Bessar Diamond Mfg. Co.Pvt.Ltd., Surat V. The Dy.CIT., Circle-1, Surat

ITA 1648/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5855 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV BATHAM
• Assessee Lawyers: M J SHAH
• Keywords: Set aside
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI T.K.SHARMA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING:29.06.10 DRAFTED ON:29.06.10 ITA NO.1648/AHD/2008 ASSESSMENT YEAR : 2005-2006 BESSAR DIAMOND MFG. CO. PVT. LTD., 3A, SARVODAY SOCIETY, OPP. OASIS HOTEL, VAISHALI CINEMA ROAD, VARACHHA, SURAT. VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT. PAN/GIR NO. : AABCB5109M (APPELLANT) .. (RESPONDENT) ITA NO.2340/AHD/2008 ASSESSMENT YEAR : 2005-2006 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. BESSAR DIAMOND MFG. CO. PVT. LTD., 3A, SARVODAY SOCIETY, OPP. OASIS HOTEL, VAISHALI CINEMA ROAD, VARACHHA, SURAT. PAN/GIR NO. : AABCB5109M (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.J.SHAH A.R. RESPONDENT BY: SHRI GAURAV BATHAM D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST THE CONSOLIDATED ORDER OF LEARNED C OMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT, DATED 02.04.2008. - 2 - 2. GROUND NOS. I AND II TAKEN BY THE ASSESSEE READS AS UNDER: I. REJECTION OF BOOK RESULT:- (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING REJECTION OF BOOK RESULT ON THE GROUND THAT THERE WAS FALL IN GROSS PROFIT AND THAT CLOSING WORK-IN PROGRESS WAS NOT TAKEN. (2) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT TAKEN INTO CONSIDERATION THE REASONS GIVEN AND PARTICULARLY THE FACT THAT THE GROSS PROFIT HAD NOT FALLEN BY 1.33% BUT BY 0.98 ONLY. (3) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ALSO ERRED IN NOT CONSIDERING THE REASONS GIVEN FOR SO CALLED DEFECTS BROUGHT OUT BY THE LEARNED ASSESSING OFFICER. (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE BOOK RESULT OUGHT TO HAVE BEEN ACCEPTED. (II) ADDITION TO GROSS PROFIT:- (1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING ADDITION TO GROSS PROFIT BY 1.33% WHEN THE REASONS FOR FALL IN GROSS PROFIT WERE GIVEN AND THAT SUCH A MINOR FLUCTUATION OF GROSS PROFIT WOULD TAKE PLACE IN ANY CASE. (2) WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBMITS THAT THE ACTUAL GROSS PROFIT THAT HAD NOT FALLEN WAS 0.98% (I.E. FROM 12.25% TO 11.27% AND THEREFORE, IN ANY CASE THERE WAS NO JUSTIFICATION FOR MAKING ADDITION OF 1.33%. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION WAS REQUIRED TO BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF CUTTING AND POLISHING OF DIAMOND ON JOB WORK BASIS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS SHOWN TURNOVER OF RS.24,92,00,548/- AND GROSS PROFIT OF R S.2,80,76,364/- AND THE GROSS PROFIT RATIO COMES TO 11.2% . IN THE EARLIER YEAR, THE ASSESSEE HAD SHOWN TURNOVER OF RS.21,71,60,310/- A ND GROSS PROFIT OF RS.2,65,92,770/- AND THE GROSS PROFIT RAT IO WAS 12.60%. - 3 - THE LEARNED ASSESSING OFFICER OBSERVED THAT THERE W AS FALL IN GROSS PROFIT RATE DURING THE YEAR UNDER CONSIDERATION. TH E ASSESSEE COULD NOT PRODUCE THE EVIDENCE OF MOVEMENT OF ROUGH DIAMO NDS. THEREFORE, THE CLAIM OF REAL CARET OF ROUGH DIAMOND S PROCESS AND CLAIMS OF EXPENDITURE ARE NOT VERIFIABLE. THE AVERA GE CLAIM OF WAGES PER CARET IN THE MONTH OF MAY 2004 IS RS.1299 /- AND IN THE MONTH OF SEPTEMBER IS RS.2733/-. SIMILARLY, THE AVE RAGE CLAIM OF POWER AND FUEL IN THE MOTH OF NOVEMBER IS RS.136/- AND IN THE MONTH OF MARCH IS RS.119/-. THUS, THE VARIOUS ARE S UCH VAST THAT THEY REQUIRE VERIFICATION WITH THE BASIS RECORDS AN D THE ASSESSEE DID NOT PRODUCE THE SAME. IN VIEW OF THE ABOVE, THE L EARNED ASSESSING OFFICER HELD THAT IT IS NOT POSSIBLE TO R EDUCE THE CORRECT PROFIT OF THE BUSINESS. ACCORDINGLY, HE ESTIMATED F URTHER NET PROFIT OF RS.33,14,366/- AND ADDED TO THE TOTAL INCOME BEI NG FALL IN GROSS PROFIT OF 1.33%. 4. IN APPEAL, THE ASSESSEE SUBMITTED THAT THE LEARN ED ASSESSING OFFICER HAS WRONGLY STATED THE GROSS PROFIT HAS FAL LEN BY 1.33%. THE FALL IN GROSS PROFIT IS FROM 12.25% IN THE LAST YEA R TO 11.27% IN THE CURRENT YEAR AMOUNTING TO 0.98%. THE ASSESSEE HAS S TATED THAT SUCH MINOR VARIATION ARE NORMAL IN THE BUSINESS AND THE FALL IN GROSS PROFIT RATE PER-SE CANNOT BE CONSIDERED TO BE SUFFICIENT GROUND FOR REJECTING THE BOOKS OF ACCOUNTS. THE ASS ESSEE HAS RELIED ON VARIOUS JUDGEMENT OF HIGH COURTS VIZ. ASHOK KUMA R AGARWAL [98 TTJ 663] (JODH), GAJANAND TRADERS [104 TTJ 1030] (B ANGALORE) DELHI PRESS PATRA PRAKASHAN [10 SOP 74] (DELHI), PA YARELAL MITTAL [290 ITR 214](GAU.) AND JAGDISH MALPANI [94 TTJ 321 ] (INDORE). THE ASSESSEE HAS ARGUED THAT IT HAD PRODUCED THE RE CORDS FOR MOVEMENT OF DIAMONDS FROM ONE STAGE TO ANOTHER. THE ASSESSEE HAS FURTHER STATED THAT THE ASSESSEE HAD RAISED THE BILL ON 31.03.05 IN RESPECT OF PARTLY PROCESSED AS IT HAD CLOSED THE OPERATION ON THAT - 4 - DAY. COPY OF THE BILL WAS ALSO GIVEN BUT LEARNED AS SESSING OFFICER HAS NOT CONSIDERED THE SAME. IT WAS STATED THAT IN SUBSEQUENT YEAR THERE WAS NO BUSINESS ACTIVITY AND THEREFORE, THERE IS NO QUESTION OF WORK IN PROGRESS IN THERE. IN THIS REGARD THE ASSES SEE HAS FILED PROFIT & LOSS ACCOUNT, BALANCE SHEET AND NEXT YEAR S PROFIT & LOSS ACCOUNT AND BALANCE SHEET ALSO. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE A ND THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER HELD THAT ADMITTEDLY ASSESSEE FAILED TO PRODUCE THE QUANTITATIVE RECORD S OF MOVEMENT OF DIAMONDS FROM ONE POINT TO ANOTHER POINT AND HENCE, IN ABSENCE OF QUANTITATIVE RECORDS, THE CORRECTNESS OF THE RESULT WAS DOUBTFUL. IT IS FURTHER SEEN THAT THIS ISSUE IS COVERED BY THE DECISION OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) VIDE ORDER DATE D 12.07.2007 IN APPEAL NO.CAS-I/263/0607 FOR ASSESSMENT YEAR 200 4-05 IN ASSESSEES OWN CASE. HE FOLLOWING THE DECISION FOR ASSESSMENT YEAR 2004-05 DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE. 6. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE FILED COPY OF THE ORDER OF THE TRIBUNAL DATED 12.02.2010 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 IN ITA NO.3483 /AHD/2007 AND SUBMITTED THAT THE TRIBUNAL ON THE SIMILAR FACT S OF THE CASE HAS ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITION MADE TO GROSS PROFIT. THEREFORE, FOLLOWING THE SAME THE APPEAL OF THE ASSESSEE SHOULD BE ALLOWED. 7 THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED WI TH THE SUBMISSION MADE BY THE LEARNED AUTHORISED REPRESENT ATIVE OF THE ASSESSEE. - 5 - 8 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE , THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CUTTING AND POLISHING OF DIAMOND ON JOB WORK BASIS. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE HAS SHOWN TURNOVER OF RS.24,92,00,548/- AND GROSS PROFI T OF RS.2,80,76,364/- AND THE GROSS PROFIT RATIO COMES T O 11.2%. IN THE EARLIER YEAR, THE ASSESSEE HAD SHOWN TURNOVER OF RS .21,71,60,310/- AND GROSS PROFIT OF RS.2,65,92,770/- AND THE GROSS PROFIT RATIO WAS 12.60%. THE LEARNED ASSESSING OFFICER OBSERVED THAT THERE WAS FALL IN GROSS PROFIT RATE DURING THE YEAR UNDER CONSIDER ATION. THE ASSESSEE COULD NOT PRODUCE THE EVIDENCE OF MOVEMENT OF ROUGH DIAMONDS. THEREFORE, THE CLAIM OF REAL CARET OF ROU GH DIAMONDS PROCESS AND CLAIMS OF EXPENDITURE ARE NOT VERIFIABL E. HE THEREFORE, MADE ADDITION OF RS.33,14,366/- TO THE GROSS PROFIT OF THE ASSESSEE WHICH WORKED OUT TO 1.33% OF THE TURNOVER. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE A DDITION MADE FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2004-05. 9. WE FIND THAT IN THE ASSESSMENT YEAR 2004-05, THE TRIBUNAL IN THE SIMILAR FACTS AND CIRCUMSTANCE OF THE CASE, DEL ETED THE ADDITION MADE TO THE GROSS PROFIT OF THE ASSESSEE BY OBSERVI NG AS UNDER:- 9. THE ASSESSING OFFICER NOTED THAT THERE IS SLIGH T FALL IN GROSS PROFIT DURING THE CURRENT YEAR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COULD NOT PRODUCE EVIDENCE OF MOVEMENT OF ROUGH DIAMONDS FROM ONE WORKER TO ANOTH ER. THEREFORE, THE CLAIM OF NUMBER OF CARATS OF ROUGH D IAMONDS PROCESSED IS NOT VERIFIABLE. THE CLAIM OF WAGES PER CARAT IN THE MONTH OF MAY-2003 IS RS.329/-BUT IN THE MONTH O F SEPTEMBER-2003 IS RS.567/-. THE EXPENSES OF POWER A ND FUEL IN THE MONTH OF NOVEMBER AND MARCH VARIES TOO MUCH. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SAME, IT RESULTS INTO REJECTION OF BOOK RESULTS AND CORRESPONDINGLY THE F ALL IN GROSS PROFIT RATE WAS ADDED TO INCOME. THE SAME WAS CONFI RMED BY THE LEARNED CIT(APPEALS). 10. THE ASSESSEE CHALLENGES THE ADDITION OF RS.7,81 ,777/- BEING GROSS PROFIT OF 0.36% ADDED. - 6 - 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. THOUGH THERE IS INCREASE IN EXPENSES, THE E XPENSES ARE DULY VOUCHED AND EVIDENCES ARE PRODUCED IN THIS REGARD. FALL IN RATE OF GROSS PROFIT CANNOT BE CONSIDERED A S DEFECT IN THE BOOKS OF ACCOUNT SO AS TO REJECT THE SAME. THOU GH THE ASSESSEE DID NOT MAINTAIN RECORDS FOR MOVEMENT OF R OUGH DIAMONDS FROM ONE WORKER TO ANOTHER, SO LONG AS THE RE IS COMPLETE TALLY OF TOTAL QUANTITY OF DIAMONDS PROCES SED AND IN RESPECT OF WHICH PROCESSING CHARGES ARE RECEIVED, T HE ASSESSEE CAN BE SAID TO HAVE BEEN MAINTAINED PROPER BOOKS OF ACCOUNT. SINCE NO OTHER ADVERSE POINT IS NOTED, WE HOLD THAT THE BOOKS OF ACCOUNT COULD NOT HAVE BEEN REJEC TED BY RESORTING TO PROVISIONS OF SECTION 145(3) OF THE I. T. ACT, 1961. WE, THEREFORE, DELETE THE ADDITION OF RS.7,81,777/- . 10. IN THE PRESENT YEAR ALSO, THERE IS FALL IN THE GROSS PROFIT RATE SHOWN BY THE ASSESSEE FROM 12.24% IN THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR TO 11.27% FOR WHICH THE LEARNED ASS ESSING OFFICER HAS MADE ADDITION TO THE INCOME OF THE ASSE SSEE OF RS.33,14,366/- WHICH WAS 1.33% OF THE TURNOVER. THEREFORE, THE FACTS OF THE PRESENT YEAR ARE IDENTICAL TO THE FACT S OF THE CASE IN THE ASSESSMENT YEAR 2004-05 AND THEREFORE, THE ORDER OF THE TRIBUNAL QUOTED ABOVE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 IS SQUARELY APPLICABLE IN THE PRESENT YEAR ALSO. IN ABSENCE OF ANY DISTINGUISHING FEATURES POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALSO KEEPING IN VIEW THE FACT TH AT NO MATERIAL WAS BROUGHT ON RECORD BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE TO SHOW THAT THE ORDER OF THE TRIBUNAL FOR ASSESSME NT YEAR 2004-05 WAS REVERSED BY A HIGHER FORUM, RESPECTFULLY FOLLOW ING THE ABOVE QUOTED ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 20 04-05, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELET E THE ADDITION OF RS.33,14,366/-. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. - 7 - 11. GROUND NO. III OF THE APPEAL READS AS UNDER :- (III) MISCELLANEOUS:- (1) THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE DELETED INTEREST UNDER SECTION 234B OF THE ACT. (2) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR VARY AND OF THE GROUNDS OF APPEAL. 12. AT THE TIME OF THE HEARING THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE DID NOT MAKE ANY SUB MISSIONS ON THE ABOVE GROUND OF APPEAL, THEREFORE THE SAME IS D ISMISSED FOR WANT OF PROSECUTION. 13. IN THE REVENUES APPEAL THE SOLE GROUND TAKEN B Y THE REVENUE READS AS UNDER:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A)-I, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.12,73,392/- MADE BY THE A.O. ON ACCOUNT OF WORK-IN-PROGRESS. 14. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAS NOT DECLARED ANY CLOSIN G STOCK OF WORK- IN-PROGRESS (HEREINAFTER REFERRED TO AS WIP). THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN JOB-WORK ONLY. THERE IS NO STOCK BELONGING TO THE ASSESSEE. IT IS NOT POSSI BLE TO MEASURE SUCH STOCK WITH REASONABLE ACCURACY. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION. THE ASSESSING OFFICER APPLYI NG THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BRI TISH PAINTS INDIA LTD. 188 ITR 44 (SC) HELD THAT THE CLOSING STOCK HA S TO BE VALUED CORRECTLY. THE ASSESSEE HAS DEBITED EXPENDITURE IN THE TRADING ACCOUNT AND CORRESPONDING RECEIPT ARE SHOWN IN THE SUBSEQUENT YEAR AND PROPORTIONATE EXPENDITURE INCURRED ON THE PROCESSED DIAMONDS WERE REQUIRED TO BE SHOWN IN THE FORM OF W IP. THE - 8 - ASSESSING OFFICER NOTED THAT THE TOTAL MANUFACTURIN G EXPENSES INCURRED ARE RS.19.04 CRORES. THE SAME WAS DIVIDED BY 12 MONTHS AS THE PROCESSING CYCLE WAS CONSIDERED TO BE ONE MO NTH PERIOD. 50% OF THE AVERAGE MONTHLY EXPENSES WERE ESTIMATED AS VALUE OF CLOSING STOCK OF WIP AND ADDITION OF RS. 12,73,392/ - WAS MADE TO THE INCOME OF THE ASSESSEE. 15. IN APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), THE ASSESSEE SUBMITTED THAT DURING TH E APPELLATE PROCEEDINGS THE APPELLANT HAS STATED THAT VIDE LETT ER DATED 27.11.2007 THE ASSESSEE HAD POINTED OUT THE AO THA T IT HAD RAISED BILL ON 31.03.2005 IN RESPECT OF THE PARTLY PROCESS ED GOODS AS IT HAD CLOSED ITS OPERATION ON THAT DAY. THE APPELLANT HAS STATED THAT THE COPY OF THE BILL WAS ALSO ENCLOSED WITH THE LET TER. THE LEARNED ASSESSING OFFICER DID NOT CONSIDERED THE REPLY OF T HE ASSESSEE IN SUBSEQUENT YEAR AS NO BUSINESS ACTIVITIES WERE CARR IED OUT BY THE ASSESSEE AND HENCE NO BILLS WERE RAISED AS NO WORK IN PROGRESS WAS THERE AND THERE WAS NO FURTHER ACTIVITY DURING THE NEXT YEAR. IN VIEW OF THE ABOVE THE APPELLANT HAS STATED THAT SIN CE THERE WAS NO WORK IN PROGRESS LEFT AS THE BILL WAS RAISED IN RES PECT OF PART PROCESSED JOB ALSO AND THE BUSINESS WAS CLOSED, THE REAFTER NO ADDITION OF WORK IN PROGRESS CAN BE MADE IN THE CUR RENT YEAR. 16. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER OBSERVED THAT ASSESSE E HAS FILED A COPY OF LETTER WRITTEN TO THE LEARNED ASSESSING OFF ICER THAT THE ASSESSEE HAS RAISED THE BILL OF PARTLY PROCESSED GO OD AS ON 31.03.2005 AS IT HAS CLOSED DOWN ITS BUSINESS AND T HERE IS NO QUESTION OF WORK IN PROGRESS BEING LEFT. THE ASSES SEE HAS FILED COPIES OF BALANCE SHEET FOR ASSESSMENT YEAR 2006-07 TO SHOW THAT - 9 - IN THE NEXT YEAR, THERE WAS NO JOB WORK DONE, THERE ARE NO JOB WORK EXPENSES, THERE IS NO INCREASE OR DECREASE, AND TH ERE ARE NO MANUFACTURING EXPENSES. AFTER CONSIDERING THE BALA NCE SHEET SO FILED BY THE ASSESSEE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT ASSESSEE HAS HAD ACCOUNTED F OR INCOME IN RESPECT OF JOB WORK BY RAISING THE BILL AS ON 31.03 .2005, THERE IS NO QUESTION OF FURTHER JOB WORK BEING LEFT WHICH REQUI RES ADDITION TO THE INCOME, HENCE THE ADDITION IS MADE WITHOUT ANY BASIS AND WITHOUT BRINGING ANY MATERIAL ON RECORD TO CONTRADI CT THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE ADDITIO N MADE ON ACCOUNT OF WORK IN PROGRESS. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE ASSESSEE HAD FILED COPY OF THE BILL DATED 31.03.20 05 BEFORE THE LEARNED ASSESSING OFFICER BUT DID NOT PRODUCE ANY O THER DOCUMENTS OR EVIDENCE TO SHOW THAT THE BILL WAS ACCOUNTED FOR BY THE ASSESSEE IN THE FINANCIAL YEAR 2004-05. THEREFORE, THE LEARN ED ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION ON ACC OUNT OF WORK IN PROGRESS TO THE INCOME OF THE ASSESSEE. 18. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS.12,73,392/- F OR WORK-IN- PROGRESS ON ACCOUNT OF EXPENDITURE INCURRED ON JOB WORK BY THE ASSESSEE DURING THE YEAR FOR WHICH BILLS WERE NOT R AISED DURING THE YEAR BY THE ASSESSEE. THE ASSESSEE PRODUCED COPY O F THE BILL BEFORE THE LEARNED ASSESSING OFFICER DATED 31.03.20 05 AND - 10 - CONTENDED THAT AS IT WAS CLOSING DOWN HIS BUSINESS OF JOB WORK OF PROCESSING OF DIAMONDS, THE BILL OF PARTLY PROCESSE D DIAMONDS AS ON 31.03.2005 WAS RAISED. THE LEARNED ASSESSING OFFICE R DID NOT CONSIDER THE SUBMISSIONS OF THE ASSESSEE WHILE MAKI NG THE ADDITION TO THE INCOME ON ACCOUNT OF WORK IN PROGRESS. IN A PPEAL, BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), TH E ASSESSEE FILED COPY OF BALANCE SHEET FOR FINANCIAL YEAR 2005 -06 TO EXPLAIN THAT IN THE FOLLOWING YEAR, THERE WAS NO JOB WORK D ONE, THERE A RE NO JOB WORK EXPENSES AND THERE ARE NO MANUFACTURING EXPENSES. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BEI NG SATISFIED WITH EXPLANATION OF THE ASSESSEE DELETED THE ADDITI ON. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT EXAMINE D WHETHER THE BILL DATED 31.03.2005 RAISED FOR PARTLY PROCESS ED GOODS HAS BEEN ACCOUNTED FOR BY THE ASSESSEE IN THE ASSESSMEN T YEAR 2005- 06 OR NOT. WE FIND THAT THE LEARNED ASSESSING OF FICER HAS ALSO NOT CONSIDERED THE ISSUE FROM THIS ANGLE. IN OUR CONSID ERED OPINION, IF THE BILL FOR PARTLY PROCESSED GOODS WAS RAISED BY T HE ASSESSEE ON 31.03.2005 AND THE SAME WAS ACCOUNTED FOR AS INCOME IN THE FINANCIAL YEAR 2004-05 THEN NO ADDITION COULD BE MA DE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF WORK-IN-PROGRE SS IN THE YEAR UNDER CONSIDERATION. THE LEARNED AUTHORISED REPRESE NTATIVE OF THE ASSESSEE SUBMITTED BEFORE US THAT HE HAS NO OBJECTI ON IF THE ISSUE IS RESTORED TO THE FILE OF THE LEARNED ASSESSING OF FICER FOR THE LIMITED PURPOSE OF VERIFICATION OF THE BILL DATED 3 1.3.2005 AS TO WHETHER THE SAME WAS RECORDED BY THE ASSESSEE IN TH E BOOKS OF ACCOUNT OF THE ASSESSMENT YEAR 2005-06 OR NOT. IN V IEW OF THE ABOVE WE SET ASIDE THE ORDERS OF THE LOWER AUTHORIT IES AND RESTORE THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSIN G OFFICER FOR VERIFICATION IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE AND THEREAFTER TO READJUDICATE THE ISSUE AS PER LAW AFT ER ALLOWING - 11 - REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THAT OF THE REVENUE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 21. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30 TH DAY OF JUNE, 2010. SD/- SD/- ( T.K. SHARMA ) ( N .S. SAINI ) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD; ON THIS 30 TH DAY OF JUNE, 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 29.06.2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 30.06.2010 ---- --------------- 3. DRAFT PROPOSED & PLACED 30.06.2010 ---------- --------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 30.06.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 30.06.2010 -------- ------------ 6. KEPT FOR PRONOUNCEMENT ON 30.06.2010 --------- ----------- 7. FILE SENT TO THE BENCH CLERK 30.06.2010 ------ -------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------