt where there is a fall in the value of the goods and the goods could not be sold even at cost, the assessee is permitted to value the goods at an estimated realizable value. But the estimate .....

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n the P&L a/c as seems to have happened in the case of the assessee otherwise the assessee would have fifed all the details before the AO during the course of the. assessment -proceeding so that its onus would have been discharged. The onus is on the assessee to prove that the net realizable value whatever has been shown by assessee is the correct net realizable value and is less than the cost. The assessee has to satisfy the AO by adducing the evidence that the net realizable value is less .....

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s. 44AB. The Authorised Representative pointed .out that the GP rate of the assessee during the year was 13.81 per cent higher than the one which ^vas earned in the earlier year. If the assessee has earned the GP rate @ 13.81 per cent, then the ""average net value realized in the case of the assessee should be more than the cost at least by 13.81 per cent if the average cost method or the net realizable value is compared. The Authorised Representative when asked for the evidence to sup .....

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nds are issued, expected yield is noted on the packets and these details are verified by the assessee or its representative when cut and polished diamonds are received from the labourers. The assessee could not run its business without getting the accounts of each and every piece of diamond. The AO in this case has valued the stock at average cost which will be less than the realizable value as the assessee has shown the GP rate @ 13.81 per cent and valuing the stock at average cost, when it is .....

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