The DCIT, Circle-1, Surat V. Kabir Jewel Pvt. Ltd., Surat

ITA 3054/AHD/2009

• Counselvise Citation: 305420514 RSA 2009
• Duration Of Justice: 3 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Gross profit estimation; Business income; Question of law; Onus to prove
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 3054/AHD/2009 ASSESSMENT YEAR :2006-07 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-1, ROOM NO. 108, AAYAKAR BHAVAN, MAJURA GATE, SURAT. V/S . M/S. KABIR JEWELS PVT. LTD. 35, SAHYOG CHAMBERS, SARDAR CHAWK, VARACHHA ROAD, SURAT. PAN NO. AA BCK5348M (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI J.P. JHANGID, SR.D.R. /BY RESPONDENT SHRI S. N. SOPARKAR, SR. ADV. WITH SMT. URVASHI SODHAN, A.R. /DATE OF HEARING 31.07.2013 /DATE OF PRONOUNCEMENT 04.10.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-I, SURAT, DATED 10.09.2009 FOR A.Y. 2006- 07AGAINST DELETING THE ADDITION MADE BY THE A.O. OF RS. 56,53,959/- MADE ON ACCOUNT OF LOW GP. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPOR T AND EXPORT OF DIAMOND AND MANUFACTURING OF JEWELLERY. THE ASSESS EE HAS SHOWN GP @ 12.52% DURING THE YEAR UNDER CONSIDERATION ON TURN OVER OF RS. 22.79 CRORE. THE ASSESSEE HAD MAINTAINED QUANTITATIVE INVENTORY OF CLOSING STOCK, BUT FAILED TO MAINTAIN THE QUALITATIVE DETAILS OF CLOSI NG STOCK. IT DID NOT FURNISH ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 2 QUALITATIVE DETAILS OF PRODUCTION AND THE OPENING S TOCK OF THE POLISHED DIAMOND. THE A.O. OBSERVED THAT THE PRICE OF THE D IAMOND IS TOTALLY DEPEND ON QUALITY OF DIAMOND. THEREFORE, IT IS NOT POSSIB LE TO VALUATE THE CLOSING STOCK AS WELL AS SALE PRICE CORRECTLY. IN ABSENCE OF PAR TICULARS IN TERMS OF QUALITATIVE DETAILS OF PRODUCTION OF DIAMOND FROM EACH LOT, IT IS NOT ASCERTAINABLE AS TO WHICH TYPE OF DIAMOND WAS PRODUCED FROM A PARTICULA R LOT. LOT TO LOT CORRELATION HAD NOT BEEN FURNISHED BY THE ASSESSEE. THUS, HE HELD THAT THE VALUATION OF STOCK IS NOT VERIFIABLE. THIS WAS THE REASON FOR FALL OF GP AS COMPARED TO OTHER TRADERS/MANUFACTURERS IN THE SAME LINE OF BUSINESS, DETAILS OF WHICH ARE AS UNDER: SR. NO. NAME OF ASSESSED & PAN NO. TURNOVER G.P. RATIO NP RATIO 1 TAPTI DIAMOND PVT. LTD. AAACT8776L 7800195 16.83% 2.18% 2 KABIR JEWELS PVT. LTD. AABCK5348M 227982200 12.52% 1.85% 3 P. ASHISH BROTHERS AADFP2761Q36749187 165978668 16.18% 0.70% 4 D. N. JEWELS AADFD5878Q 36749187 17.96% 1.56% 5 DHARA EXPORTS AAEFD3800B 17.3% 6 COSMOS JEWELS AADFC9126G 34568576 17.78% 2.34% THE A.O. ANALYZED THE MANUFACTURE PROCESS AND DIFFE RENTIATED THE DIAMOND VALUATION FROM OTHER ARTICLES AND THINGS ON PAGE NO . 