DCIT 3(1), MUMBAI V. AUROSTAR JEWELLERY (INDIA) P.LTD, MUMBAI

ITA 4007/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4256 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI . , ! ' #'' '$ , % ! & BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 4007 / / 2012 A.Y. 2007-08 ITA NO. : 4007/MUM/2012 (ASSESSMENT YEAR: 2007-08) DCIT, CIRCLE 3(1), ROOM NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 VS M/S AUROSTAR JEWELLERY (INDIA) PVT. LTD., C-64, MITTAL COURT, NARIMAN POINT, MUMBAI -400 021 .: PAN: AAACA 7307 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURINDER JIT SINGH RESPONDENT BY : NONE /DATE OF HEARING : 04-07-2013 !' / DATE OF PRONOUNCEMENT : 10- 07-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE DEPARTMENT, AGAINST THE ORDER OF CIT(A) 5, MUMBAI, DATED 16.03.2012, WHEREIN THE FOLLOWING GROUNDS HAV E BEEN TAKEN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 5,46,69,072/- , HOLDING THAT THE VALUATION DONE BY THE AO ON THE BASIS OF AVERAGE PURCHASE PRICE IS NOT CORRECT AS THE ASSESS EE IS FOLLOWING COST OF PURCHASE METHOD, WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE IS NOT MAINTAINING ITEM WISE DETA ILS OF CLOSING STOCK OF ROUGH AND POLISHED DIAMONDS AND FURTHER, I N THE COURSE OF ASSESSMENT PROCEEDINGS, IN SPITE OF SPECIFIC OPP ORTUNITY GIVEN TO IT, THE ASSESSEE FAILED TO FURNISH SPECIFIC DETA ILS REGARDING COLOUR, CLARITY, SHAPE & CARATS IN RESPECT OF LOTS OF ROUGH DIAMONDS ISSUED FOR CUTTING AND POLISHING AND RECEI VED BACK BY IT SO THAT THE CO-RELATION CAN BE MADE BETWEEN LOTS OF ROUGH M/S AUROSTAR JEWELLERY (INDIA) PVT. LTD. ITA NO. 4007/MUM/2012 2 DIAMONDS IMPORTED AND LOTS OF CUT AND POLISHED DIAM ONDS EXPORTED 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 2. AS NONE APPEARED NOR ANY ADJOURNMENT LETTER HAS B EEN RECEIVED BY OR ON BEHALF BEHALF OF THE ASSESSEE, HENCE, WE PROCEED TO DECIDE THE APPEAL EX-PARTE QUA THE ASSESSEE ON MERIT, AFTER HEARING LD. DR 3. THE SOLITARY GROUND IS DELETION OF RS. 5,46,69,072/-, BEING THE ADDITION MADE BY THE AO ON ACCOUNT OF VALUATION OF CLOSING STOCK OF DIAMONDS. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SALE OF DIAMOND STUDDED JEWELLERY. IN THE INSTANT YEAR, THE ASSESSEE COMPUTED THE VALUATION OF ITS STOCKS OF ROUGH DIAMONDS AT RS. 7,50,06,220/- AS ON 31.03.2007. 5. AS PER THE SUBMISSIONS MADE BEFORE THE AO, ASSESSEE IM PORTS ROUGH DIAMONDS AND ARE VALUED AT COST OF PURCHASE ON C ONVERTED RUPEE RATES AS PER THE PREVAILING EXCHANGE RATE. THIS IS AS PER ACCOUNTING STANDARDS AS LAID DOWN BY ICAI. 6. THE ASSESSEE ALSO SUBMITTED BEFORE THE AO, THAT POLISH ED DIAMONDS RECEIVED FROM KARIGARS ARE VALUED AT COST OR MARKET VALUE WHICH IS LOWER AND IS CERTIFIED BY THE MANAGEMENT. THE METH OD FOR VALUATION HAS BEEN IN PLACE OVER THE YEARS AND WAS BEING CONSISTENTLY FOLLOWED AND ALSO ACCEPTED BY THE DEPARTMENT. THE ASSESS EE DOES NOT MAINTAIN ANY REGISTER FOR CLOSING STOCK AND NO DISTINCTION IS MADE, CARAT WISE OR PIECE WISE, AS THE SAME WAS IMPOSSIBLE. 7. THE AO, ON GOING THROUGH THE REPLY OF THE ASSESSEE, REJ ECTED THE SAME AND ARRIVED AT THE AVERAGE PER CARAT RATE OF RS. 40,478.221 AND WORKED OUT THE VALUE OF CLOSING STOCK AT RS. 12,75,58,613/-. M/S AUROSTAR JEWELLERY (INDIA) PVT. LTD. ITA NO. 4007/MUM/2012 3 BY APPLYING THE ABOVE CALCULATED AVERAGE RATE OF R S. 40478.22 PER CARAT, THE VALUE OF CLOSING STOCK OF ROUGH DIAMONDS IS REWORKE D OUT AS UNDER:- PARTICULARS AMT. (RS.) CLOSING STOCK OF ROUGH DIAMONDS- 3151.290 CARATS VALE OF CLOSING STOCK OF ROUGH DIAMONDS 40478.22X31 51.290 12,75,58,613 VALE OF CLOSING STOCK OF REJECTED ROUGH RECEIVED FR OM KARIGAR INCAPABLE OF PRODUCING POLISHED DIAMONDS AS PER THE STATEMENT SUBMITTED BY THE ASSESSEE (SUCH REJECTED ROUGH HAS BEEN INCLUDED BY THE ASSESSEE IN ITS VALUATION OF CLOSING STOCK OF ROUGH DIAMONDS) 21,16,679 TOTAL VALUE OF CLOSING STOCK OF ROUGH DIAMONDS 12,9 6,75,292 LESS : VALUE OF TOTAL CLOSING STOCK AS PER ASSESSEE 7,50,06,220 DIFFERENCE 5,46,69,072 8. THE AO, THEREFORE, REDUCED THE VALUE TAKEN BY THE ASS ESSEE AT RS. 7,50,06,220/- AND MADE AN ADDITION OF RS. 5,46,69,072/-, AS PER THE ABOVE WORKING DONE BY THE AO. 9. AGAINST THIS ADDITION, THE ASSESSEE APPROACHED THE CIT (A), WHO RELYING ON THE DECISION FOR ASSESSMENT YEAR 2005-06, REN DERED BY THE ITAT DELETED THE ADDITION WHEREIN IT WAS HELD THAT APPLICA TION OF AVERAGE PER CARAT RATE FOR VALUATION OF CLOSING STOCK WA S NOT JUSTIFIED AND ACCEPTED THE METHOD REGULARLY EMPLOYED BY THE ASSESSEE. 10. THE CIT(A) ALSO MENTIONED IN THE ORDER THAT IN SUBSEQ UENT YEAR, I.E. ASSESSMENT YEAR 2008-09, THE AO HAS ACCEPTED THE M ETHOD OF VALUATION, REGULARLY EMPLOYED BY THE ASSESSEE. HE, THEREFOR E, DELETED THE ADDITION. 11. AGAINST THE ORDER, THE DEPARTMENT IS IN APPEAL. 12. ON THE DATE OF HEARING, THE CASE WAS CALLED. NEITHER TH ERE WAS ANY PRAYER FOR ADJOURNMENT NOR WAS THERE ANY ATTENDA NCE. THE CASE WAS PASSED OVER, AS NOBODY ATTENDED ON BEHALF OF THE ASS ESSEE, EVEN AT THE END OF THE BOARD, IT WAS DECIDED TO TAKE UP THE APP EAL EX PARTE , IN SO FAR AS THE ASSESSEE WAS CONCERNED. 14. THE DR VEHEMENTLY SUPPORTED ORDER OF THE AO. M/S AUROSTAR JEWELLERY (INDIA) PVT. LTD. ITA NO. 4007/MUM/2012 4 15. AFTER HAVING HEARD THE DR AND ON GOING THROUGH THE ORDER OF THE AO AND THE ORDER OF THE CIT(A), WE FIND THAT THE METHOD OF VALUATION HAS NOT BEEN DISTURBED BY THE DEPARTMENT EXCEPT IN AS SESSMENT YEAR 2006-07 WHEN THE ITAT DELETED THE ADDITION AND NOW, IN T HE CURRENT YEAR. EVEN IN THE SUBSEQUENT YEAR, THE CIT(A) NOTES THAT THE AO HAS NOT MADE ANY ADDITION ON THE VALUATION POINT. 16. IN VIEW OF THE CONSISTENCY IN APPROACH AND ALSO RESPE CTFULLY FOLLOWING THE DECISION OF THE EARLIER YEAR BY THE COORDINATE BENCH, THE CIT(A) DELETED THE ADDITION MADE IN THE INSTANT YEAR. THIS D ECISION WE SUSTAIN, AS WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDE R AND GIVE US ANY REASON TO DISTURB THE ORDER OF CIT(A). 17. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2013. SD/- SD/- ( . ) ( #'' '$ ) ! ! (B. RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 10 TH JULY, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A)-5, MUMBAI. 4) & & ' 3, MUMBAI / THE CIT3, MUMBAI. 5) ()* + , , & + , -. / THE D.R. A BENCH, MUMBAI. 6) */ 0 COPY TO GUARD FILE. &12 / BY ORDER 3 / 4 5 & + , -. DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS