The ACIT, Circle-6, Surat V. M/s. Sun Rays(R.F.), Surat

ITA 1538/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9154 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 12-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: NIRAV SHAH
• Keywords: Gross profit estimation; Rejection of books of accounts; Right to appeal
• Section: 143(3); 80HHC; 145; 148; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI SHAILENDRA YADAV, JM, & MANISH BOR AD, AM. ITA NO.1538/AHD/2012 ASST. YEAR: 2003-04 ACIT, CIRCLE-6, SURAT. VS. M/S SUN RAYS, 1 ST FLOOR, BALAJI DARSHAN BUILDING, NR. GODHANI CIRCLE, KATARGAM, SURAT. APPELLANT RESPONDENT PAN AAJFS 8148Q APPELLANT BY SMT. SONIA KUMAR, SR. DR RESPONDENT BY SHRI NIRAV SHAH, AR DATE OF HEARING: 25.2.2016 DATE OF PRONOUNCEMENT: 22/03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-IV, SURAT, DATED 23.03.2012 IN APPEAL NO.CAS -IV/338/10-11. ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 254 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) ON 30.12.2010 BY DCIT, CIR- 6, SURAT FOR ASST. YEAR 2003-04. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.59,51,473/ -MADE ON ACCOUNT OF REVALUATION OF CLOSING STOCK, ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS NOT APPRECIATED THE ACT OF THE A.O. FOR REJECTI NG THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE ACT AND ALLOWED THE APPEAL OF TH E ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSI NG OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF T HE LD.CIT(A)-IV, SURAT MAY BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER'S ORDER MAY BE RESTORED. 2. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AND THE SOLITARY GRIEVANCE ISSUE INVOLVED IN GROUND NOS.1 & 2 IS AGA INST THE ORDER OF LD. CIT(A) IN DELETING THE ADDITION OF RS.59,51,473 /- MADE ON ACCOUNT OF CLOSING STOCK AND ALSO NOT APPRECIATING THE ACT OF ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF T HE ACT. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT ORDER ARE THAT ASSESSEE WHICH IS A PARTNERSHIP FIRM FILED ITS INCOME WAS FILED ON 23.10.2003 DECLARING TOTAL INCOME AT RS.10,97,970/- . THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT WAS ISSUED ON 8.9.2009 AND DULY SERVED UPON THE ASSESSE E ON 17.9.2009. ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT REJECTI NG THE BOOKS OF ACCOUNT AND MAKING ADDITION OF RS.12,79,722/-. AGGR IEVED, ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ADDITION. THEREAFTER THE ASSESSEE WENT IN APPEAL BEFORE THE C O-ORDINATE BENCH. THE HON. CO-ORDINATE BENCH VIDE ITS ORDER DA TED 15.1.2010 SET ASIDE THE MATTER TO THE ASSESSING OFFICER FOR F RESH CONSIDERATION IN ACCORDANCE WITH LAW AFTER OBSERVING AS UNDER:- 'PARA-L0. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FINDIN G GIVEN BY THE AO. WE FIND THAT THE CTT(A) EVEN AFTER CONSIDERING THE RECORDS PLACED BEFORE DID NOT ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 3 CARE FOR THE PROCESS FOLLOWED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME. WE FIND THAT THE AO CALCULATED THE GP ONLY ON THE BASI S OF LAST TWO YEARS YIELD. HE DID NOT VERIFIED THE BOOKS FOR THE YEAR UNDER CONSIDERA TION. THE C1T(A) ALSO CONFIRMED THE ACTION OF THE AO BY POLISHING IT AND HE NEVER APPLIED HIS MIND. THE TRIBUNAL HAS TIME AND AGAIN DECIDED THE IDENTICAL I SSUE BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KACHWAL A GEMS V/S JCIT SB (288 ITR 10 (SUPREME COURT) WHEREIN IT IS HELD THAT IN A BEST JUDGMENT ASSESSMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK NO D OUBT THE AUTHORITIES CONCERNED SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF T HE INCOME EVEN IN A BEST JUDGMENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBI TRARY. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE APPLICATIO N OF MIND IS NECESSARY AT THE LEVEL OF AO. THEREFORE FOLLOWING THE ABOVE MENTIONE D DECISION OF THE SUPREME COURT, WE SET ASIDE THE ORDER OF THE LEARNED CJT(A) AND RESTORE THIS MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION IN ACCORDANC E WITH LAW. NEEDLESS TO SAY THAT ASSESSEE WILL BE GIVEN FAIR AND REASONABLE OPPORTUN ITY OF HEARING. PARA-11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES.' 4. IN THE SECOND ROUND OF THE PROCEEDINGS U/S 143(3 ) R.W.S. 254 OF THE ACT NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 8.9.2009 WHICH WAS DULY SERVED UPON THE ASSESSEE ON 19.7.2009. 5. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE LD . CIT(A) WHO DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE T HE TRIBUNAL ON ACCOUNT OF DELETION OF ADDITION OF RS.59,51,473/- A ND ALSO REJECTING THE OBSERVATION OF ASSESSING OFFICER RELATING TO RE JECTION OF BOOKS OF ACCOUNTS U/S 145 OF THE ACT. ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 4 7. LD. DR SUPPORTED THE ORDER OF LD. ASSESSING OFFI CER AND EMPHASIZED THE FINDING OF DECISION IN THE CASE OF M /S D. SUBHASHCHANDRA & CO. VS. ACIT IN ITA NO.2805/AHD/20 06. 8. ON THE OTHER HAND, LD. AR RELIED ON THE FINDING OF LD. CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE IS A DEALER IN DIAM ONDS. THEREFORE, THERE IS A HUGE VARIATION IN THE TYPES OF GOODS DEA LT IN BY THE ASSESSEE IN REGARD TO THEIR COSTS AS WELL AS QUALIT Y AND, THEREFORE, AVERAGE RATE FOR THE PURPOSE OF VALUATION OF COST C ANNOT BE ADOPTED AND ALSO SUBMITTED THAT ASSESSEE IS REGULARLY MAINT AINING BOOKS OF ACCOUNTS AND STOCK RECORDS DULY AUDITED U/S 44AB OF THE ACT AND ALSO SUBMITTED THAT HON. CO-ORDINATE BENCH IN THE FIRST ROUND OF PROCEEDINGS HAD GIVEN A SPECIFIC FINDING WHILE SETT ING ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE INSTRUCTI ONS TO ESTIMATE THE INCOME OF ASSESSEE IN HONEST AND FAIR WAY AND SHOUL D NOT ACT ARBITRARILY. THE LD. AR FURTHER SUBMITTED THAT IN T HE ASSESSMENT ADDITION OF RS. 12,79,722/- WAS MADE IN THE PROCEED INGS U/S 143(3) OF THE ACT AND HON. CO-ORDINATE BENCH HAS SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AND MAKE A FAIR ESTIMATE OF ADDITION WHICH WAS WRONGLY MADE AT HIGH ER AMOUNT. IN OTHER WORDS, LD. AR SUBMITTED THAT THE INDICATION O F THE CO-ORDINATE BENCH TO THE ASSESSING OFFICER TO SCALE DOWN THE HI GH PITCHED ADDITION TO A FAIR ESTIMATE. WHEREAS THE LD. ASSESS ING OFFICER TOOK ALTOGETHER A DIFFERENT VIEW AND MADE ADDITION OF RS .59,51,473/- FOR UNDER VALUATION OF CLOSING STOCK WHEREAS THE ADDITI ON RELATING TO UNDER VALUATION OF CLOSING STOCK WAS NOT AT ALL TAK EN BY THE ASSESSING ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 5 OFFICER IN THE FIRST ROUND U/S 143(3) OF THE ACT AN D, THEREFORE, THE ADDITION AT RS.59,51,473/- WAS RIGHTLY DELETED BY L D. CIT(A). 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IN THE SECOND ROUND OF APPEAL BEFORE US TWO ISSUES ARE EMANATING FIRSTLY DELETION OF ADDITION BY LD. CIT( A) AT RS.59,51,473/- MADE ON ACCOUNT OF CLOSING STOCK AND SECONDLY LD. C IT(A) NOT APPRECIATING THE ACT OF ASSESSING OFFICER FOR REJEC TING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. 10. FIRST WE WILL TAKE UP GROUND NO.1 AND WE FIND T HAT LD. CIT(A) HAS DELETED THE ADDITION OF RS.59,51,473/- BY OBSERVING AS UNDER :- 2.6. I HAVE GONE THROUGH THE FACTS OF THE CASE. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER THE A.O. COULD HAVE MADE A N ADDITION ON A DIFFERENT ISSUE THAN WHAT WAS THERE IN THE ORIGINAL ASSESSMEN T WHICH WAS APPEALED AGAINST AND WHETHER THE ADDITION COULD BE IN EXCESS OF THE QUANTUM IN ORIGINAL ASSESSMENT. TO ANSWER THIS QUESTION WE NEED TO LOOK AT THE ACT. THE SCHEME OF THE ACT IS DESIGNED IN SUCH A WAY THAT IT IS FAIR T O BOTH PARTIES, I.E. THE ASSESSEE AND THE DEPARTMENT. THE ASSESSMENT IS MADE BY THE O FFICER OF THE DEPARTMENT AND THEREFORE THERE IS NO PROVISION FOR APPEAL BY T HE DEPARMTENT AGAINST SUCH AN ORDER. THE REMEDIES AVAILABLE TO THE A.O. FOR AN Y ERROR OF OMISSION OR COMMISSION ON HIS PART, IF ANY, ARE ASSESSMENT PROC EEDINGS U/S. 148 OR INVOCATION OF THE REVISIONARY POWERS OF THE COMMISS IONER U/S.263. THEREFORE AS FAR AS THE DEPARTMENT IS CONCERNED THE ORDER PASSED BY THE A.O. IS FINAL AND CAN BE ENHANCED ONLY THROUGH SECTION-148 OR SECTION-263 . ON THE OTHER HAND THE ASSESSEE HAS THE RIGHT TO APPEAL AGAINST THE ORDER OF THE A.O. BEFORE APPELLATE AUTHORITIES TO GAIN RELIEF. APPEAL IS THEREFORE AN INSTRUMENT FOR RELIEF TO THE ASSESSEE. THEREFORE ANY ORDER PASSED BY THE APPELLA TE AUTHORITY CANNOT BE USED BY THE A.O. TO THE DETRIMENT OF THE APPELLANT VIS-A -VIS THE ORIGINAL ORDER. JUST LIKE PROCEEDINGS U/S. 148 OR 263 CANNOT BE USED FOR THE BENEFIT OF THE APPELLANT OR SECTION-264 AGAINST IT, SIMILARLY AN ORDER PASSE D IN APPEAL CANNOT BE USED TO ITS DETRIMENT UNLESS THE APPELLATE AUTHORITY GIVES A SPECIFIC DIRECTIONS OR ORDERS ENHANCEMENT. THEREFORE, IN MY OPINION, THE POWERS O F THE A.O. IN THE SET-ASIDE PROCEEDINGS ARE LIMITED TO ADJUDICATION ON THE ADDI TIONS MADE IN ORIGINAL ASSESSMENT. SINCE THE A.O, HAS CONSIDERED THE TOTAL LY NEW ISSUE OF ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 6 UNDERVALUATION OF CLOSING STOCK IN SET-ASIDE PROCEE DINGS AND MADE AN ADDITION OF RS.59,51,473/- ON THIS ACCOUNT, IT IS HELD THAT THE A.O. HAS TRAVELLED BEYOND HIS JURISDICTION AS FAR AS THIS ADDITION IS CONCERN ED. THE ADDITION MADE ON THIS GROUND IS THEREFORE REQUIRED TO BE DELETED. 11. LD. CIT(A) APART FROM DELETING THE ADDITION AS MENTIONED ABOVE HAS ALSO ADJUDICATED THE ISSUE ON MERITS AND DELETE D THE ADDITION BY OBSERVING AS BELOW 2.7.5. I HAVE GONE THROUGH THE FACTS OF THE CASE. THE BOOKS OF ACCOUNTS WERE AUDITED AND THESE WERE PRODUCED BEFORE THE A.O. ALO NG WITH OTHER EVIDENCES. NO DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS. THE FAL L IN GP WAS EXPLAINED TO BE PARTLY ON ACCOUNT OF EXCHANGE RATE FLUCTUATION AND PARTLY ON ACCOUNT OF PREVAILING MARKET CONDITIONS. THE YIELD SHOWN BY THE APPELLANT IS WELL WITHIN THE RANGE CERTIFIED BY THE EXPORT PROMOTION COUNCIL AND IN AN Y CASE HIGHER THAN THE CASE REFERRED TO BY THE A.O. EVEN WITH YIELD OF 8.7% ON ACCOUNT OF REJECTION DIAMONDS, THE YIELD SHOWN BY M/S. B. SURESHKUMAR & CO. IS ONL Y 24.47% AS AGAINST 30.69% ACHIEVED BY THE APPELLANT. IT WOULD BE UNFAIR TO DR AW ANY ADVERSE INFERENCE FROM SUCH COMPARISON ONLY BECAUSE APPELLANT HAS NOT SHOW N ANY YIELD ON ACCOUNT OF REJECTION DIAMONDS WHEN THE CASE REFERRED TO FOR SU CH AN INFERENCE HAS A LOWER YIELD OVERALL. IN ANY CASE NO ADDITION ON ACCOUNT O F LOW YIELD HAS BEEN MADE BY THE A.O. IN THE CASE OF M/S. D. SUBHASHCHANDRA & CO . THE CLOSING STOCK HAD BEEN VALUED AT NET REALIZABLE VALUE WHICH WAS BELOW THE COST AND THEREFORE IT WAS HELD THAT THE ONUS WAS ON THE ASSESSEE TO SHOW THAT THE NRV WAS LOWER THAN THE COST. IN THE CASE OF THE APPELLANT THE STOCKS HAVE BEEN VALU ED AT COST WHICH WAS LOWER THAN THE NRV AND THEREFORE THERE WAS NO OCCASION TO APPL Y THE DECISION IN THE CASE OF M/S. D. SUBHASHCHANDRA & CO. IN A CASE WHERE THE CO ST OF INDIVIDUAL ITEMS ARE SPREAD OVER A LARGE RANGE, VALUATION ON THE BASIS O F AVERAGE VALUES WILL ALWAYS LEAD TO ABSURD RESULTS. THE ASSESSEE HAS BEEN ABLE TO SHOW THAT THERE WAS LARGE VARIATION IN COST AND THAT AVERAGE SALE REALIZATION S WERE MUCH HIGHER THAN THE AVERAGE COST PRICE INDICATING THEREBY THAT HIGHER V ALUE GOODS HAD BEEN SOLD OUT. IN SUCH A SITUATION APPLYING AVERAGE COST METHODS WOUL D RESULT IN THE ASSESSEE HAVING A GP OF ALMOST 68% WHICH IS UNHEARD OF HI THE DIAMO ND TRADE. THE A. O. HAS NOT GIVEN ANY CONSIDERATION TO THE FACT THAT EXCHANGE R ATE FLUCTUATION ACCOUNTED FOR ALMOST 7% OF THE FALL IN GP AND THAT THE KARIGARS H AD CONFIRMED THAT NO REJECTION DIAMONDS WERE RETURNED TO THE APPELLANT. ABOVE ALL, STOCK REGISTERS HAVE BEEN MAINTAINED AND NO DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS WHICH WERE PRODUCED BEFORE THE A.O. EXPLANATIONS WITH JUSTIFIC ATION WERE GIVEN FOR FALL IN GP AND YIELD WAS WITHIN CERTIFIED RANGE AND METHOD WAS CONSISTENTLY FOLLOWED AND ACCEPTED BY THE DEPARTMENT. IN MY OPINION, THERE WA S NO REASON FOR REJECTING THE BOOKS OR REVALUATION OF CLOSING STOCK. IT IS NOT A CASE WHERE DIFFERENCE IN QUANTITY ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 7 HAS BEEN FOUND BUT THE EXISTING QUANTITY HAS BEEN R EVALUED. THIS WOULD NOT RESULT IN ANY GAIN TO THE REVENUE AS THE INCREASED FIGURE WOULD HAVE TO BE SUBSTITUTED IN THE SUBSEQUENT YEAR. IN FACT, THERE WOULD BE REVENU E LOSS AS THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 80HHC @ 50% DURING THE YEAR WHICH WOULD REDUCE ITS TAX BURDEN IN THE CURRENT YEAR ON ANY ADDITION TO THE B USINESS PROFITS AS IT HAS 100% EXPORT SALES WHEREAS THE FULL VALUE OF INCREASE IN CLOSING STOCK WILL HAVE TO BE ALLOWED IN THE SUBSEQUENT YEAR WHICH HAS DEDUCTION @ 30% ONLY. IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING THE TOTALITY OF CI RCUMSTANCES, IT IS HELD THAT THE REJECTION OF BOOKS OF ACCOUNTS WAS NOT PROPER AND S UBSEQUENT ADDITION MADE ON ACCOUNT OF REVALUATION OF STOCKS APPLYING AVERAGE V ALUE METHOD WAS NOT BASED ON PROPER FACTS AND THEREFORE DELETED. GROUNDS NO. 1,3 & 4 ARE ALLOWED. 12. FROM GOING THROUGH THE OBSERVATIONS OF LD. CIT( A) WE FIND THAT LD. ASSESSING OFFICER HAS EXCEEDED HIS POWERS IN S ET ASIDE PROCEEDINGS WHICH WERE SENT TO HIS FILE FOR FRESH A DJUDICATION FOR THE LIMITED PURPOSE BECAUSE FOR ANY NEW ISSUE WHICH LD. ASSESSING OFFICER WANTED TO RAISE REMEDIES WERE AVAILABLE U/ S 148 OF THE ACT AS WELL AS REVISION POWERS U/S 263 OF THE ACT, THEREFO RE, LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION BY OBSERVING THAT LD. ASSESSING OFFICER HAS TAKEN UP A NEW ISSUE AND HAS TRAVELLED BEYOND HIS J URISDICTION. WE FURTHER FIND THAT AS FAR AS MERITS OF THE CASE ARE CONCERNED, ASSESSEE IS ENGAGED IN EXPORT OF DIAMONDS AND AVERAGE PRICE OF EXPORTS SALE STOOD AT RS.22,688/- PER CARAT AS AGAINST AVERAGE C OST PER CARAT OF RS.6959.85 WHICH CLEARLY INDICATES THAT SALE OF BET TER QUALITY OF GOODS WAS MADE DURING THE YEAR AND CLOSING STOCK REMAINED WAS OF LOWER QUALITY. FURTHER BUSINESS OF DIAMONDS AND GEMS STON E HAS ITS OWN TYPICAL NATURE BECAUSE THERE IS EVERY POSSIBILITY O F HUGE VARIATION IN THE SALE PRICE OF SUCH DIAMOND MANUFACTURED OUT OF ROUGH DIAMONDS BECAUSE THE QUALITY VARY FROM PIECE TO PIECE. IT IS ALWAYS POSSIBLE THAT A LOT OF ROUGH DIAMOND MAY GIVE A VERY GOOD YIELD A LONG WITH VERY GOOD QUALITY OF DIAMOND OR IT MAY GIVE A GOOD YIELD BUT NOT WITH GOOD ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 8 QUALITY OF DIAMOND AND THE LOSS MAY ARISE DUE TO PO OR YIELD AND GOOD/BAD QUALITY OF DIAMOND. THEREFORE, IN SUCH PRO BABILITIES COUPLED WITH THE TYPE OF BUYER WITH WHOM THE BUSINESS IS DE ALING AS WELL AS STRATEGIC ANALYSIS MADE BY MANAGEMENT, ONE CANNOT C OMPARE THE RESULTS OF SIMILAR TYPES OF BUSINESS RUN BY DIFFERE NT ENTERPRENEURS. IN THE CASE OF ASSESSEE YIELD SHOWN IS 30.69% WHICH IS HIGHER THAN THE OTHER COMPARABLES MADE BY THE LD. ASSESSING OFFICER . SIMILARLY DUE TO VARIATION IN THE COST PRICE OF GOODS THE BASIS OF V ALUATION OF CLOSING STOCK AT AVERAGE PRICE METHOD IS NOT FEASIBLE AND N ORMAL NET REALIZABLE VALUE OR COST WHICHEVER IS LESS BASIS IS TAKEN UP. IF AT ALL THE VALUATION OF CLOSING STOCK IS APPLIED AT AVERAG E COST PRICE METHOD THEN THE GP RATE OF ASSESSEE WOULD BE ALMOST 68% WH ICH IS AGAIN UNBELIEVABLE MARK FOR A DIAMOND TRADE. IN THESE CIR CUMSTANCES, WE AGREE WITH THE FINDING OF LD. CIT(A) AND DO NOT FIN D ANY REASON TO INTERFERE WITH HIS FINDING AND ACCORDINGLY DISMISS THIS GROUND OF REVENUE. 