The ACIT,Range-6, Surat V. M/s. Om Anand Exports, Surat

ITA 3703/AHD/2008

• Counselvise Citation: 370320514 RSA 2008
• Duration Of Justice: 3 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 11-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A TIRKEY
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3703 / AHD/2008 (ASSESSMENT YEAR 2005-06) ACIT, CIRCLE 6, SURAT VS. M/S. OM ANAND EXPORTS, 6/1271, BHGWATI NIWAS, MAHIDHAPURA BHUT SHERI, SURAT I.T.A.NO. 56/AHD/2010 (ASSESSMENT YEAR 2006-07 M/S. OM ANAND EXPORTS, VS. ACIT, RANGE 6, 6/1271, BHGWATI NIWAS, SURAT MAHIDHAPURA BHUT SHERI, SURAT PAN/GIR NO. : AAAFO4473B (APPELLANT) .. (RESPONDENT) DEPARTMENT BY: SHRI A TIRKEY, SR. DR ASSESSEE BY: SHRI RASESH SHAH, AR DATE OF HEARING: 11.10.2012 DATE OF PRONOUNCEMENT: 02.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- OUT OF THESE TWO APPEALS, THE FIRST APPEAL IN ASSE SSMENT YEAR 2005- 06 IS FILED BY THE REVENUE WHEREAS THE 2 ND APPEAL IN ASSESSMENT YEAR 2006- 07 IS FILED BY THE ASSESSEE. THE APPEAL OF THE REV ENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, SURAT DATED 29.8.2008 F OR THE ASSESSMENT YEAR I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 2 2005-06 WHEREAS THE APPEAL OF THE ASSESSEE IS DIREC TED AGAINST THE ORDER OF LD. CIT(A) IV, SURAT DATED 30.10.2009 FOR THE AS SESSMENT YEAR 2006- 07. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN I.T.A.NO. 3703/AHD/2008 THE GROUNDS RAI SED BY THE REVENUE ARE AS UNDER: [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION OF RS. 43,52,368/-, MADE BY THE ASSESSING OFFICER ON T HE GROUND OF UNDER VALUATION OF CLOSING STOCK OF DIAMONDS. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)-IV, SURAT HAS ERRED IN RESTRICTING THE ADDITION OF RS. 93,320/- TO RS. 50,000/-, MADE BY THE ASSESSING OFFICER ON THE GROUND OF DISALLOWANCE OF FOREIGN TR AVEL EXPANSES. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [4] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A)-IV, SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OF FICER RESTORED. 2.1 REGARDING GROUND NO.1, THE FACTS TILL THE ASSES SMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 3 & 4 OF HIS ORDER WHIC H ARE REPRODUCED BELOW: THE NEXT GROUND OF APPEAL IS REGARDING ADDITION OF RS.43,52,368/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF POLISHE D DIAMONDS. THE AO HAVING REJECTED THE BOOK RESULTS FURTHER OBS ERVED THAT THE CLOSING STOCK OF POLISHED DIAMONDS SHOULD HAVE BEEN VALUED AT RS.11,30,82,148/- ON AVERAGE COST METHOD, THE AO PR EPARED A CHART, ON PAGE-12 AND 13 OF THE ASSESSMENT ORDER AN D WORKED OUT THE COST OF MANUFACTURE OF POLISHED DIAMONDS AT RS. L1,30,82,148/- BY CONSUMING 2,73,716.87 CARATS OF ROUGH DIAMONDS A ND HAD SHOWN THE MANUFACTURING COST AT RS.40,44,18,323/-. WHEN REQUIRED TO SHOW CAUSE, THE APPELLANT STATED THAT THE POLISH ED DIAMONDS I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 3 WERE VALUED AS PER THE MARKET TREND AND THE LAST EX PORTS AS WELL AS THE NEXT YEARS EXPORT. THE APPELLANT FURNISHED DET AILS OF SALE OF DIAMONDS FROM APRIL TO JULY, 2005 IN SUPPORT OF THE CONTENTION. THE AO CONCLUDED THAT THE TOTAL SALES FOR THESE FOU R MONTHS WAS 21052.35 CARATS VALUED AT RS. 17,97,63,879/- AND TH E AVERAGE SALE PRICE WAS RS.8,539 PER CARATS. THE VALUE OF CLOSING .STOCK DECLARED BY THE APPELLANT WAS RS.10,87,29,780 FOR 20818.39 C ARATS. HE THEREFORE, ADOPTED THE VALUE OF CLOSING STOCK ON TH E BASIS OF AVERAGE COST AND MADE AN ADDITION OF RS.43,52,368/- ON THIS ACCOUNT. 2.1.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THIS ADDITION AND NOW, T HE REVENUE IS IN APPEAL BEFORE US. 2.1.2 IT WAS SUBMITTED BY THE LD. D.R. THAT IT IS N OTED BY THE A.O. ON PAGE 8 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HA D NOT PRODUCED QUALITATIVE DETAILS OF CLOSING STOCK AND THE DETAIL S IN STOCK BOOK DID NOT CONTAIN SUCH DETAILS SUCH AS COLOUR, CUT AND CLARIT Y. IT IS FURTHER POINTED OUT THAT IT IS ALSO NOTED BY THE A.O. ON PAGE 9 OF THE ASSESSMENT ORDER THAT PURCHASE VALUE OF THESE DIAMONDS HAS RANGED FROM RS .467/- TO RS.2390/- AND SALE PRICE HAS ALSO RANGED FROM RS.1030/- TO RS .21787/- AND THEREFORE, IN THE ABSENCE OF INVENTORY WITH QUANTIT Y AND QUALITY, IT IS NOT POSSIBLE TO VALUE THE CLOSING STOCK CORRECTLY. HE DRAWN OUR ATTENTION TO PAGE 13 OF THE ASSESSMENT ORDER AND POINTED OUT THA T THE A.O. HAS WORKED OUT THE VALUE OF CLOSING STOCK ON THE BASIS OF OPEN ING STOCK OF POLISHED DIAMONDS ADDED WITH COST OF PRODUCTION OF POLISHED DIAMONDS LESS PURCHASE OF POLISHED DIAMONDS. HE FURTHER POINTED OUT THAT THE A.O. HAS WORKED OUT COSTS OF SALES BY DEDUCTING GROSS PROFIT FROM THE SALE PROCEEDS AND BY REDUCING THE COSTS OF SALE FROM COS T OF PRODUCTION, THE A.O. HAS WORKED OUT THE VALUE OF CLOSING STOCK WHIC H IS JUSTIFIED IN THE I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 4 FACTS OF THE PRESENT CASE WHEN QUALITY WISE STOCK R ECORDS ARE NOT MAINTAINED AND, THEREFORE, ORDER OF LD. CIT(A) SHOU LD BE REVERSED AND THAT OF THE A.O. SHOULD BE RESTORED. 2.1.3 AS AGAINST THIS, LD. AR SUBMITTED THAT ON PAG E 8-32 IS THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2004-05 AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGES 16-18 OF THE PAPER BOOK I.E. PARA 11 OF THE TRIBUNAL ORDER AND SUBMITTED THAT TH IS ISSUE IN DISPUTE IN THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE A SSESSEE BY THE TRIBUNAL ORDER IN ASSESSEES OWN CASE. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT IN THAT YEAR, AS PER THE TRIBUNAL ORDER, THE TRIBUNAL HAS CONSIDERED THE COST OF PRODUCTION LESS COST OF SALE AND ON THIS BASIS, IT WAS FOUND THAT THE RATES OF CLOSING STOCK WAS COMING TO RS.6496/CARAT BUT VALUE WAS TAKEN BY THE ASSESSEE IN THAT YEAR @ RS.6 717/- PER CARAT AND, THEREFORE, UNDER THESE FACTS, IT WAS HELD BY THE TR IBUNAL IN THAT YEAR THAT VALUE OF CLOSING STOCK MADE BY THE ASSESSEE IN THAT YEAR WAS CORRECT. THE BENCH WANTED TO KNOW THE POSITION IN THE PRESENT YE AR. IN REPLY, LD. A.R. COULD NOT SHOW THAT SUCH VALUE ON THE BASIS OF COST OF PRODUCTION LESS COST OF SALE WORKED OUT EQUAL TO OR LESS THAN THE VALUE PER CARAT ADOPTED BY THE ASSESSEE FOR VALUATION OF THE CLOSING STOCK. IT WA S HIS ALTERNATIVE SUBMISSION THAT IF THE ADDITION IS UPHELD, DIRECTIO N SHOULD BE GIVEN TO CONSIDER OPENING STOCK IN NEXT YEAR AS SUCH INCREAS ED VALUE. 2.1.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD. A.R. WE FIND TH AT IN ASSESSMENT YEAR 2004-05, THE ISSUE IN DISPUTE WAS DECIDED BY THE TR IBUNAL AS PER PARA 11 I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 5 AND FOR THE SAKE OF READY REFERENCE, THIS PARA OF T HE TRIBUNAL ORDER IS REPRODUCED BELOW: 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT T HE ASSESSING OFFICER HAS TABULATED THE DETAILS OF ROUGH, POLISHE D AND REJECTED DIAMONDS AT PAGE NO.12-13 OF ASSESSMENT ORDER AND O BSERVED THAT ASSESSEE HAS SHOWN VALUATION @ RS.6716.90 PER CARAT OF POLISHED DIAMOND WHEREAS COST OF DIAMONDS CALCULATED BY HIM COMES AT RS 7770 PER CARAT OF POLISHED DIAMONDS. AS THE AO REQU IRED ASSESSEE TO EXPLAIN UNDER VALUATION OF CLOSING STOCK AND ASS ESSEE REPLIED IN DETAIL VIDE LETTER DATED 15-12-2006, THE ASSESSING OFFICER REJECTED ASSESSEE'S REPLY AND REQUIRED TO FURNISH THE DETAIL S OF SELLING PRICE OF THE CLOSING STOCK OF FINISHED DIAMONDS. WE FIND THAT THE ASSESSEE SUBMITTED THE DETAILS OF SALES PROCEEDS OF CLOSING STOCK FOR THE MONTH OF APRIL AND MAY'04 ALONG WITH XEROX COPY OF THE SALES BILLS AND THESE DETAILS OF SALES OF APRIL AND MAY'0 4 ARE REPRODUCED BY ASSESSING OFFICER AT BOTTOM OF PAGE NO. 16 AND T OP OF PAGE NO.17 OF ASSESSMENT ORDER AND CALCULATED THE NET RE LEASABLE VALUE OF CLOSING STOCK OF FINISHED DIAMOND AT RS.8309.9 B Y AVERAGING THE SALES PRICE OF APRIL AND MAY AND REDUCING GROSS PRO FIT FROM IT. ACCORDINGLY THE AO CALCULATED THE SALE VALUE OF POL ISHED DIAMOND AT RS.9223 PER CARAT AND AFTER DEDUCING GROSS PROFI T AT 5.9%, NET REALIZABLE VALUE COMES AT RS.8309.9 PER CARAT. WE F IND THAT THE ASSESSEE HAS SHOWN VALUE OF POLISHED DIAMOND AT RS. 6716.9 PER CARAT AND THE AO TREATED THE DIFFERENCE OF RS.1593 (8309.9 - 6716.9) AS SUPPRESSION IN VALUATION IN CLOSING STOC K OF POLISHED DIAMOND. IN VIEW OF THE ABOVE FACTS, WE FIND THAT T HE AO MADE ADDITION OF RS.1.33.36.596/-, I.E. ON ACCOUNT OF CL OSING STOCK OF POLISHED DIAMOND OF 8371 CARATS AT RS.1593 PER CARA T. WE FURTHER FIND FROM THE RECORDS