3 & 4 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS GIVEN REASONABLE OPPORTUNI TY OF BEING HEARD ON THIS ISSUE, BUT IT WAS CLAIMED THAT HE DID NOT MAINTAIN THE QUALITATIVE DETAILS OF THE DIAMOND AND ALSO NOT MAINTAINABLE OR NOT PRACTICABL E TO MAINTAIN THE QUALITATIVE DETAILS. HOWEVER, THE A.O. WAS FOUND T HAT EVERY DIAMOND ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 3 ASSESSEE HAS TO MAINTAIN QUALITATIVE DETAILS TO CON TROL ON THE BUSINESS OPERATIONS AND GET MAXIMUM RETURN ON IT. THE QUAN TITY DETAILS IN THE DIAMOND INDUSTRY ARE SECONDARY AND QUALITATIVE DETAILS PLAY VITAL ROLE IN FIXING PRICE. LD. A.O. AFTER POINTING OUT THIS DEFECT IN THE ACCOUNTI NG HAD GIVEN REASONABLE OPPORTUNITY ON REJECTION OF BOOKS OF ACCOUNT AND HE ASKED TO FURNISH VARIOUS DETAILS AS PER PARAGRAPH NO. 5.2(I), 5.2(A), 5.3, 5 .4, 5.5 & 5.6. THE REPLY OF THE ASSESSEE WAS CONSIDERED BY THE A.O. ON PARAGRAPH NO .5.7 TO 5.13. THE A.O. AFTER CONSIDERING THE REPLY OF THE ASSESSEE HELD TH AT PRICE OF THE FINISHED DIAMONDS DEPEND UPON 4C I.E. CUT, COLOUR, CLARITY A ND CARAT. HE FURTHER OBSERVED THAT IN ABSENCE OF QUALITY STOCK, THE ASSE SSEE WOULD NOT HAVE SOLD LOTS OF DIAMOND AT DIFFERENT PRICES AS IS EVIDENT F ROM THE EXPORT PACKING SLIP. HE ALSO REPRODUCED ONE OF THE PACKING SLIP ON PAGE 10 & 11. HE REPRODUCED THE PACKING SLIP TO DEMONSTRATE THAT ASSESSEE IS MA INTAINING QUALITATIVE DETAILS BUT NOT PRODUCING BEFORE HIM ON PAGE 10 & 11. THE A.O. FURTHER HELD THAT AS PER SECTION 44AA, THE ASSESSEE HAS TO MAINTAIN SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS MAY ENABLE THE ASSESSING OFFICER TO COMPUTE THE ASSESSEES TOTAL INCOME IN ACCORDANCE WITH THE PROV ISIONS OF THE IT ACT. THE PURPOSE AND INTENTION OF LEGISLATURE IN INSERTING THE PROVISIONS OF SECTION 44AA OF THE ACT IS TO PUT AN OBLIGATION ON THE ASSE SSEE TO MAINTAIN AND KEEP PRIMARY RECORD ON THE BASIS OF WHICH THE TAX AUTHOR ITIES ARE ABLE TO ASCERTAIN AND COMPUTE THE CORRECT INCOME. THE ASSESSEE DID N OT MAINTAIN THE BOOKS OF ACCOUNT AND DOCUMENTS ON THE BASIS OF WHICH THE INC OME DECLARED IN THE RETURN COULD BE ASCERTAINED. IF THE PRIMARY RECORD S WERE MAINTAINED BY THE ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 4 ASSESSEE THEY WERE NOT PRODUCED FOR EXAMINATION TO COMPUTE THE CORRECT INCOME. THE A.O. HAD TO DETERMINE THE TAXABLE INCO ME BY MAKING SUCH COMPUTATION AS HE THINK FIT. HE RELIED IN CASE OF CIT VS BRITISH PAINTS INDIA LTD (1991) 188 ITR 44 (SC), WHEREIN IT WAS HELD THAT WHERE THE ACCOUNTS ARE PREPARED WITHOUT DICLSOING THE REAL COST OF THE STO CK IN TRADE ALBEIT ON SOUND EXPERT ADVISE IN THE INTEREST OF EFFICIENT ADMINIST RATION OF BUSINESS, IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE TAXA BLE INCOME BY MAKING SUCH COMPUTATION. THUS, HE DID NOT ACCEPT THE ASSESSEE S CONTENTION THAT HE WAS NOT MAINTAINING QUALITATIVE DETAILS OF FURNISHED DI AMONDS. HE FURTHER RELIED IN CASE OF MUMBAI ITATS DECISION IN THE CASE OF DCIT VS. SAMIR DIAMONDS EXPORT PVT. LTD. REPORTED IN 71 ITD 75. THUS, HE REJECTED