M/s. R.Jaykumar & Co., Surat V. The ACIT., Circle-9, Surat

ITA 1721/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6365 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 25-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 26-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: RASESH SHAH
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 02/06/2011 DRAFTED ON: 06 /06/2011 ITA NO.1721/AHD/2007 ASSESSMENT YEAR : 2004-05 M/S.R.JAYKUMAR & CO. A/1, KRINK TOWER MINI BAZAAR VARACHHA ROAD SURAT VS. THE ASST.CIT CIRCLE-9 SURAT PAN/GIR NO. : AADFR 1175 N ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : S/SHRI RASESH SHAH & HARDIK VORA RESPONDENT BY: SHRI P.L. KUREEL, D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -V, SURAT DATED 23/02/2007 PASSED FOR ASSESSMENT YEAR 2004-05 AND THE SUBSTANTIVE GROUND NOS.1 & 2; REPRODUCED BELOW: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING TH E BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDIT ION OF RS.21,89,930/- FOR ALLEGED LOW GROSS PROFIT. ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING AS SESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DAT ED 21.12.2006 WERE THAT THE ASSESSEE-FIRM IS ENGAGED IN THE BUSINESS OF EX PORT OF DIAMONDS. A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.6, 75,330/- HAS BEEN FILED. HOWEVER, A GP ADDITION OF RS.21,89,930/- W AS MADE WHICH IS THE SUBJECT OF CONTROVERSY IN THIS APPEAL. 3. THE AO HAS OBSERVED THAT GROSS PROFIT WAS DECLAR ED AT RS.30,68,691/- ON THE TURNOVER OF RS.4,37,98,613/-, HENCE, GIVING GP RATIO @ 7.01%. AS AGAINST; THAT FOR THE IMMEDIA TE PRECEDING ASSESSMENT YEAR ON TURNOVER OF RS.2,19,00,007/- GP OF RS.29,34,551/- WAS DISCLOSED WHICH WAS @ 13.40%. SINCE THERE WAS A FALL OF GP OF ABOUT 6.39% IN COMPARISON TO TH E PAST RESULTS, HENCE, INVESTIGATION WAS COMMENCED. AT THE OUTSET , LD.AR AT THIS JUNCTURE HAS INFORMED THAT THE AO HAS PROCEEDED ON A WRONG ASSUMPTION THAT THE ASSESSEE USED TO IMPORT ROUGH D IAMONDS IN LOTS. THIS OBSERVATION WAS MADE BY THE AO AS PER PARAGRAP H NO.4 OF THE IMPUGNED ASSESSMENT ORDER. SINCE THE AO HAS MIS UNDERSTOOD THE FACTS THEREFORE, IN PARAGRAPH NO.5 HE HAS COMMENTED THAT TO ASCERTAIN THE PRODUCTION OF THE DIAMONDS, IT WAS NE CESSARY TO KEEP THE RECORDS BOTH IN TERMS OF QUALITY AND IN TERMS O F QUANTITY. LD.AR HAS AGAIN VEHEMENTLY OBJECTED THAT ONCE THE ASSESSE E WAS NOT IN THE MANUFACTURING OF POLISHED DIAMONDS OUT OF THE PURCH ASE OF ROUGH DIAMONDS, THEREFORE, SUCH AN OBSERVATION OF THE AO WAS FACTUALLY ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 3 - INCORRECT. TO BUTTRESS THIS FACTUAL POSITION, LD.A R HAS STATED THAT IN PARAGRAPH NO.5 THE AO HAS MADE A CHART WHEREIN THER E WAS NEITHER AN OPENING NOR A CLOSING STOCK OF ROUGH DIAMOND WHI CH BY ITSELF HAS PROVED THAT THERE WAS NO EXISTENCE OF ROUGH DIAMOND S, HENCE, THERE WAS NO MANUFACTURING OF POLISHED DIAMONDS. FOR TH E SAKE OF COMPLETENESS, THAT CHART IS REPRODUCED BELOW: ITEM OPENING (CARATS) VALUE (RS.) CLOSING (CARATS) VALUE (RS.) ROUGH DIAMONDS NIL NIL NIL NIL POLISHED DIAMONDS 4,083.52 3,51,18,272 2,301.04 1,72,57,900 REJECTED DIAMOND 2,204.98 22,050 2,204.98 22,050 3.1. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE SUBMI SSION MADE BEFORE THE AO AS IT WAS REFERRED IN PARAGRAPH NO.5. 2 OF THE IMPUGNED ASSESSMENT ORDER; REPRODUCED BELOW: 5.2. IN THIS REGARD THE ASSESSEE VIDE ITS SUBMISSI ON DATED 24.11.2006, THE ASSESSEE HAS STATED THAT THE VALUA TION OF POLISHED DIAMOND WAS DONE AT AVERAGE COST PRICE. V ALUATION OF STOCK AT COST IS IN CONFORMITY WITH THE ACCOUNTI NG STANDARD. THE VALUATION OF COST OF AVERAGE BASIS IS NOT PRESC RIBED FOR VALUATION OF CLOSING STOCK BY ICAI. ASSORTMENT AN D RE- ASSORTMENT IS CONTINUOUS FOR RAW MATERIALS AS WELL AS FOR POLISHED DIAMONDS. THE STOCK AT YEAR END WAS FROM DIFFERENT LOT PURCHASED. SO IT IS NOT POSSIBLE TO MATCH THE COST OF MANUFACTURING WITH POLISHED DIAMOND. CONSIDERING S UCH PECULIARITY OF TRADE THE STOCK IS VALUED T AVERAGE. THE METHOD ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 4 - OF VALUATION IS SAME AS FOLLOWED IN THE PRECEDING P REVIOUS YEAR AND IT WAS ACCEPTED BY THE DEPARTMENT IN THREE YEARS SCRUTINY ASSESSMENTS ALSO. IT IS TO BE ALSO NOTED THAT ASSESSEE MAINTAINS PROPER RECORDS AND NO DEFECTS IN THE MAIN TENANCE OF RECORDS WAS POINTED OUT. THE RATE OF GROSS PROFIT IS HIGHER THAN THAT OF OTHER BUSINESS MAN OF THIS LINE OF BUS INESS. SO THERE IS NO QUESTION OF REJECTION OF BOOKS U/S.145 OF THE ACT, AS THE METHOD IS PROPER AND ACCEPTED BY THE DEPARTMENT IN THE PRECEDING YEAR ALSO. 3.2. IT HAS ALSO BEEN CONTESTED THAT IN THE LAST TH REE ASSESSMENT YEARS SCRUTINY WAS DONE BUT NO SUCH ADDITION WAS PR OPOSED, THOUGH THE ASSESSEE HAD FOLLOWED THE SAME METHOD OF VALUAT ION. IT WAS ALSO CONTESTED THAT NO DEFECT WAS FOUND IN THE RECO RDS OF THE ASSESSEE. IT WAS ALSO INFORMED THAT THERE WAS A CL OSING STOCK OF ONLY POLISHED DIAMONDS OF THE QUANTITY OF 492.51 CARATS FOR THE VALUE OF RS.49,98,977/-. THE AO WAS NOT CONVINCED AND HE HAS INSISTED UPON TO FURNISH THE DETAILED INVENTORY STOCK IN TER MS OF QUALITY OF THE DIAMONDS. AS PER AO, IN THE ABSENCE OF DETAILS IN TERMS OF QUALITY-WISE PRODUCTION OF DIAMONDS FROM EACH LOT I T WAS NOT ASCERTAINABLE WHICH TYPE OF DIAMONDS WERE PRODUCED FORM A PARTICULAR LOT IN ORDER TO DETERMINE THE VALUE. HE HAS, THEREFORE, CONCLUDED VIDE PARAGRAPH NO.6.1 THAT IT WOULD BE CORRECT TO SAY THAT THE VALUATION OF THE STOCK WAS NOT VERIFIABLE. AGAINST THAT OBSERVATION OF THE AO, THE ASSESSEE HAS AGAIN REITE RATED THAT IT WAS WRONG ON THE PART OF THE AO TO SAY THAT THERE WAS P RODUCTION OF ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 5 - DIAMONDS. THROUGH A WRITTEN SUBMISSION CORRECT FACTS WERE REITERATED AS UNDER:- 7.3. THE ASSESSEE VIDE ITS LETTER DATED 24.11.2006 HAS REPLIED THAT IT IS TO BE NOTED THAT THE ASSESSEE IS DOING THE BUSINESS OF TRADING OF GOODS I.E. ASSESSEE PURCHASES THE POLISH ED DIAMONDS AND SOLD THE POLISHED DIAMONDS. DAY TODAY STOCK RECORDS ARE MAINTAINED. NO DEFECTS WERE POINTED OU T DURING THE ASSESSMENT PROCEEDINGS. BUSINESS IS NOT MATHEM ATICAL FORMULA WHERE THE END RESULT IS ALWAYS THE SAME. CONFIRMATION OF PURCHASE PARTIES HAVE ALREADY FILED . SALES ARE OF EXPORT. EVERY EXPORT OF POLISHED DIAMOND WE RE PASSED THROUGH CUSTOM CLEARANCE. THE BUSINESS NEVER CONST ANT FROM YEAR TO YEAR. THE MARGIN OF PROFIT DEPENDS UPON TH E DEMANDS OF THE GOODS MANUFACTURED BY THE ASSESSEE FIRM AND THE SUPPLY OF THE SAME GOODS IN THE MARKET, QUALITY OF GOODS MANUFACTURED, MARKET ACCESSIBILITY OF THE PARTNERS OF THE FIRM, ETC. IT IS TO BE NOTED THAT THERE IS INCREASE IN T HE GROSS PROFIT AND NET PROFIT IN ABSOLUTE TERMS, WHICH IS THE MAIN OBJECT OF THE BUSINESSMEN. THE RATE OF G.P.8% IS BETTER COMP ARED TO THE PROFIT EARNED IN THIS LINE OF BUSINESS. AS THERE IS TRANSACTION OF IMPORT AND EXPORT ONLY AND SAME WAS PASSED THROU GH CUSTOM AUTHORITIES, THE TRADING RESULT DECLARED SHO ULD BE ACCEPTED. 3.3. EVEN THEN, THE AO WAS NOT CONVINCED AND HE HAS COMPUTED THE FALL OF GROSS PROFIT PERCENTAGE AS UNDER: 7.2. THE ABOVE TABLE SHOWS THAT IN THE PRECEDING A .Y., THE ASSESSEE HAS ACTUALLY MADE GROSS PROFIT OF 13.38% ( 13.4 .02) THOUGH INCLUDING THE EXCHANGE RATE GAIN, THE BUSINE SS GROSS ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 6 - PROFIT HAD INCREASED TO 13.4%. WHEREAS IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS LOST 1.1% OF ITS G.P . DUE TO EXCHANGE RATE GAIN. IF WE EXCLUDE THE PERCENTAGE L OSS DUE TO EXCHANGE RATE DIFFERENCE, THE ACTUAL GROSS PROFIT P ERCENTAGE EARNED DURING THE YEAR COMES TO ONLY 8.11 (7.01 + 1 .1). THUS, THE ACTUAL DOWN FALL OF GROSS PROFIT PERCENTAGE AS COMPARED TO THE LAST YEAR IS 5.27%. 3.4. THOUGH, THE FALL IN GP WAS COMPUTED AT 5.27% B UT IT WAS HELD BY THE AO THAT IT WOULD BE REASONABLE TO ENHANCE T HE DECLARED GROSS PROFIT BY 5% AND ACCORDINGLY AN ADDITION OF RS.21, 89,930/- WAS MADE WHICH WAS CONTESTED. 4. IT WAS CONTESTED THAT ONLY POLISHED DIAMONDS WER E AVAILABLE AT THE CLOSING STOCK WHICH WERE VALUED AT AVERAGE COST PRICE BASIS. IT WAS CONTESTED THAT THE AO HAD PROCEEDED TO ESTIMATE THE GROSS PROFIT AT 5% THOUGH NO DEFECT WAS FOUND IN THE BOOKS OF AC COUNT. IT WAS CONTESTED THAT ALL THE PURCHASES AS WELL AS THE SAL ES WERE DULY RECORDED. IT WAS ALSO REITERATED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE ASSESSEE HAD CARRIED OUT ONLY TRADING ACTI VITY, I.E. PURCHASE OF POLISHED DIAMONDS AND EXPORT OF POLISHED DIAMOND S. IT WAS EMPHASISED THAT THE AO HAD WRONGLY PRESUMED THAT TH E ASSESSEE HAD CARRIED OUT MANUFACTURING ACTIVITY. IT WAS VEHEMEN TLY PLEADED THAT UNDER THE WRONG PRESUMPTION, THE AO HAD PROCEEDED T O MAKE AN ADDITION ON ACCOUNT OF LOW GROSS PROFIT. THOUGH TH E LD.CIT(A) HAS RECORDED THOSE PLEADINGS IN PARAGRAPH NO.6 BUT HE H AS OVERLOOKED AND AFFIRMED THE ACTION OF THE AO ON THE GROUND TH AT EVEN IF THE ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 7 - ASSESSEE HAD CARRIED OUT TRADING ACTIVITY OF POLISH ED DIAMONDS BY PURCHASING THE SAME FROM THE OPEN MARKET AND EXPORT ING OUT OF THE COUNTRY, BUT WHILE PREPARING THE INVENTORY OF THE C LOSING STOCK THE ASSESSEE SHOULD HAVE PREPARED THE DETAILS OF THE DI AMONDS IN TERMS OF THE QUALITY AND THE QUANTITY OF EACH PIECE OF DI AMOND. THE ASSESSEE HAD FAILED TO PRODUCE THOSE DETAILS, THERE FORE, THE AO WAS JUSTIFIED IN ASSESSING THE GROSS PROFIT AT 5.27% AN D HE WAS REASONABLE TO MAKE THE ADDITION BY ADOPTING GP RATE AT 5% ONLY. SINCE THE APPEAL WAS DISMISSED, THEREFORE THE ASSES SEE IS NOW FURTHER IN APPEAL. 5. FROM THE SIDE OF THE APPELLANT, S/SHRI RASESH SH AH & HARDIK VORA APPEARED AND PRELIMINARY OBJECTION WAS THAT TH E AO HAD PROCEEDED ON A WRONG FOOTING THAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING ACTIVITY OF DIAMONDS. THE CORRECT FACT IS THAT THE ASSESSEE IS A TRADER AND, THEREFORE, PURCHASED POLI SHED DIAMONDS FROM THE LOCAL MARKET AND EXPORTED THE POLISHED DIA MONDS OUT OF COUNTRY. SINCE THE ASSESSEE IS IN A TRADING BUSI NESS, THEREFORE, DAY- TO-DAY STOCK WAS PROPERLY MAINTAINED. ALL THE PU RCHASES AS WELL AS THE SALES WERE FULLY RECORDED. LD.AR HAS CONTESTED THAT THERE WAS NOT A SINGLE WHISPER OF ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE HAS PLEADED THAT THERE WAS ONLY ONE ALLEGATION THAT THE ASSESSEE HAS NOT FURNISHED THE QUALITY-WISE DET AILS OF THE DIAMONDS. IN THIS REGARD, LD.AR HAS PLACED RELIANC E ON A DECISION OF ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 8 - ITAT C BENCH AHMEDABAD IN THE CASE OF M/S.DHAMI B ROTHERS VS. ACIT BEARING ITA NO.2309/AHD/2008 FOR ASSESSMENT YE AR 2004- 05, DATED 06/08/2010 FOR THE LEGAL PROPOSITION THAT THERE WAS NO MANDATORY REQUIREMENT TO MAINTAIN QUALITATIVE DETAI LS IN THIS TYPE OF BUSINESS FOR THE PURPOSE OF COMPUTATION OF PROFIT. LD.AR HAS ALSO PLACED AN ORDER OF THE ASSESSEE WHICH WAS PASSED FO R THE AY 2001- 02 U/S.143(3) OF THE ACT DATED 25/02/2004 IN SUPPOR T OF THE ARGUMENT THAT THERE WAS A FALL OF GP IN THAT YEAR B UT NO ADDITION WAS MADE BY DISTURBING THE GROSS PROFIT DECLARED BY THE ASSESSEE. HE HAS CLARIFIED THAT FOR AY 2001-02 GROSS PROFIT WAS 9.96 % AS AGAINST THE GROSS PROFIT @ 15.61% OF THE PRECEDING YEAR BUT EVE N THEN NO GP ADDITION WAS MADE IN AY 2001-02 THOUGH A THOROUGH S CRUTINY WAS DONE. LD.AR HAS ALSO PLEADED THAT THE AO HAS NOT CITED ANY COMPARABLE CASE OF THAT AREA, HOWEVER, THE CORRECT FACT IS THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE WAS BETTER TH AN OTHERS. HE HAS CONCLUDED THAT SINCE THE ASSESSEE IS IN THE TRA DING BUSINESS, THEN NATURALLY THE PERCENTAGE OF THE PROFIT IS LOWER IN COMPARISON TO THE MANUFACTURING ACTIVITY. 6. FROM THE SIDE OF THE REVENUE, LD.DR SUPPORTED T HE ORDERS OF THE REVENUE AUTHORITIES AND ARGUED THAT IN THE ABSE NCE OF QUALITATIVE DETAILS, IT WAS NOT POSSIBLE FOR THE RE VENUE DEPARTMENT TO EXAMINE THE CORRECTNESS OF THE PROFIT DECLARED B Y THE ASSESSEE. HE HAS PLEADED; IN THIS LINE OF BUSINESS OF DIAMOND S, THE MOST ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 9 - IMPORTANT FACTOR IS THE QUALITY OF THE DIAMOND, THE REFORE, NON- DISCLOSURE OF THE QUALITY WAS WITH THE PURPOSE TO H IDE THE CORRECT PROFIT EARNED. 