AND THE DETAILS FILED BEFORE US THAT THE ASSESSEE MADE THE VALUATION OF POLISHED DIAMOND AT RS.5,62,33,930/- FOR 8372 CARATS ON BASIS OF MAR KET VALUE LESS MARGINAL PROFITS, SO AVERAGE OF THIS INVENTORY CO MES TO RS.6747/- PER CARAT AND ACCORDINGLY ASSESSEE MADE THE VALUATION CONSIDERING THE NET REALIZABLE VALUE AFTE R CONSIDERING 4'C I.E. CUT, CLARITY, COLOUR AND CARAT AND DETAILED IN VENTORY, WHICH CONTAINS14 QUALITIES OF DIAMONDS WITH DIFFERENT VAL UES BUT THE AO ADOPTED THE AVERAGE VALUES OF SALES MADE IN THE NEX T TWO MONTHS I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 6 I.E. APRIL AND MAY'04 AND HE TOOK INTO CONSIDERATIO N 11 SALES BILLS OF THE MONTH OF APRIL AND MAY'04 THROUGH WHICH 6021 .70 CARATS WERE EXPORTED WITH AVERAGE VALUES OF S223 PER CARAT . WE FIND THAT, IN FACT, THERE ARE NUMEROUS QUALITIES IN THESE ELEV EN INVOICES AND WITH MANY PACKET OF DIAMOND WITH DIFFERENT SELLING PRICE BUT THE AO HAS TAKEN AVERAGE VALUE OF EACH INVOICE AND ALSO AVERAGE OF 11 BILLS, IN FACT ASSESSEE EXPORTED DIAMOND IN NEXT TW O MONTH WITH VARYING VALUE AND LOWEST BEING RS.1,115/- PER CARAT . BEFORE ASSESSING OFFICER AND CIT(A) ASSESSEE PRODUCED EXP ORTS BILL OF NOT ONLY NEXT TWO MONTHS BUT TILL AUG.'04 AND ASSES SEE CORRELATED THE VALUATION WITH THE DIAMOND EXPORTED BY TICKING THE MARKING OF EXPORT MADE BY ASSESSEE IN SUBSEQUENT MONTHS HAVING SALE VALUE SIMILAR WITH THE VALUATION MADE BY THE ASSESSEE. IT IS NOT NECESSARY THAT ONLY CLOSING STOCK OF POLISHED DIAMONDS OF THE . YEAR UNDER CONSIDERATION IS SOLD IN SUBSEQUENT MONTHS, T HIS IS SO, BECAUSE MANUFACTURING OF DIAMONDS IS VERY MUCH A CO NTINUOUS PROCESS AND ACCORDINGLY IT IS QUITE LOGICAL THAT EX PORTS IN SUBSEQUENT MONTHS ARE MADE OUT OF PRODUCTION OF POL ISHED DIAMONDS IN SAID MONTHS. THUS, AVERAGE SELLING PRIC E OF THESE TWO MONTHS I.E. RS.9223 PER CARAT CANNOT BE TAKEN AS BA SE FOR ARRIVING AT THE COST OF CLOSING STOCK OF POLISHED DIAMONDS F OR THE YEAR UNDER CONSIDERATION. THE COSTING OF POLISHED DIAMOND MANU FACTURED DURING THE YEAR COMES TO RS.7026 PER CARAT CONSIDER ING THE REJECTED DIAMOND. AO TOOK THE VALUE AT RS.8309.90 PER CARAT WHICH IS VERY MUCH HIGH COMPARED TO COSTING OF POLISHED DIAMOND M ANUFACTURED DURING THE YEAR OF RS.7C25 - PER CARAT. ACCORDING T O US, IN VIEW OF THE DATA PRODUCED BY THE ASSESSEE. THE AVERAGE COST ING METHOD, VALUATION OF CLOSING STOCK REPRESENTS VALUE OF OPEN ING STOCK PLUS COST OF PRODUCTION LESS COST OF SALES AND AS PER TH IS METHOD, THE VALUATION THE VALUE OF CLOSING STOCK COMES TO RS.64 96/- PER CARAT WHICH IS LESS THAN VALUE TAKEN BY ASSESSEE AT RS.67 17/- PER CARAT. FURTHER, METHOD OF VALUATION ADOPTED BY THE ASSESSE E FOR VALUATION OF POLISHED DIAMOND WAS BEING CONSISTENTLY FOLLOWED IN PAST AND SAME WAS ALSO ACCEPTED IN SCRUTINY ASSESSMENT IN PA ST. ACCORDINGLY, IT CLEARLY ESTABLISHES THAT VALUATION OF CLOSING STOCK MADE BY ASSESSEE IS VERY MUCH FAIR AND HENCE, THERE IS NO JUSTIFICATION IN DISTURBING THE VALUATION OF CLOSIN G STOCK MADE BY ASSESSEE. ACCORDINGLY, EVEN THE PARTS SUSTENANCE OF VALUATION OF CLOSING STOCK OF ROUGH DIAMONDS BY THE CIT(A) AMOUN TING TO I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 7 RS.2,83,184/-IS WITHOUT ANY BASIS AND ACCORDINGLY T HE ORDER OF CIT(A) TO THAT EXTENT IS REVERSED. THIS ISSUE OF AS SESSEE'S APPEAL IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 2.1.5 FROM THE ABOVE PARA OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR HE ASSESSMENT YEAR 2004-05, WE FIND THAT IN THA T YEAR, THE ASSESSEE ADOPTED THE RATE OF RS.6717/- PER CARAT FOR THE PUR POSE OF VALUING CLOSING STOCK OF POLISHED DIAMONDS AND ON THE BASIS OF AVER AGE COSTING METHOD BEING VALUE OF OPENING STOCK + COST OF PRODUCTION L ESS COSTS OF SALE, THE VALUE PER CARAT WORKED OUT TO RS.6496/- CARAT IN TH AT YEAR. UNDER THESE FACTS, THE VALUATION METHOD ADOPTED BY THE ASSESSEE WAS APPROVED BY THE TRIBUNAL IN THAT YEAR. IN THE PRESENT YEAR, WE FIN D THAT THE ASSESSEE HAS ADOPTED THE RATE OF RS. 5222.78 PER CARAT FOR VALUA TION OF CLOSING STOCK OF 20,818.39 CARATS POLISHED DIAMONDS AT RS. 10,87,297 80/- ON PAGE 13 OF THE ASSESSMENT ORDER, THE A.O. HAS NOTED THE OPENIN G STOCK PURCHASE AND COST OF PRODUCTION OF DIAMONDS ALONG WITH COST OF S ALE OF DIAMONDS AND WORKED OUT THE VALUE OF CLOSING STOCK OF POLISHED D IAMONDS AT RS. 11,30,82,148/- WHEREAS, THE ASSESSEE HAS WORKED OUT THE VALUE OF CLOSING STOCK IN ITS BOOKS AT RS.10,87,29,780/-. PER CARAT VALUE OF CLOSING STOCK ON THE BASIS OF AVERAGE COSTING METHOD AS CONSIDERE D BY THE TRIBUNAL IN THE PRECEDING YEAR COMES TO RS.5431.84 IN THE PRESE NT YEAR WHEREAS THE ASSESSEE HAS ADOPTED RATE OF RS.5222.78 PER CARAT F OR THE PURPOSE OF VALUING CLOSING STOCK OF POLISHED DIAMONDS IN THE P RESENT YEAR. THIS GOES TO SHOW THAT THE FACTS IN THE PRESENT YEAR ARE NOT IDENTICAL BECAUSE AS PER THE FACTS OF THE PRESENT YEAR, VALUE OF CLOSING STO CK AS PER AVERAGE COSTING METHOD IS COMING HIGHER AT RS. 5431.84 PER CARAT WH EREAS, THE RATE ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING ST OCK OF POLISHED DIAMONDS IS LESS I.E. RS.5222.78 PER CARAT BUT IN T HE PRECEDING YEAR, AS PER I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 8 AVERAGE COSTING METHOD, THE VALUE OF CLOSING STOCK OF POLISHED DIAMONDS WAS COMING TO RS.6496 PER CARAT WHICH WAS FOUND TO BE LESS THAN THE VALUE TAKEN BY THE ASSESSEE AT RS.6717 PER CARAT. IN OUR CONSIDERED OPINION, IN THE FACTS OF THE PRESENT YEAR, THE ISSU E IS COVERED AGAINST THE ASSESSEE BY THIS TRIBUNAL DECISION IN THE ASSESSEE S OWN CASE WHEREIN THE TRIBUNAL HAS APPROVED THE AVERAGE COSTING METHOD FO R THE PURPOSE OF VALUATION OF CLOSING STOCK OF POLISHED DIAMOND IN T HE ABSENCE OF QUALITATIVE RECORDS. BY THE SAME METHOD, IN THE PR ESENT YEAR, WE FIND THAT THE VALUE OF CLOSING STOCK MADE BY THE A.O. IS PROP ER AND THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF LD. CIT(A) IS NOT SUSTAINABLE. LD. CIT(A) HAS DELETED THIS ADDITION ON THIS BASIS THAT THE AVERAGE VALUE METHOD CANNOT BE APPLIED BECAUSE THER E IS LARGE NUMBER OF ITEMS IN THE CLOSING STOCK AND IF AVERAGE WEIGHTED VALUATION IS APPLIED FOR SUCH A WIDE VARIETY OF ITEMS OF CLOSING STOCK, IT W ILL DISTORT THE FINANCIAL RESULTS. WE FIND THAT THIS FINDING OF LD. CIT(A) I S IN CONTRADICTION WITH THE FINDING OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004-05 WHERE THE TRIBUNAL HAS APPROVED THE AVERAGE COSTING METHOD OF VALUATION OF CLOSING STOCK ON THE BASIS OF VALUE OF PURCHASE + COST OF PRODUCTION LESS COST OF SALE AND IT WAS NOTED BY TH E TRIBUNAL IN THAT YEAR THAT AS PER THIS METHOD OF VALUATION OF CLOSING STO CK RATE WAS COMING TO RS.6496 PER CARAT WHICH IS LESS THAN THE VALUE TAKE N BY THE ASSESSEE AT RS.6717/ CARAT AND UNDER THESE FACTS, IT WAS ACCEPT ED THAT THE VALUE ADOPTED BY THE ASSESSEE IS BETTER. IN THE PRESENT YEAR, WE HAVE SEEN THAT VALUE ADOPTED BY THE ASSESSEE IS NOT BETTER BECAUSE THE SAME IS ON LOWER SIDE AS COMPARED TO THE VALUE COMING AS PER AVERAGE COSTING METHOD AND HENCE, WE REVERSE THE ORDER OF LD. CIT(A) AND RESTO RE THAT OF THE A.O. ON I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 9 THIS ISSUE. REGARDING ALTERNATIVE CONTENTION OF LD . A.R., WE FIND FORCE IN THE SAME AND HENCE, DIRECT THE A.O. TO ADOPT THE IN CREASED VALUE AS OPENING STOCK IN THE NEXT YEAR. 2.1.6 IN THE RESULT, GROUND NO.1 OF THE REVENUE IS ALLOWED. 2.2 REGARDING GROUND NO.2, WE FIND THAT THE A.O. HA S MADE DISALLOWANCE TO THE EXTENT OF 10% ON FOREIGN TRAVEL EXPENSES IN RESPECT OF FOREIGN TRAVEL BY A PARTNER OF THE ASSESSEE FIRM AN D IN THIS MANNER, A.O. MADE DISALLOWANCE OF RS.93,320/-. LD. CIT(A) HAS H ELD THAT THE DISALLOWANCE OF RS.50,000/- IS JUSTIFIED AND HE ALL OWED RELIEF OF RS.43,320/-. NOW, THE REVENUE IS IN APPEAL FOR THE RELIEF ALLOWED BY LD. CIT(A). 2.2.1 LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHERE AS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). 2.2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE DISALLOWANCE MADE BY THE A.O. WAS ON ESTIM ATE BASIS AND THE RELIEF ALLOWED BY LD. CIT(A) IS ALSO ON ESTIMATE BA SIS. CONSIDERING THE FACTS OF THE PRESENT CASE, WE DO NOT FIND ANY REASO N TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 2.2.3 IN THE RESULT, THIS APPEAL OF THE REVENUE IS PARTLY ALLOWED. 3. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2006-07 IN I.T.A.NO. 56/AHD/2010. 3.1 GROUND NO.1 WAS NOT PRESSED AND REJECTED. THE ONLY REMAINING GROUND IS GROUND NO.2 WHICH READS AS UNDER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.46,35,873/-. I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 10 3.2 BOTH THE SIDES AGREED THAT THE FACTS ARE IDENTI CAL IN THIS YEAR ALSO AND HENCE, THE SAME MAY BE DECIDED ON SIMILAR LINES . 3.2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WH EN WE EXAMINE PAGE 7-8 OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07, WE FIND THAT CLOSING STOCK OF POLISHED DIAMONDS WAS OF 17121.12 CARATS AND THE SAME WAS VALUED BY THE ASSESSEE AT RS.11,99,95, 960/- AND THE AVERAGE VALUE PER CARAT IS COMING TO RS.7008.65. AS PER TH E AVERAGE COSTING METHOD I.E. OPENING STOCK + COST OF PRODUCTION LESS COSTS OF SALE, AVERAGE VALUE PER CARAT IS COMING OUT AT RS.7279.42 PER CAR AT AND HENCE, IT IS SEEN THAT THE VALUE OF POLISHED DIAMONDS PER CARAT AS PE R AVERAGE COSTING METHOD IS HIGHER THAN THE VALUE PER CARAT ADOPTED B Y THE ASSESSEE FOR THE VALUE OF CLOSING STOCK AND HENCE, IN THIS YEAR ALSO , THE FACTS ARE DIFFERENT THAN IN ASSESSMENT YEAR 2004-05 BECAUSE IT IS NOTED BY THE TRIBUNAL IN THAT YEAR THAT AS PER AVERAGE COSTING METHOD, THE VALUE OF DIAMONDS PER CARAT WAS WORKED OUT AT A LESSER AMOUNT OF RS.6496 PER CA RAT AS AGAINST THE VALUE PER CARAT ADOPTED BY THE ASSESSEE FOR VALUE O F CLOSING STOCK AT RS.6717 PER CARAT. UNDER THESE FACTS, IT WAS HELD BY THE TRIBUNAL IN THAT YEAR THAT THE VALUATION DONE BY THE ASSESSEE IS BET TER. WHEN THE VALUATION AS PER AVERAGE COSTING METHOD IS HIGHER THAN IT CAN NOT BE SAID THAT THE VALUATION DONE BY THE ASSESSEE IS BETTER AS HAS BEE N HELD BY US IN ASSESSMENT YEAR 2005-06. SIMILARLY, IN ASSESSMENT YEAR 2006-07 ALSO, WE HOLD THAT THE VALUATION DONE BY THE ASSESSEE IS NOT PROPER AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GROUND OF THE ASSESSEE IS REJECTED. S IMILARLY, ABOUT THE ALTERNATIVE CONTENTION OF THE LD. A. R., WE DIRECT THE A.O. THAT OPENING STOCK IN THIS YEAR SHOULD BE THE VALUE OF CLOSING S TOCK IN ASSESSMENT YEAR I.T.A.NO.3703/AHD/2008 I.T.A.NO. 56/AHD/2010 11 2005-06 AND IN NEXT YEAR I.E. ASSESSMENT YEAR 2007- 08, THE OPENING STOCK SHOULD BE CONSIDERED AT THE VALUE OF CLOSING STOCK ADOPTED BY THE A.O. IN ASSESSMENT YEAR 2006-07. 3.2.2 IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 4. IN THE COMBINED RESULT, THE APPEAL OF THE REVENU E IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE IS ALSO PARTLY ALLOW ED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 15/10/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/10/2012.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 02/11/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.2/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 02/11/2012 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. .