THE BOOKS OF ACCOUNT U/S. 145(3) OF THE IT ACT. INCOME FROM SALES/EXPOR T OF POLISHED AND REJECTION DIAMONDS HAD BEEN SHOWN AT RS.22,79,82,200/-. HE E STIMATED THE GP @ 15% ON TOTAL SALES AND MADE ADDITION OF RS.56,53,95 9/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE CIT(A) WHO HAD DELETED THE ADDITION B Y OBSERVING AS UNDER: 2.3.1 1 HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. FROM THE ABOVE, IT IS CLEAR THAT NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT BY THE A.O. THE ONLY REASON FOR REJECTION OF THE BOOKS OF ACCOUNT IS THA T THE A.O. HAS NOT PRODUCED QUALITY-WISE DETAILS IN THE OPENING ST OCK AND CLOSING STOCK FOR PURCHASE, SALES ETC. THE A.O. HAS AGREED THAT QUANTITATIVE DETAILS HAVE BEEN MADE AND PRODUCED BU T IN ABSENCE OF QUALITY-WISE DETAILS THE VALUATION OF TH E OPENING AND STOCK CANNOT BE MADE, THE APPELLANT ON THE OTHER HAND POINTED OUT THAT IT IS DOING BOTH TRADING AND MANUFACTURING ACTIVITY AND NOT ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 5 SIMPLY TRADING ACTIVITY WHEREAS THE EXAMPLES GIVEN SHOWN THAT TAPTI DIAMOND PVT. LTD., COSMOS JEWELS AND D.N. JEWELS HA VE NOT SOLD ANY CUT POLISHED DIAMONDS AT ALL. THE ENTIRE SALE C ONSISTS OF GOLD/ DIAMOND STUDDED JEWELLERY WHEREAS IN THE CASE OF TH E ASSESSEE THERE IS A SALE OF CUT POLISHED DIAMOND ALSO. HEN CE THE CASES ARE NOT COMPARABLE AT ALL. THE APPELLANT HAS ALSO REL IED ON SEVERAL CASE LAWS OF THE AHMEDABAD ITAT AS WELL AS OTHER IT ATS AND HAS STATED THAT AS PER THE POSITION OF LAW UNLESS THE A .O. HAS ESTABLISHED THE INCORRECTNESS IN THE SALES AND PURCHASE OR SPEC IFIED ANY DEFECTS IN THE BOOKS OF ACCOUNT, THE BOOKS OF ACCOUNT CANNO T BE REJECTED. THE APPELLANT HAS ALSO RELIED ON THE DECISION OF TH E JODHPUR ITAT IN THE CASE OF SHREE GAUTAM TEXTILES (SUPRA) WHEREIN THE HON'BLE I.T.A.T. HAS STATED THAT REJECTION OF BOOK RESULT WAS NOT JUSTIFIED WHEN THERE WERE PRACTICAL DIFFIC ULTIES IN MAINTAINING PROCESS-WISE STOCK REGISTER AND WHEN ALL THE NECESS ARY DETAILS IN RESPECT OF OPENING INVENTORY AND CLOSING INVENTORY WAS VERIFIABLE. THE APPELLANT RELIED ON THE DECISION OF THE HON'BLE ITAT, AHMEDABAD IN THE CASE OF LMP TRACTORS PVT. LTD. (SU PRA) WHEREIN THE HON'BLE ITAT HAS HELD THAT NON-MAINTENANCE OF Q UANTITY DETAILS AS PER SPECIFICATION COULD NOT BE A GROUND FOR REJE CTION OF BOOKS OF ACCOUNT. THE APPELLANT RELIED ON THE DECISION OF T HE HON'BLE ITAT, AHMEDABAD IN THE CASE OF BHAGWATI EMPORIUM (SUPRA) WHEREIN THE HON'BLE ITAT STATED THAT THE G.P. ADDITION CANNOT B E MADE BECAUSE OF NON-MAINTENANCE OF STOCK BOOK AND NO OTHER ENTRY OF BOOKS OF ACCOUNT WAS FOUND ERRONEOUS. THE PUNJAB ITAT IN TH E CASE OF GAJANAND TRADERS (SUPRA) HELD THAT FALL IN G.P. CAN NOT BE BASIS FOR REJECTION OF BOOKS OF ACCOUNT. THIS IS NOT MANDATO RY AS PER THE PROVISIONS OF SECTION 145 AND HENCE THE BOOKS OF AC COUNT CANNOT BE REJECTED FOR THESE TWO REASONS. THE APPELLANT HAS FURTHER RELIED ON THE DECISION OF THE CIT(A)-V, SURAT IN THE CASE OF JODHANI EXPORTS FOR A.Y. 2004-05 AS WELL AS IN THE CASE OF M/S. R-S. DIAMONDS FOR A.Y. ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 6 2005-06 AND ALSO IN THE CASE OF M/S. PANKAJ DIAMOND FOR A.Y. 2005- 06. ALL THESE CASES ARE DEALING WITH THE DIAMOND CA SES. IN THE CASE OF JODHANI EXPORTS FOR A.Y. 2004-05, THE A.O. HAS N OTED THAT THE ASSESSEE HAS SHOWN A TURNOVER OF RS.47.97 CRORE AND G.P. RATE AT 8.12% IN WHICH THE ASSESSEE HAD MAINTAINED ONLY QUA NTITY- WISE DETAILS AND NOT QUALITY-WISE DETAILS. THE A.O. REJ ECTED THE BOOKS OF ACCOUNT SAYING THAT THE DETAILS ARE NOT IN QUANTITY -WISE THAT PLAID MAJOR ROLE IN FIXING THE PRICE. THE A.O. REJECTED T HE BOOKS OF ACCOUNT AND MADE AN ADDITION OF RS. 6L,8 4,485/- BY ADOPTING G.P. RATE AT 8.37%. THE CIT(A) DELETED THE ADDITION SAYING THAT THE A.O. HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS O F ACCOUNT AND FOR REJECTING THE BOOK RESULTS BY HIM WITHOUT THAT WAS ARBITRARY IN NATURE IS ACCEPTABLE IN THE EYES OF LAW AS THE VARIOUS DEC ISIONS RELIED ON BY HIM, I.E. THE DECISION OF THE HON'BLE ITAT, AHMEDAB AD IN THE CASE OF RAJESH TEA CO. VS. ITO (35-TTJ-350), PUSHPANJALI DY G. & PTG. MILLS VS. JT. CIT (72-TTJ-886), SUREKHA BINDING WORKS VS. ITO (38-TTJ- 350) AND ALSO THE DECISION OF THE HON'BLE GUJARAT H IGH COURT IN THE CASE OF VIKRAM PLASTICS VS. CIT (239-ITR-161) TO HO LD THAT THE G.P. ADDITION WAS ILLEGAL WITHOUT POINTING OUT ANY SPEC IFIC DEFECTS IN IT. ON SIMILAR FACTS SIMILAR DECISION WAS GIVEN BY THE CLT(A) IN THE CASE OF JODHANI EXPORTS FOR A.Y. 2005-06. IN VIEW OF THE ABOVE BOOKS OF ACCOUNT CANNOT BE REJECTED. FURTHER, THE RESULTS I N TERMS OF TURNOVER, G.P. RATE AND N.P. RATE ARE BETTER THAN EARLIER YEA RS AND HENCE G.P. ADDITION MADE IS DELETED. THESE GROUNDS OF APPEAL A RE ALLOWED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY ARGUED THAT ASSESSEE HAD DISCLOSED GP @ 12.5% ON SALE OF RS. 22 .79% WHICH WAS LESSER THAN VARIOUS CASES IN THE LINE OF SAME BUSINESS IS MENTIONED BY HIM ON PAGE 3 OF THE ASSESSMENT ORDER. HE FURTHER REITERATED T HAT THE DIAMOND BUSINESS TOTALLY DECIDED ON THE BASIS OF 4C. THE ASSESSEE C HARGED THE PRICE OF FINISHED ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 7 DIAMOND ON THE BASIS OF 4C. FIRSTLY, HE ISSUED THE RAW DIAMOND FOR LABOUR FOR PROCESSING. THEREAFTER, WHATEVER FINISHED PRODUCT IT GOT THEN THE QUALITY AS WELL AS PRICE OF THE DIAMOND DECIDED ON THE BASIS O F 4C. THE ASSESSEE WAS NOT ONLY EXPORTING, IMPORTING AND TRADING OF THE DI AMOND BUT ALSO MANUFACTURING AND FABRICATING OF GOLD JEWELLERY AND DIAMOND ORNAMENTS AND JEWELLERY. IF THE ASSESSEE IS NOT MAINTAINING QUAL ITATIVE STOCK OF THE FINISHED DIAMOND, THE A.O. CANNOT ADDUCE THE CORRECT INCOME OF THE ASSESSEE AS ENTIRE SALE NOR THE OPENING AND CLOSING STOCK IS VE RIFIABLE FROM THE BILLS AND BOOKS. LD. A.O. , THEREFORE, IS REASONABLE TO APPL Y GP RATE @ 15%. HE FURTHER RELIED UPON IN CASE OF ACIT VS. HANSAL DIAM , IN ITA NO. 3089/AHD/2007 & ITA NO. 2585/AHD/2009 FOR A.Y. 2004-05 & 2005-06 , WHEREIN CO-ORDINATE C BENCH, ITAT, AHMADABAD, HAD ALLOWED THE REVENUES APPEAL BY FOLLOWING THE ITAT, MUMBAI BENC H DECISION IN CASE OF DCIT VS. SAMIR DIAMONDS EXPORT PVT. LTD. (1999) 71 ITD 75, WHERE CO- ORDINATE BENCH DECIDED THIS ISSUE IN FAVOUR OF THE REVENUE. LD. CIT(A) HAD DELETED THE ADDITION ON THE BASIS OF PRODUCTION OF QUANTITATIVE DETAILS BY THE ASSESSEE BEFORE THE A.O. AND NO SPECIFIC DEFECT HAD BEEN POINTED OUT BY HIM. THE CASES REFERRED BY THE A.O. IN ASSESSMENT ORDER ARE NOT COMPARABLE AT ALL TO IT. THE A.O. HAS TO ESTABLISH THE INCORRECTNESS IN THE SALE AND PURCHASE OR SPECIFIED ANY DEFECT IN THE BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT CANNOT BE REJECTED. BUT LD. A.O. HAS RIGHTLY POINTED OUT FUN DAMENTAL DEFECTS IN THE BOOKS I.E. NOT MAINTAINING QUALITATIVE DETAILS. THUS, HE REQUESTED TO REVERSE THE ORDER OF THE CIT(A). AT THE OUTSET, LD. COUNSEL FO R THE APPELLANT ARGUED THAT LD. ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 8 CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE A.O. HE HAS DRAWN OUR ATTENTION ON PAGE NO. 13 OF THE CIT(A)S ORDER AND ARGUED THAT REVENUE HAD NOT CONTROVERTED THE FINDING OF THE LD. CIT(A). TH E FINDINGS GIVEN BY THE LD. CIT(A) ON PAGE NO. 14 HAD NOT BEEN CHALLENGED BY TH E REVENUE. THE A.O. ESTIMATED INCOME ON THE BASIS OF 15% GP BUT ALL THE COMPARABLE CASES ARE ACTUALLY NOT COMPARABLE WITH THE ASSESSEE AS IT CAN BE SEEN FROM THE CHART ON PAGE NO.3 OF THE ASSESSMENT ORDER THAT ASSESSEES S ALE IS MUCH MORE THAN OTHER PARTIES MENTIONED FOR COMPARISON IN THE ASSES SMENT ORDER. IT IS EVIDENT FROM THE CIT(A) ORDER THAT GP AS WELL AS SALES IN T HE CASE OF ASSESSEE DURING YEAR ARE HIGHER THAN IMMEDIATE PRECEDING YEAR. ON PAGE NO.1 OF THE PAPER BOOK, THE ASSESSEE ENCLOSED THE COPY OF ASSESSMENT IN ITS CASE FOR A.Y. 04- 05, WHEREIN NO ADDITION ON ACCOUNT OF GP WAS MADE B Y THE A.O. AND BOOK RESULT HAS BEEN ACCEPTED BY THE A.O. HE FURTHER HA S DRAWN OUR ATTENTION ON PAGE NOS. 34 & 35 AND ARGUED THAT M/S.D. NITION & C O., SURAT, IS IN THE TRADING OF GOLD-DIAMOND JEWELLERY WHEREAS THE ASSESSEE HAS IMPORTING AND EXPORTING/ MANUFACTURING OF DIAMOND FOR WHICH ASSESSEE HAS INF RASTRUCTURE REFERRED ON PAGE 50 OF THE PAPER BOOK. THE ASSESSEE HAS DISCLO SED THE OPENING AS WELL AS CLOSING STOCK ON THE BASIS OF WEIGHTAGE OF GOLD JEWELLERY AND CUT AND POLISHED DIAMOND ON THE BASIS OF CARAT BEFORE THE A .O. AND ARGUED THAT THE ASSESSEE HAS REGULARLY FOLLOWING THE SAME METHOD OF ACCOUNTING FOR VALUATION OF OPENING AS WELL AS CLOSING STOCK. THE JEWELLERY IS VALUED ON COST, DIAMOND AND COLOUR, STONE, LOWER OF COST OR NET REALIZABLE VALUE AND GOLD AND OTHER METAL ARE VALUED EITHER COST OR NET REALIZATION VAL UE WHICHEVER IS LOWER. THE ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 9 ASSESSEE IS MAINTAINING QUANTITATIVE DETAILS OF TH E OPENING STOCK, PURCHASE SALE AND CLOSING STOCK OF THE ITEMS. THE ASSESSEE IS NOT MAINTAINING ANY QUALITATIVE RECORD FOR DETERMINING THE INCOME. HE FURTHER RELIED UPON FOLLOWING CASES: I. ACIT VS. M/S. JODHANI EXPORTS IN ITA NO. 3645/AH D/2007 FOR A.Y. 04-05 FOR LOW GP AND REJECTION OF BOOKS OF ACCOUNT U/S. 1 45(3), WHEREIN ITAT D BENCH, AHMEDABAD, HAD DECIDED IDENTICAL ISSUE IN FA VOUR OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE REVENUE BY OBSERVING TH AT THERE WAS NO SPECIFIC DEFECT HAD BEEN POINTED OUT BY THE A.O. IN THE BOOK S OF ACCOUNT FOR REJECTION OF BOOK RESULT U/S. 145(3) OF THE IT ACT. THE BOOK S RESULT IN PRECEDING YEAR HAS BEEN ACCEPTED BY THE A.O. THEREFORE, ON THE BA SIS OF REJECTION OF ACCOUNT BOOK ON THE BASIS OF NO QUALITATIVE DETAILS OF DIAM OND, IS NOT JUSTIFIED. AFTER RELYING VARIOUS DECISIONS, IT WAS HELD BY THE CO-OR DINATE BENCH THAT BURDEN TO PROVE ENTRY SHOWN IN THE BOOKS OF ACCOUNT ARE NOT R EAL STATE OF AFFAIRS LIES ON THE REVENUE. II. ACIT VS. PANKAJ DIAMOND IN ITA NO. 2529/AHD/200 8 FOR A.Y. 05-06, WHEREIN IDENTICAL ADDITIONS WERE MADE ON THE BASIS OF GP BY REJECTING THE BOOKS OF ACCOUNT ON THE BASIS OF NOT MAINTAINING QU ALITATIVE RECORD OF THE FINISHED DIAMOND. THE CO-ORDINATE D BENCH, AHMED ABAD, DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF M/S. DHAMI BROTHERS VS. ACIT IN ITA NO. 2309/AHD/2008 FOR A.Y. 04-05, DATED 06.08.2010, WHEREIN IT WAS OPINED THAT THE QUALITATIVE DETAILS OF EACH PRI CE OF DIAMOND IN NOT NECESSARY FOR COMPUTATION OF THE INCOME OF THE ASSE SSEE. ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 10 III. M/S. D. NITIN & CO. VS. ACIT, IN ITA NO. 2298/ AHD/2009 FOR A.Y. 06-07, WHEREIN IDENTICAL ISSUE OF REJECTION OF BOOKS WHEN NO DEFECTS WERE POINTED OUT AND NO PROPER STOCK REGISTER MAINTAINED BY THE ASSE SSEE WAS THERE BY FOLLOWING THE DECISION OF M/S. B. SURESHKUMAR & CO. IN ITA NO. 2632/AHD/2003, ORDER DATED 19.12.2007, IT WAS HELD THAT NON MAINTENANCE OF QUALITYWISE STOCK REGISTER FOR PURCHASE AND SALE OF THE DIAMOND WOULD NOT BE A GROUND FOR REJECTING THE BOOKS OF ACCOUNT OF THE AS SESSEE IS UNRELIABLE. IN CASE OF CIT VS. M/S. D. NITIN & CO. IN TAX APPEAL NO. 1917 OF 2010, HONBLE GUJARAT HIGH COURT FOUND NO QUESTION OF LAW ARISES APPEAL ON THE BASIS OF WITHOUT SPECIFIC DEFECT POINTED OUT BY THE A.O. AND REJECTED THE BOOKS RESULT. THEREFORE, HE REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE APPELLANT HAD SHOWN GP RATE AT 12.52% IN THE YEAR UNDER CONSIDERATION AS COMPARED TO 11.76% IN PRECEDING YE AR, WHICH WAS 10.7% IN A.Y. 04-05. THE TURNOVER OF THE ASSESSEE HAS GONE UP FROM RS. 15.3 CRORE TO RS. 22.79 CORE IN THE YEAR UNDER CONSIDERATION COMP ARED TO PRECEDING YEAR. THE APPELLANT HAD SHOWN INCREASE IN THE TURNOVER AS WELL AS IN GP. THE COMPARABLE CASE CITED BY THE A.O. ARE HAVING LESSER TURNOVER AND ALSO WERE DEALING IN THE DIFFERENT ITEMS I.E. ASSESSEE IS IMP ORTING AND EXPORTING AND TRADING OF THE DIAMOND AS WELL AS THE GOLD JEWELLER Y. THE CASE CITED BY THE A.O. ARE NOT COMPARABLE FURTHER HE ONLY MADE THE GR OUND FOR REJECTION OF BOOK RESULT I.E. NOT MAINTAINING QUALITATIVE DETAILS OF THE OPENING STOCK, PURCHASE SALE AND CLOSING STOCK. AS VARIOUS CO-ORDINATE BEN CH HAD DECIDED THAT THIS IS ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 11 NOT A SUFFICIENT GROUND FOR REJECTING THE BOOK RESU LT. THE A.O. HAS TO BRING ON RECORD OTHER EVIDENCES WHICH SUPPORT THE REJECTION OF BOOK RESULT, WHICH HAS NOT BEEN FOUND PLACE IN THE ASSESSMENT ORDER. FURT HER, IN CASE OF M/S. DHAMI BROTHERS VS. ACIT (SUPRA), THAT THERE IS NO REQUIREMENT OF LAW TO MAINTAIN QUALITATIVE DETAILS OF EACH PEACE OF DIAMOND FOR CO MPUTING THE INCOME. THE RELEVANT PARA 8 IS REPRODUCED AS UNDER: THE SALE AND PURCHASE OF THE ASSESSEE IS VOUCHED A ND VERIFIABLE. THE ASSESSEE HAS ALSO MAINTAINED QUANTITATIVE DETAI LS IN RESPECT OF DIAMONDS PURCHASED AND SOLD BY IT AS WELL AS FOR PR OCESSING OF DIAMOND. THERE IS NO ADVERSE COMMENT FROM THE AUDIT OR THAT THE PROFIT CANNOT BE COMPUTED FROM THE BOOKS OF ACCOUNT S MAINTAINED BY THE ASSESSEE. IN OUR OPINION, THE QUALITATIVE DETA ILS OF EACH PIECE OF DIAMOND IS NOT NECESSARY FOR COMPUTATION OF THE INC OME OF THE ASSESSEE. INCOME OF THE ASSESSEE CAN BE VERY WELL COMPUTED ON THE BASIS OF ACCOUNTS ALREADY MAINTAINED BY THE ASS ESSEE. IN VIEW OF THE ABOVE, WE ARE UNABLE TO AGREE WITH THE AO THAT THERE IS DEFECT IN THE SYSTEM OF METHOD OF ACCOUNTING OF THE ASSESSEE WHICH REQUIRES REJECTION OF THE BOOK RESULTS UNDER SECTION 145(3) OF THE ACT AND ESTIMATION OF THE GP. THE REVENUE IS RELIED UPON IN CASE OF M/S. HANSAL D IAM, WHEREIN GP WAS HEAVILY DOWN IN A.Y. 04-05 BY RS. 6.91% COMPARED TO PRECEDING YEAR. FURTHER, ASSESSEE WAS MAINTAINING QUALITYWISE AND Q UANTITYWISE DETAILS OF STOCK BUT THE SAME WERE NOT PRODUCED BEFORE THE A.O . BUT IN CASE OF ASSESSEE, IT PRODUCED THE QUANTITATIVE DETAILS AND WAS NOT MAINTAINING QUALITATIVE DETAILS OF EACH PEACE OF DIAMOND. THIS IS THE MAIN DISTINCTION FROM ITA NO. 3054/AHD/09 A.Y. 06-07 PAGE 12 THE CASE CITED BY THE REVENUE. WE MAKE IT CLEAR TH AT WE HAVE DECIDED THE ISSUE IN THE LIGHT OF PECULIAR FACTS AND CIRCUMSTAN CES OF THE CASE AND IT SHALL NOT BECOME A PRECEDENCE FOR ALL THE CASES. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 04.10.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;