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TMI Blog2022 (5) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... rejecting book result when the assessee had maintained complete quantitative accounts of the diamonds. (2) The appellant submits that the learned Commissioner of Income Tax (Appeals) erred in not considering the submission and evidence in the above matter. (3) The appellant further submits that the learned Commissioner of Income Tax (Appeals) erred in relying on the judgment of D. Subhashchandra & Co. which dealt with polished diamonds whereas the appellant dealt with rough diamonds. (4) The appellant further submits that the learned Commissioner of Income Tax (Appeals) further erred in not differentiating between the rough makeable diamonds and rough rejected diamonds. (III) Changing base of addition: (1) On the facts and circumstances of the case and as per law, the learned Commissioner of Income Tax (Appeals) was not justified in changing the base of addition from valuation of stock (Rs. 52,32,680/-) to estimating alleged unaccounted profit of (Rs. 41,00,000) to alleged unaccounted profit. (2) The appellant further submits that there was no basis to retain and make addition of Rs. 41,00,000/-. (IV) Miscellaneous: (1) The learned Commissioner of Income Tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee submitted that rough diamonds are obtained and issued to the contractors for manufacturing of polished diamonds but these rough diamonds from which also include and remained in stock and are referred to as rejected rough diamonds having negligible value. It was also contended that when the rough diamonds and rejected rough diamonds are shown together rough diamonds having very low value, the overall valuation of all rough diamonds goes down considerably. And that rough diamonds of 20,294.02 carat, there was rejection of 17,041.34 carat. The reply of the assessee was not accepted by the assessing officer. The assessing officer held that the assessee has not furnished the quality wise details of diamonds. Diamonds are very precious item and the assessee is require to maintain stock movement register, lot to lot details, issue and dispatch register and has to prepare detail inventory of opening and closing stock. From verification of purchase bills, sales bills and from purchase and sale register, genuineness of rejected diamonds is not verifiable. Hence, the details filed before ld CIT(A) regarding valuation of closing stock in not credible. The assessee failed to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surd, which is about 45.63% of the turnover. The ld CIT(A) made additions of Rs. 41.00 lakhs by applying 20% rate to the total inward of diamonds (opening stock plus purchases) in the following manner; Particulars Carats Rate/ carat Rs. Amount Rs. Opening stock values by the assessee- rough (Marketable + rejected) 19,630.27 558.84 1,09,70,181 Opening stock values by assessee -Polished 244.5 6070.55 14,84,251 Purchases during the year 6123.49 1303.33 79,80,949 Total inward 25,998.26 786.03 2,04,35,381 Addition @ 20% 40,87,076 Rounded 41,00,000 6. Further aggrieved the assessee has filed present appeal before this Tribunal. 7. We have heard the submissions of the ld. AR for the assessee and the learned departmental representative (DR) for the revenue and have gone through the orders of the lower authorities. Ground No. 2 relates to the rejection of books of accounts and the ground No.3 relates to the addition of Rs. 41,00,00/- on account of valuation of stock. The ld AR for the assessee submits that assessee is a partnership firm engaged in the business of manufacturing of rough and polished diamond. In the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed diamonds manufactured cannot be traced back to the cost of rough diamonds for the purpose of polished diamonds valuation. This is a case of valuation of rough diamonds, where the assessee follow weighted average basis of valuation which is scientific and acceptable. For rough diamonds valuation, what needs to be seen suppliers invoices. The valuation done by assessee is purely at cost. The ld AR for the assessee submits that next objection of the assessing officer was the genuineness of the rough diamonds rejection is not verifiable. The logic of assessing officer is that there would not be rejection of rough diamonds. This is absolutely absurd and is a statement without any knowledge of industry. While making assortment of rough diamonds, many rough diamonds are of extremely low quality are not fit for manufacturing. These diamonds are extracted by undertaking assortment of rough diamonds and get in a separate low value assigned at its market value, which is generally very low. Unfortunately, both the assessing officer and the ld. CIT(A) has disregarded the submissions of the assessee. There was no reason for rejection of books of account, if the rejection diamonds are remove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following case laws; * ITO Vs B Sureshkumar & Co (ITA No. 2632/Ahd/2003, * ACIT Vs Gami Export (ITA 3146/Ahd/2007), * Dhami Brothers Vs ACIT ( ITA No. 2309/Ahd/2008), * Pankaj Diamond Vs ACIT ( ITA No. 555/Ahd/2008) and * Arvind Kumar Kuberbhai Patel Vs DCIT [2017] 82 taxmann.com 214 (Gujarat). 10. On the other hand the ld DR for the revenue supported the orders of the ld CIT(A) on both the grounds of appeals. The ld DR for the revenue further submits that during the assessment the assessee failed to furnish complete details of valuation of closing stock despite granting opportunity. The assessee made part compliance of the show cause notices issued by the assessing officer. On verification of purchase bills, sales bills and from purchase and sale register, genuineness of rejected diamonds was not verifiable. The details filed before ld CIT(A) regarding valuation of closing stock is not credible and was rejected by the assessing officer. The ld DR for the revenue prayed to reject the ground No. 2 of the assessee. 11. On the validity of the additions on estimation basis, the ld DR for the revenue submits that the ld CIT(A) after affirming the rejection of valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valuation of closing stock were furnished. We find that the submissions of ld AR of the assessee are contrary to the submissions recorded by the assessing officer. It is not the case of assessee that the finding of the assessing officer is perverse. We are conscious of the fact that that this is second round of litigation and instead of sending matter back, we are proceeds to adjudicate the issues. We find that there is objection of the assessing officer that the complete details were not provided by the assessee on the other hand, now we noted that the assessee has now taken stand that assessee follows weighted average basis of valuation for valuation of stock as recognized in para-16 of Accounting Standard -2, dealing with the valuation of inventories issued by Institute of Chartered Accountants of India. No such explanation or stand was asserted by the assessee before assessing officer. The assessee has taken new plea, which is not acceptable to us. Thus, we affirm the order of assessing officer in rejecting the valuation of closing stock. 14. In view of the aforesaid discussions, the ground No. 2 of the appeal is dismissed. 15. Now turning to the ground No.3, relates to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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