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BEL OW IN THE LIGHT OF THE SHORT COMPILATION FILED BEFORE US. AT THE OUT SET, IT IS NECESSARY TO PLACE ON RECORD THAT THE ENTIRE ASSESSMENT ORDER WAS BASED UPON A WRONG APPRECIATION OF FACTS. UNDER A WRONG PREMISE , THE AO HAS PROCEEDED THAT THE ASSESSEE WAS ENGAGED IN THE MANU FACTURING ACTIVITY OF THE DIAMONDS. FACTS OF THE CASE HAVE BEEN REVEALED THAT THE ASSESSEE HAS, IN FACT, TRADED IN THE POLISHED D IAMONDS. RECORDS OF THE CASE HAVE REVEALED THAT POLISHED DIAMONDS HA VE BEEN PURCHASED FROM THE LOCAL MARKET AND THOSE WERE EXPO RTED OUT OF THE COUNTRY. THIS FACT COULD HAVE BEEN ASCERTAINED BY THE AO HIMSELF BECAUSE HE HAS PLACED IN THE BODY OF THE ASSESSMENT ORDER A CHART OF THE STOCK OF POLISHED DIAMOND AND REJECTED DIAMOND AND IN THAT CHART ROUGH DIAMONDS WERE SHOWN AS NIL. MEANING TH EREBY NEITHER THERE WAS AN OPENING BALANCE NOR A CLOSING BALANCE OF ROUGH DIAMONDS. THIS FACT HAS ALSO BEEN BROUGHT TO HIS NOTICE THAT IN THE PAST THE ASSESSMENTS WERE UNDER SCRUTINY AND NO SU CH ADDITION WAS EVER WARRANTED AND WHATEVER GP RATE WAS DECLARED TH E SAME WAS ACCEPTED BY THE REVENUE DEPARTMENT. BEFORE US, SUC H AN ASSESSMENT PASSED U/S.143(3) OF THE ACT FOR AY 2001 -02 DATED ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 10 - 25/02/2004 IS FURNISHED. ON PERUSAL OF THE IMPUGNE D ASSESSMENT ORDER, IT IS ALSO EVIDENT THAT NO SPECIFIC DEFECT I N THE BOOKS OF ACCOUNT HAVE BEEN POINTED OUT BY THE AO. ON THE O THER HAND, THE ASSESSEE HAS PLACED ON RECORD THAT ON ACCOUNT OF EX PORT TRADING ACTIVITY THE PURCHASES AS WELL AS THE SALES WERE FU LLY VOUCHED AND, THEREFORE, VERIFIABLE. ON THE PART OF THE REVENU E, THERE WAS NO DETECTION OF ANY WRONG MENTION OF SALES OR INFLATIO N OF PURCHASES. THE ASSESSEE HAS ALSO EXPLAINED THE REASON OF FALL IN GP THAT DUE TO VARIATION IN EXCHANGE RATE IN FOREIGN CURRENCY THE ASSESSEE HAD SUFFERED LOW PROFIT IN COMPARISON TO THE PAST YEAR. HOWEVER, IT WAS PLEADED THAT IT WAS A UNIVERSAL PHENOMENON, THEREFO RE, THE EXCHANGE RATE HAS ALSO CAUSED LOWER MARGIN OF PROFIT FOR THE ASSESSEE AS WELL. ACCORDING TO US, SINCE THE AO HAS PROCEEDED UNDER A WRONG PREMISE AND MADE THE ADDITION UNDER WRONG ASSUMPTION OF FAC TS, THEREFORE, SUCH AN ADDITION MUST NOT BE AFFIRMED. WE HEREBY R EVERSE THOSE FINDINGS WHICH WERE BASED UPON AN ERROR AND DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 17 TH JUNE, 2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 17 / 6 /2011 T.C. NAIR, SR. PS ITA NO.1721/AHD /2007 M/S.R.JAYKUMAR & CO. VS. ACIT ASST.YEAR - 2004-05 - 11 - COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, SURAT 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION.. 02/06/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06/06/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S17/6/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17/6/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER