The ACIT, Circle-7, Surat V. M/s. M.Kishor & Co., Surat

ITA 3679/AHD/2008

• Counselvise Citation: 367920514 RSA 2008
• Duration Of Justice: 3 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANURAG SHARMA
• Keywords: Unexplained cash credit; Rejection of books of accounts; Corroborative evidences
• Section: 6

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ././ ./ I.T.A. NO.3679/AHD/2008 AND CO NO.324/AHD/2008 ( / / / / ASSESSMENT YEAR: 2005-06) 1. THE ASST.CIT CIRCLE-7, SURAT 2. M/S.M.KISHOR & CO. 2 ND FLOOR MODHESHWARI BHAVAN SURAT / VS. 1. M/S.M.KISHOR & CO. 2 ND FLOOR MODHESHWARI BHAVAN BAMANJI NI SHERI RUGHNATHPURA, SURAT 2. THE ASSTT. CIT CIRCLE-7, SURAT ! ./'# ./ PAN/GIR NO. : AAEFM 1986 D ( $ / // / APPELLANTS ) .. ( %&$ / RESPONDENTS ) ASSESSEE BY : SHRI ANURAG SHARMA, SR.D.R. REVENUE BY : SHRI HIREN VEPARI '( ) *+! / / / / DATE OF HEARING : 29/12/2011 ,- ) *+! / DATE OF PRONOUNCEMENT : 16/3/2012 . / O R D E R PER SHRI A.MOHAN ALANKAMONY, AM: THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-IV, SURA T DATED 12/08/2008 PASSED FOR ASSESSMENT YEAR 2005-06 IN APPEAL NO. C AS-IV/127/07-08. THE RESPONDENT ASSESSEE IS IN CROSS OBJECTION. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT DATED 24/12/2007 WERE THAT THE ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 2 - ASSESSEE-FIRM FILED ITS RETURN OF INCOME ON 31/10/2 005 DECLARING TOTAL INCOME AT RS.36,11,360/- ALONG WITH AUDIT REPORT U/S.44AB OF THE I.T. ACT IN FORM NOS.3CB & 3CD. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 24/12/2007 U/S.143 (3) OF THE I.T. ACT. THE ASSESSEE IS IN THE BUSINESS OF EXPORTING DIAMONDS AFTER PROCESSING THE SAME. THE LD. A.O. REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE RECOR DING VARIOUS REASONS AND ADDITIONS WERE MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK, INFLATED LABOUR EXPENSES AND UNEXPLAINED CASH CREDIT U/S.68 OF THE I.T. ACT. BEFORE THE LD. CIT(A), CERTAIN DELETIONS WERE MADE AND NOW THE REVENUE AND ASSESSEE BOTH ARE IN APPEAL AND CROSS APPEAL BEFO RE US. 3. WE SHALL FIRST TAKE UP THE REVENUES APPEAL, I. E. ITA NO.3679/AHD/2008. THE REVENUE HAS TAKEN TWO GROUNDS IN ITS APPEAL FIRST GROUND :- DELETION OF AN ADDITION MADE OF RS.15,62,500/- MADE ON ACCOUNT OF INFLATED LABOUR EXPENSES. 4.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, L D. A.O. OBSERVED THAT THE TOTAL OUTSTANDING AMOUNT TOWARDS JOB-WORK CHAR GES WERE DISCLOSED BY THE ASSESSEE AT RS.23,45,385/- WHICH COMES TO THREE MONTHS WAGES. FURTHER, THE ASSESSEE COULD NOT FURNISH ANY REASON FOR PAYMENT OF LABOUR CHARGES AT THE RATE VARYING FROM RS.310/- PER CARAT TO RS.500/- PER CARAT TO DIFFERENT JOB-WORKERS AND ASSESSEE WAS UNABLE TO EX PLAIN THE BASIS HOW THIS CHARGES ARE WORKED OUT. ON THE OVERALL ANALYSIS OF THE LABOUR PAYMENT MADE, IT APPEARED TO BE AT AN EXORBITANT RATE WHEN COMPAR ED TO THE NORMAL RATE PREVALENT IN THE INDUSTRY WHICH IS APPROXIMATELY RS .250-300 PER CARAT. THE LD.AO AFTER LOOKING INTO THE NATURE OF WORK DONE BY THE JOB-WORKERS AND TAKING INTO ACCOUNT OF THE OUTSTANDING AMOUNT PAYABLE FOR LABOUR CHARGE FOR THE FINANCIAL YEAR ENDED 31/03/2005 AND COMPARING IT WI TH THE TREND IN THE INDUSTRY FOR SUCH PAYMENT, DISALLOWED 2/3 RD OF THE OUTSTANDING TOWARDS LABOUR CHARGES AND THUS AN ADDITION OF RS.15,62,500/- WAS MADE. ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 3 - 4.2. WHEN THE MATTER WAS BROUGHT BEFORE THE LD. CIT (A), THE LEARNED CIT(APPEALS) AFTER EXAMINING THE ISSUE OBSERVED TH AT ONE OF THE CONTRACTORS SHRI ANIL KALOLA PRODUCED A REGISTER HAVING DETAILS OF YIELD, RATE AND TOTAL LABOUR CHARGES RAISED. HOWEVER, IT WAS ALSO NOTED THAT THE REGISTER WAS WRITTEN IN ONE SITTING. SAME WAS THE CASE WITH OTH ER TWO CONTRACTORS. HOWEVER, THE LD.AR HAD EXPLAINED THAT ALL THE LABOU R PAYMENTS WERE MADE TO CONTRACTORS WHO IN TURN PAID TO THE LABORERS. ALL THE FIVE SUB-CONTRACTORS WERE FILING THEIR RETURN(S) OF INCOME AND BALANCE-SHEET AND DUE TDS WAS DEDUCTED FOR PAYMENTS MADE TO THESE SUB-CONTRACTORS. THE L D. CIT(A) OBSERVED THAT THE AO'S MAIN DOUBT WAS WITH RESPECT TO THE THREE M ONTHS OUTSTANDING LABOUR CHARGES WITH THE CONTRACTORS AND SUB-CONTRACTORS WH ICH DID NOT APPEAR TO BE REASONABLE OR GENUINE AND THE WAGE RATES RECORDED I N THE BOOKS OF ACCOUNTS THEREOF WAS AT AN EXORBITANT RATE. FURTHER THE LD. CIT(A) OPINED THAT THE OBSERVATION OF THE LD.AO WAS BASED ON ESTIMATE AND DID NOT CARRY ANY SUBSTANCE. SINCE THE ASSESSEE HAS PROVED THAT ALL THE PAYMENTS HAVE BEEN MADE TO THE SUB-CONTRACTORS AND AFTER DEDUCTING DUE TDS, THE IDENTITY OF THE SUB-CONTRACTORS WERE ESTABLISHED AND APPEARED TO BE GENUINE, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 4.3. THE LD. DR SUBMITTED BEFORE US THAT THE STATEM ENT OF LABOUR CONTRACTORS WERE RECORDED U/S.131 OF THE I.T. ACT AND IT WAS FOUND THAT THEY ARE PERSONS OF MEAGER MEANS AND DO NOT HAVE SUFFI CIENT FUND TO PAY TO THE LABORERS. FURTHER THE SUB-CONTRACTORS WERE NOT ABLE TO PRODUCE PROPER BOOKS OF ACCOUNTS OR PRODUCE SUPPORTING EVIDENCE TO SUBSTANTIATE THAT THEY ARE GENUINE SUB-LABOUR CONTRACTORS. THE ASSESSEE W AS ALSO NOT ABLE TO EXPLAIN AS TO, WHY THE LABOUR RATES WERE VARYING FR OM RS.310/- PER CARAT TO RS.500/- PER CARAT. THE LD. DR POINTED OUT PAGE 17 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE AND SUBMITTED THAT ALL TH E BILLS ARE RAISED ON THE SAME DATE FROM WHICH IT IS APPARENT THAT THE TRANSA CTIONS ARE NOT GENUINE. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 4 - BASIS ON WHICH SUCH LABOUR CONTRACTORS WERE PAID. THEREFORE, IT WAS SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER I S TO BE SUSTAINED. 4.4. THE LD.AR RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS) AND VEHEMENTLY ARGUED THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT AND FURNISHED EVERY POSSIBLE DETAILS AVAILA BLE WITH IT BEFORE THE REVENUE, I.E. ESTABLISHING THE IDENTITY OF THE CONT RACTORS AND THE GENUINENESS OF PAYMENTS MADE TO THEM AFTER DEDUCTING DUE TDS. THE LD.AR RELIED ON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE SUSTAINED. 4.5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES CAREFULLY AS WELL AS THE PAPER BOOK SUB MITTED BY THE ASSESSEE. IT IS APPARENT FROM THE FACTS THAT THE LD.AO HAS MADE THE ADDITION OF RS.15,62,500/- PURELY ON THE BASIS OF SURMISES AND CONJECTURES. IN FACT THE APPELLANT HAD PROVED THE GENUINENESS OF THE SUB-LAB OUR CONTRACTORS AND ALSO PRODUCED THEM BEFORE THE REVENUE. FOR ALL THE PAYM ENTS DUE TDS WAS DEDUCTED. LOOKING AT THE NATURE OF THE SKILLED LAB OUR INVOLVED IN THIS KIND OF JOB WORK IT IS APPARENT THAT THE VARIANCE OF LABOUR RATE IS BOUND TO OCCUR AND THERE IS NO REASON TO DOUBT THE GENUINESS OF SUCH V ARIANCE IN LABOUR RATE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION THAT THE ORDER PASSED BY THE LEARNED CIT (APPEALS) DESERVES TO BE SUSTAINED. WE ORDER ACCORDINGLY. THEREFORE, THIS GROUND RAISED BY THE REVENUE IS DISMISSED. SECOND GROUND:- DELETING THE ADDITION OF RS.7,00,000/- MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND BY THE LD.AO THAT THE ASSESSEE HAD BROUGHT IN LOAN OF RS.7,00,00 0/- FROM M/S. RATNA KALA EXPORTS AND RS.4,00,000/- FROM M/S. R.C. GEMS WHICH WAS SQUARED UP ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 5 - DURING THE YEAR SINCE THE SAME WAS REPAID. LD. AO O BSERVED THAT THIS TRANSACTION WAS NOT REFLECTED IN THE TAX AUDIT REPO RT. THE ASSESSEE SUBMITTED CONFIRMATION STATEMENTS FROM BOTH THE PARTIES, HOWE VER THE LD. AO WAS OF THE VIEW THAT THE ASSESSEE IS NOT IN A POSITION TO ESTA BLISH THE CREDITWORTHINESS AND GENUINESS OF M/S. RATNAKALA EXPORTS FROM THE DE TAILS SUBMITTED. THEREFORE THE LD.AO MADE AN ADDITION OF RS.7,00,000 /- IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. WHEN THE MATTER CROPPED UP BEFORE THE LD. CIT(A), THIS ADDIT ION WAS DELETED SINCE SUFFICIENT DOCUMENTS WAS PRODUCED TO ESTABLISH THAT THE CREDITOR WAS ASSESSED TO TAX AND THE LOAN WAS EXTENDED BY A/C PA YEE CHEQUE WHICH WAS SUBSEQUENTLY REPAID BY THE ASSESSEE IN THE SAME FIN ANCIAL YEAR. BEFORE US THE LD. DR SUPPORTED THE ORDER OF THE LD.AO AND REL IED ON THE DECISION OF THE CASE CIT VS KORLAY TRADING LTD., REPORTED IN 232 IT R 820, ITO VS DIZA HOLDINGS (P) LTD., 255 ITR 572 AND THE ASSESSEE RE LIED ON THE ORDER OF THE LD. CIT(A). CONSIDERING THE FACTS OF THE CASE WE DO NOT HAVE ANY HESITATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) SINCE TH E REVENUE HAS NOT COME OUT WITH ANY MATERIALS TO HOLD THE ISSUE OTHERWISE. THE LD. CIT(A) HAS VERIFIED THE GENUINESS OF THE A/C PAYEE CHEQUE PAYMENT AND THE C REDITOR FROM THE DOCUMENTS PLACED BEFORE HIM. THEREFORE WE DISMISS T HIS GROUND OF THE REVENUE. 6. WE SHALL NOW TAKE UP THE ASSESSEES CROSS APPEA L, I.E. CO NO.324/AHD/2008. THE ASSESSEE HAS TAKEN THREE GROUN DS IN ITS CROSS APPEAL WHEREIN GROUND NO. 3 IS GENERAL IN NATURE AND DO NO T SURVIVE FOR ADJUDICATION. THE OTHER TWO GROUNDS ARE CONSIDERED HEREIN BELOW. FIRST GROUND: - REJECTION OF BOOKS OF ACCOUNTS LD. CIT(A) ERRED IN CONFIRMING THE REJECTION OF BOOKS IRRESPECTIVE OF THE FACT THAT PROPER DETAILS OF STOCK, CONSUMPTION, PRODUCTION, PURCHASES AND S ALES WERE FURNISHED. ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 6 - SECOND GROUND: - UNDER VALUATION OF CLO SING STOCK. LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.46,38,447/- WHEN THE A PPELLANT HAD VALUED THE CLOSING STOCK AS PER ACCOUNTING STANDARD 2 AND ON T HE BASIS OF A SCIENTIFIC METHOD. 6.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LEARNED AO OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED DETAIL S OF ROUGH DIAMOND MOVEMENT IN THE MANUFACTURING PROCESS. DETAILS OF Q UALITY, QUANTITY, NUMBER OF PIECES MANUFACTURED ON DAY TO DAY BASIS WAS NOT AVAILABLE. FURTHER, THE LABOUR PAYMENTS VARIED FROM LABOURER TO LABOURER SI NCE DIFFERENT WAGES WERE PAID TO DIFFERENT SUB-CONTRACTORS. THE ASSESSEE ALS O FAILED TO PRODUCE DIAMOND PROCESSING REPORT OF EACH DIAMOND FROM OGI MARKET WITH THE PLEA THAT THE MACHINES WERE NOT FUNCTIONING. THE DETAILS OF OPENING AND CLOSING STOCK AND THE BASIS OF VALUATION OF THE SAME WERE N OT PRODUCED THOUGH THE ASSESSEE HAS STATED THAT THE CLOSING STOCK WAS VALU ED ON COST OR MARKET PRICE WHICHEVER IS LOWER. DUE TO THE ABOVE MENTIONE D REASONS THE LEARNED AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE IT ACT. FURTHER, THE LEARNED AO ANALYZING THE CLOSING STOCK IN DETAIL AR RIVED AT THE CONCLUSION THAT THE ASSESSE HAS SUPPRESSED THE CLOSING STOCK TO THE EXTENT OF RS.46,38,447/- BASED ON THE FOLLOWING FINDINGS: TOTAL PRODUCTION DURING THE YEAR WAS OF 10212 CTS. OF POLISHED DIAMOND WHICH GIVE COST OF PRODUCTION AT 5,63,41,98 7/10212 = 5517.13 RUPEES PER CARAT WHEREAS ASSESSEE HAS SHOWN CLOSING STOCK AT AVERAGE PRICE OF RS.4506.99 PER CARAT. EVEN THE OPE NING STOCK OF POLISHED DIAMOND IS OF THE VALUE OF RS.6776.50 PER CARAT WHICH MEANS CLOSING STOCK POLISHED DIAMOND SHOULD HAVE BEEN VAL UED AT RS.5517.13 PER CARAT AT LEAST. TAKING THIS COST OF PRODUCTION OF POLISHED DIAMOND AT RS.5517.13 PER CARAT, TOTAL VAL UE OF CLOSING STOCK IS RECOMPUTED AT RS.4591.93 * 5517.13 = 2,53,34,275 /- WHEREAS ASSESSEE HAS SHOWN CLOSING SOCK OF POLISHED DIAMOND OF RS.2,06,95,828/- THEREBY CAUSING A TOTAL SUPPRESSIO N ON ACCOUNT OF VALUATION OF CLOSING STOCK BY RS.46,38,447/- (2,53, 34,275 2,06,95,828) AND SAME IS ADDED TO THE TOTAL INCOME ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK OF POLISHED DIAMOND. ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 7 - WHEN THE MATTER TRAVELLED BEFORE THE LEARNED CIT(A) , THE ACTION OF THE LEARNED AO WAS CONFIRMED AND THE LEARNED CIT(A) OBSERVED TH US: I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH THE DETAILS FILED BY THE APPELLANT. THERE IS NO DOUBT A BOUT THE FACT THAT THE APPELLANT HAS NOT MAINTAINED ANY QUALITY WISE DETAI LS OF PRODUCTION AND CLOSING STOCK OF POLISHED DIAMOND. THAT WOULD MEAN THAT THE CLOSING STOCK HAS BEEN VALUED BY THE APPELLANT AS PER HIS C ONVENIENCE. ALTHOUGH I AM INCLINED TO AGREE WITH THE APPELLANT THAT THE PRICE OF DIAMOND WOULD DEPEND UPON A NUMBER OF FACTORS WHICH HAVE BEEN ENUMERATED BY THE LD. AR IN HIS SUBMISSIONS, BUT TH IS METHOD OF VALUATION IS NOT ACCEPTABLE SINCE IT WILL DEPEND UP ON THE APPELLANTS WORD ONLY AND WOULD HAVE NO SCIENTIFIC OR MATHEMATI CAL BASIS BEHIND IT. THE APPELLANT COULD VERY WELL VALUE A PIECE OF DIAM OND WHICH HAS A COST PRICE OF RS. 1 LAKH AT RS.10,000/- POINTING OU T A NUMBER OF FACTORS BUT THAT WOULD NOT BE ITS PRICE AS SUCH. IN ORDER T O ARRIVE AT A CORRECT PICTURE OF CLOSING STOCK, THE ONLY METHOD AVAILABLE WOULD BE AVERAGE COST PRICE WHICH HAS BEEN RIGHTLY ADOPTED BY THE AO . IT IS SEEN THAT THE VALUE OF CLOSING STOCK TAKEN BY THE APPELLANT IS FA R LESS THAN THE AVERAGE NET REALIZABLE PRICE AND ALSO THE COST PER CARAT AFTER INCLUDING DIRECT OVERHEADS TO THE COST OF ROUGH DIAMONDS. THE REFORE, THE AOS ACTION IN RE-VALUATION OF CLOSING STOCK IS IN ORDER AND THE SAME IS HEREBY CONFIRMED. IT IS ALSO IMPORTANT TO NOTE THAT IT IS ALSO IMPORTANT TO NOTE THAT THE APPELLANT HAS NOT FURNISHED QUALITY W ISE DETAILS OF POLISHED DIAMONDS TO THE AO ALTHOUGH THE SAME WAS A VAILABLE WITH THE APPELLANT SINCE THE EXPORT INVOICES MENTIONED THE N UMBER OF PIECES PER CARAT FOR A PARTICULAR LOT. IT IS ALSO SEEN THA T THE APPELLANT HAS ADOPTED THE CLOSING STOCK OF BALANCE WHICH WAS MUCH LOWER THAN THE COST OF PRODUCTION. FURTHER, IN THE CASE OF D. SUBHASHCHANDRA & CO. FOR AY 2003-04 THE ADDITION MADE ON ACCOUNT OF UNDE R VALUATION OF CLOSING STOCK WAS CONFIRMED BY THE HONBLE ITAT, AHMEDABAD BY THEIR ORDER IN ITA NO.2805/AHD/2006, DATED 04.01 .2008 HAS UPHELD THE ADDITION ON THIS ACCOUNT. THEREFORE, SINCE THE HIGHEST FACT FINDING APPELLATE AUTHORITY HAVE CONFIRMED THE FINDINGS, IT LEAVES NO ROOM FOR ALLOWING ANY RELIEF ON THIS ACCOUNT. THE A DDITION MADE IS THEREFORE CONFIRMED. 6.2 BEFORE US THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE THE REVENUE ON EARLIER OCCASIONS WHEREAS THE LEARNED DR RELIED UPON THE ORDER OF THE LEARNED AO AND THE LEARNED CIT(A). ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 8 - 6.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE PAPER BOOK AND OTHER CASE LAWS PRODUCED BEFORE US. FROM T HE FACTS OF THIS CASE, IT IS EVIDENT THAT THE ASSESSEE DID NOT MAINTAIN PROPE R STOCK RECORD WITH RESPECT TO MANUFACTURING AND SALE OF DIAMONDS. IT IS PERTIN ENT TO NOTE THAT THE DIAMONDS DO HAVE HIGH VALUE THOUGH VARYING FROM PIE CE TO PIECE ACCORDING TO THEIR QUALITY. IN SUCH CIRCUMSTANCES, ACCOUNTS ARE GENERALLY MAINTAINED METICULOUSLY IN REALITY, HOWEVER, IN MOST OF THE CA SES SUCH DETAILS WERE NOT PRODUCED BEFORE THE REVENUE. UNLESS THESE DETAILS S UCH AS PURCHASES OF DIAMONDS, PRODUCTION OF DIAMONDS, SALES OF DIAMONDS , OPENING STOCK OF DIAMONDS AND CLOSING STOCK OF DIAMONDS ARE ACCURATE LY RECORDED, IT BECOMES VERY DIFFICULT TO DETERMINE THE EXACT VALUE OF CLOS ING STOCK. IN THIS CIRCUMSTANCE, WE DO NOT HAVE ANY HESITATION TO UPHO LD THE ORDERS OF THE REVENUE ON THIS ISSUE. THEREFORE, THE REVENUE IS RI GHT IN ITS REALM TO REJECT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WITH RESPECT TO T HE DETERMINATION OF STOCK. FURTHER, WITH THE MATERIALS AVAILABLE ON RECORD THE LEARNED AO HAS ARRIVED AT THE CLOSING STOCK ON A SCIENTIFIC METHOD WHICH COUL D NOT BE SUCCESSFULLY CONTROVERTED BY THE LEARNED AR WHICH HAS BEEN FURTH ER ENDORSED BY THE LEARNED CIT(A). IN THESE CIRCUMSTANCES, WE ARE LEFT WITH NO OTHER OPTION BUT TO CONFIRM THE ORDERS OF THE REVENUE WITH RESPECT TO R EJECTION OF BOOKS OF ACCOUNTS AND VALUATION OF CLOSING STOCK. BOTH THE G ROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITS C. O. ARE THUS DISMISSED. 7. THE ASSESSEE IN ITS CROSS APPEAL HAS ALSO RAISED AN ADDITIONAL GROUND WITH RESPECT TO ADJUSTMENT OF OPENING STOCK FOR THE SUBSEQUENT YEAR BASED ON THE VALUATION OF CLOSING STOCK OF THE EARLIER YEAR RELYING UPON THE JUDGMENT OF THE CASE CIT VS MAHAVIR ALUMINUM LTD. , 297 ITR 77. ON PERUSAL OF THE PLEA OF THE APPELLANT, WE HEREBY ADMIT THIS GROUND BEING A LEGAL GROUND AND HEREBY DIRECT THE LEARNED AO TO MAKE SUCH ADJUSTMEN T AS PER THE DECISION OF THE HONBLE HIGH COURT CITED (SUPRA). THUS, THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED AND ALLOWED IN ITS FAVOUR. ITA NO.3679/AHD/2008 (BY REVENUE) & CO NO.324/AHD/2008 (BY ASSESSEE) ACIT VS. M/S.M.KISHOR & CO. ASST.YEAR - 2005-06 - 9 - 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND THE CROSS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF MARCH, 2012. SD/- SD/- (BHAVNESH SAINI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER ORDER PRONOUNCED ON 16/3/12 SD/- SD/- AM JM (AMA) (MK S) AHMEDABAD; DATED 16 / 3 /2012 /+.., .../ T.C. NAIR, SR. PS . ) %*0 1 0* . ) %*0 1 0* . ) %*0 1 0* . ) %*0 1 0*/ COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT 2. %&$ / THE RESPONDENT. 3. * '2 / CONCERNED CIT 4. '2() / THE CIT(A)-IV, SURAT 5. 056 %* , , / DR, ITAT, AHMEDABAD 6. 67 8( / GUARD FILE. .' .' .' .' / BY ORDER, &0* %* //TRUE COPY// 9 99 9/ // / ' ' ' ' (DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION.. 23.1.12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 24.1.12 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 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 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