PARIN GEMS, MUMBAI V. ITO - 30(2)(4), MUMBAI

ITA 5985/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8778 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH K SINGH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 5985/MUM/2016 ASSESSMENT YEAR: 2011 - 12 PARIN GEMS G - 5, BASEMENT, PRASAD CHAMBERS PREMISES CO. OP. SOCIETY LTD., OPERA HOUSE, MUMBAI - 400004. VS. INCOME TAX OFFICER - WARD - 30 (2)(4), MUMBAI, C/13 PRATYAKSHAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. PAN NO. AALFP4724B APPELLANT RESPONDENT ASSESSEE BY : NONE REVENUE BY : MR. MANISH K. SINGH , DR DATE OF HEARING : 09 /10/2018 DATE OF PRONOUNCEMENT : 27/12/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 41 , MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF T HE INCOME TAX ACT 1961, (THE ACT). WE FIND FROM RECORD THAT THOUGH THE CASE WAS FIXED FOR HEARING ON 02.05.2018, 23.07.2018 AND 09.10.2018, NEITHER THE ASSESSEE NOR ITS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THE TRIBUNAL ON THE ABOVE PARIN GEMS ITA NO. 5985/MUM/2016 2 DATES. IN VIEW OF THE REPEATED NON - COMPLIANCE BY THE ASSESSEE, WE DECIDE THE CASE AFTER EXAMINING THE MATERIALS AVAILABLE ON RECORD AND HEARING THE LD. DR. 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN MAKING AN ADDITION OF RS.41,42,011/ - ON ACCOUNT OF ALLEGED SUPPRESSION OF CLOSING STOCK AND WHILE DOING SO HE AMONGST OTHER ERRED: A. IN APPLYING STANDARD REJECTION RATE IN MANUFACTURING OF DIAMONDS @ 8.84% B. IN HOLDING THAT THERE WAS SUPPRESSION OF CLOSING STOCK OF ROUGH DIAMONDS OF 4619.18 CTS. C. IN DETERMINING THE LOST WISE SUPPRESSION OF CLOSING STOCK AT 5868.86 CTS. 3. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2011 - 12 ON 21.09.2011 DECLARING TOTAL INCOME OF RS.20,91,113/ - . THE ASSESSEE IS A MANUFACTURER AND TRADER OF DIAMOND. THE ASSESSING OFFICER ( AO ) MADE AN ADDITION OF RS.2,68,14,340/ - WITH THE FOLLOWING OBSERVATION: THE ASSESSEE HIMSELF SHOWN REJECTION AT THE RATE OF 8.84% OF TOTAL DIAMOND SENT, WHEN THE DIAMOND IS PRODUCED BY ITSELF, IF THE SAME PERCENTAGE IS CONSIDER ED FOR THE WHOLE DIAMOND SENT FOR MANUFACTURE, THE ASSESSEE IS SHOWN EXTRA REJECTION @ 7.12% OF TOTAL DIAMOND SENT FOR MANUFACTURING. THUS 8.84% OF THE TOTAL ROUGH DIAMOND SENT FOR MANUFA CTURING BEING 5735.16 CT ROUGH DIAMOND HAS BEEN ALLOWED AS REJECTION AND BALANCE REJECTION BEING 4619.18 CT SHOWN BY THE ASSESSEE IS DISALLOWED. AND HENCE IT IS CLEAR THAT THE ASSESSEE ALSO SUPPRESSED ITS STOCK OF DIAMOND OF 4619.18 CT DIAMOND HENCE PARIN GEMS ITA NO. 5985/MUM/2016 3 AVERAG E COST OF ROUGH DIAMOND IS ADDED TO THE TOTAL CLOSING STOCK OF THE ASSESSEE. THE ASSESSEE HAS IMPORTED ROUGH DIAMOND AT A AVERAGE PRICE OF RS.5805/ - PER CT., CALCULATING AT THE SAME RATE THE CLOSING STOCK OF ROUGH DIAMOND IS CALCULATED AT RS.2,68,14,340/ - . HENCE CLOSING STOCK OF ROUGH DIAMOND OF THE ASSESSEE IS ENHANCED BY RS.2,68,14,340/ - AND HENCE PROFIT OF THE ASSESSEE IN INCREASED BY RS.2,68,14,340/ - , THEREFORE, THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE A O, THE ASSESSEEE FILED AN APPEAL BEFORE THE LD. CIT(A). REGARDING THE ADDITION OF RS.2,68,14,340/ - MADE BY THE AO, THE LD. CIT(A) ASKED THE ASSESSEE TO COMPUTE EXCESS REJECTION OVER 8.84% LOT WISE AND VALUE OF EXCESS REJECTION ACCORDING TO COST OF THAT LOT . IN RESPONSE TO IT , THE ASSESSEE PREPARED THE CHART ON THE BASIS OF THE DETAILS FILED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE LD. CIT(A) HAVING EXAMINED THE SAID CHART HELD : IN THE SAID CHART, REJECTION ON BOTH IN HOUSE AND OUTSIDE PRODUCTI ON HAS BEEN RESTRICTED TO 8.84% AS ALLOWED IN THE ASSESSMENT ORDER AND QUANTUM OF EXCESS REJECTION DISALLOWED HAS BEEN WORKED OUT AT 5868.86 CTS WHICH IS MORE THAN REJECTION OF 4619.13 CTS DISALLOWED BY THE AO. THE VALUE OF EXCESS REJECTION HAS BEEN COMPUT ED LOT WISE AT RS.41,42,011/ - AS PER THE COST OF ROUGH DIAMOND IN THAT LOT. HENCE THE CLOSING STOCK AND CORRESPONDING INCOME IS ENHANCED BY RS.41,42,011/ - . TO CONCLUDE, ADDITION ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK IS RESTRICTED TO RS.41,42,011/ - AGA INST RS.2,68,14,340/ - MADE BY THE AO. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT IN THE CHART FILED BEFORE HIM, REJECTION ON BOTH INHOUSE AND OUTSIDE PRODUCTION HAS PARIN GEMS ITA NO. 5985/MUM/2016 4 BEEN RESTRICTED TO 8.84% AS ALLOWED IN THE ASSE SSMENT ORDER AND QUANTUM OF EXCESS REJECTION DISALLOWED HAS BEEN WORKED OUT AT 5868.86 CTS WHICH IS MORE THAN REJECTION OF 4619.13 CTS DISALLOWED BY THE AO. RIGHTLY, THE LD. CIT(A) HAS NOTED THAT THE VALUE OF EXCESS REJECTION HAS BEEN COMPUTED LOT WISE AT RS.41,42,011/ - AS PER THE COST OF ROUGH DIAMOND IN THAT LOT. THEREFORE, THE LD. CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK TO RS.41,42,011/ - AS AGAINST RS.2,68,14,340/ - MADE BY THE AO. WE FIND THE ABOVE ORDER OF THE LD. CIT(A) RESTRICTING THE DISALLOWANCE TO RS.41,42,011/ - AS REASONABLE AND UPHOLD IT. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/12/2018 SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 27/12/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI