TMI Blog2010 (5) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... ify the sales and purchases when the letter of enquiry were returned by the postal authorities unserved. 3. Assessee is a private limited company engaged in the business of trading in diamonds. The assessee purchases both rough and polished diamonds and sells the same. The total turnover shown by the assessee during the previous year was ₹ 33.10 crores as against ₹ 22.94 crores in the immediately proceedings year. Gross profit during the previous year was ₹ 93.25 lakhs giving up GP margin of 2.82%. In the course of assessment proceedings, the Assessing Officer issued notice u/s. 133(6) to 19 parties. These parties had entered into transactions of purchase or sale with the assessee during the previous year. Out of the 19 parties, 2 parties responded to the notice issued by the Assessing Officer. The notices sent to 4 parties were returned unserved by the Postal Authorities. Names and addresses of these parties were as follows:- S.No. Name of the party Address 1 M/s. Shruti Gems 204, Viabhav Chambers, Raghunathpura Main Road, Surat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer, however, did not choose to issue summons to any of the parties; but on the other hands, chose to treat the price at which the assessee carried out transactions of purchase or sale, as not capable of verification. This is one of the grounds for the Assessing Officer to reject book result of the assessee. 4. Another reason given by the Assessing Officer was that GP shown by the assessee was less compared to the GP shown by similar assessees in the same line of business. The Assessing Officer had given the following details in this regard :- S.No. Name of the party Turnover (Rs. in crores) Gross profit (Rs. in crores) Percentage GP 1 Susashish Diamonds Ltd. 750.69 76.54 10.2% 2 Shrenju Co. Ltd. 293.8 32.58 11.09% 3 Shital Gems P. Ltd. 22.47 1.11 4.9% 5. On the above stand of the Assessing Officer, the assessee submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s than the value declared in the import documents. The consignment had been imported from Dubai and Hong Kong. The Assessing Officer further noticed that during the previous year also, the assessee had imported rough diamonds from Dubai and Hong Kong amounting to ₹ 13.33 crores. On the above aspect pointed out to the Assessing Officer, the Assessee submitted that the action of learned DRI did not relate to the previous year. The assessee pointed out that in respect of import margin of rough diamond worth ₹ 13.33 crores during the previous year, Custom Authorities have appraised and found the value to be in order; and therefore no adverse inference can be drawn. The assessee also pointed out that the order passed by the DRI has been set aside by CESTAT and the matter has been remanded for fresh valuation. The assessee thus pointed out that this aspect cannot also be the basis to doubt the correctness of the accounts of the assessee. 7. The Assessing Officer also was of the view that the assessee was not maintaining quality-wise stock Register for rough and polished diamonds. In this regard, the assessee pointed out that it was not possible to maintain quality-wise s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned AR of the assessee as well as the contents of the impugned assessment order. I find force in the submissions and arguments of the appellant that the action of learned Assessing Officer to invoke the provisions of section 145 of the I.T. Act, 1961 for any of the reasons mentioned in the impugned order, is not justified in the facts and circumstances of the instant case. I have also gone through the case law relied upon by learned Assessing Officer and find there was a case for further scrutiny and rejection of books of accounts as there was decline in GP from earlier years. The law laid down by Hon'ble Allahabad High Court is till holds good on this issue i.e. absence of stock registers, cash memos, vouchers etc. and existence of low profits are relevant factors; where absence of a stock register, cash memos etc., if coupled with other factors like absence of vouchers in support the existence expenses and purchases and existence of low profit, may give raise to a legitimate inference that all is not well with the books and the same cannot be relied upon to assessee the income, profit or gains of an assessee, the authorities would be justified in rejecting the account books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by Assessing Officer. This clearly demonstrates that the ratio of DCIT Vs. Samir Diamonds Exports Pvt. Ltd., 71 ITD 75 cannot be applied universally in all cases of Diamond dealers including the appellant. Thus, I do not find any justification to invoke the provisions of section 145 of the I.T. Act, 1961 and estimate the income by enhancing the progressive GP on the basis of unwanted comparisons with apparently incomparable cases on which there is no need to deliberate in detail in view of the above discussion and in the facts and circumstances of the instant case as detailed in this order above. Accordingly, the impugned addition is deleted and the Assessing Officer is directed to accept the disclosed GP. 10. Aggrieved by the order of learned CIT(A), the Revenue has preferred the present appeal before the Tribunal. We have heard the rival submissions. Learned DR relied on the order of the Assessing Officer. Learned counsel for the assessee reiterated the stand of the assessee as made before the learned CIT(A). 11. We have considered the rival submissions. We are of the view that the order of learned CIT(A) does not call for any interference. Admittedly all 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Commissioner of Customs. Therefore proceedings before the DRI, which do not relate to the present assessment year cannot have any bearing on conclusion drawn by the Assessing Officer. 15. We are of the view that the books of account cannot be rejected without pointing out defects in the same. The Assessing Officer has not pointed out any defects whatsoever in the books of account maintained by the assessee. In this regard, the assessee has relied on several judicial pronouncements before us; but we deem it appropriate to refer to the decision of Hon'ble Bombay High court in the case of R.B. Bansil Abirchand Spinning and Weaving Mills Vs. CIT, 75 ITR 260 (Bom); Pandit Brothers Vs. CIT, 26 ITR 159 (Punjab) and Ashok Retractories Co. P. Ltd, 279 ITR 457. Considering facts and circumstances prevailing in the present case, we are of the view that learned CIT(A) was right in deleting the addition made by the Assessing Officer. The Order of learned CIT(A) is therefore upheld and the appeal of the revenue is dismissed. 16. In the result, appeal of the revenue is dismissed. Order has been pronounced on 14th Day of May, 2010. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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