13. NOW WE TAKE GROUND NO.2 REGARDING REJECTION OF BOOKS OF ACCOUNT BY ASSESSING OFFICER NOT HELD TO BE CORRECT BY LD. CIT(A). 14. WE FIND THAT LD. CIT(A) HAS REJECTED THIS GROUN D OF REVENUE BY OBSERVING AS UNDER :- 3. GROUND NO.5 IS AGAINST THE ADDITION OF? 12,79,72 2/- ON ACCOUNT OF LOW GP WHICH WAS THE MATTER SET ASIDE BY THE HON'BLE ITAT. THE A.O. HAS NOT MADE SEPARATE ADDITION FOR THIS AS HE HAS STATED THAT TH IS IS SUBSUMED AND INCLUDED IN THE ADDITION OF 59,51,473/-MADE ON ACCOUNT OF REVALUA TION OF CLOSING STOCK AS IT ALSO ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 9 AFFECTS THE GP. IT HAS BEEN ARGUED BY THE APPELLANT THAT NO REASON FOR MAKING THIS ADDITION HAS BEEN GIVEN BY THE A.O. IN THE ASSESSME NT MADE CONSEQUENT TO THE ORDER OF THE ITAT AND THAT PROPER EXPLANATION HAD B EEN GIVEN FOR FALL HI G.P & YIELD. IN MY OPINION, ANY ADDITION ON ACCOUNT OF LO W GP CAN BE MADE AFTER REJECTION OF BOOKS OF ACCOUNTS. I HAVE FOR THE REAS ONS GIVEN IN MY DECISION FOR GROUND NO.3 HELD THAT INVOCATION OF SECTION-145(3) AND REJECTION OF BOOKS OF ACCOUNTS BY THE A.O. WAS NOT PROPER. AS REJECTION O F BOOKS OF ACCOUNTS IS NOT UPHELD, NO ADDITION COULD BE MADE ON ACCOUNT OF LOW GP AND THEREFORE THE ADDITION MADE IS DELETED. THIS GROUND IS ALLOWED. 15. WE FIND THAT AGAINST ADDITION OF RS.12,79,722/- ON ACCOUNT OF LOW GP DURING ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, ORDER WAS SET ASIDE BY THE CO-ORDINATE BENCH TO LD. ASSES SING OFFICER AND HE HAS NOT AT ALL DEALT SPECIFICALLY WITH THIS ISSU E AND HAS ONLY SUMMARIZED AND INCLUDED THE GP OF RS.12,79,722/- IN THE ADDITION OF RS.59,51,473/- MADE ON ACCOUNT OF REVALUATION OF CL OSING STOCK AS IT ALSO AFFECTS THE GP. WE FURTHER FIND THAT ASSESSEE IS REGULARLY MAINTAINING ITS BOOKS OF ACCOUNTS AND HAS CLAIMED D EDUCTION U/S 80HHC OF THE ACT ON THE BASIS OF CERTIFICATE FROM T HE AUDITORS AND HAS ALSO GOT HIS FINANCIAL STATEMENT AUDITED U/S 44AB O F THE ACT AND SAME WERE PRODUCED BEFORE THE ASSESSING OFFICER ALONG WI TH OTHER EVIDENCES AND NO MAJOR DEFECTS HAVE BEEN POINTED OU T IN THE BOOKS AND FALL IN GP WAS MAINLY ON ACCOUNT OF EXCHANGE RA TE FLUCTUATION. IN THESE CIRCUMSTANCES, LD. CIT(A) HAS RIGHTLY HELD TH AT INVOCATION OF SECTION 145(3) OF THE ACT OF REJECTION OF BOOKS OF ACCOUNT BY ASSESSING OFFICER WAS NOT PROPER AND WE DO NOT FIND ANY REASON TO ITA NO. 1538/AHD/2012 ASST. YEAR 2003-04 10 INTERFERE WITH HIS ORDER AND WE UPHOLD THE SAME. TH IS GROUND OF REVENUE IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 22/3/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 26/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 8/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 22/3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: