SAPPHIRE TRADING COMPANY, Jaipur V. ITO, Jaipur

ITA 731/JPR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4905 (ITAT-JAIPUR)
• Duration Of Justice: 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 11-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 731/JP/2013 ASSESSMENT YEAR: 2007-08 PAN NO. AADFS7595M M/S SAPPHIRE TRADING COMPANY, VS. INCOME TAX OFFIC ER 1318, MARDAN KHAN STREET, WARD 5(2), JAIPUR M.C. ROAD, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI D.C. SHARMA. DATE OF HEARING : 10.10.2013 DATE OF PRONOUNCEMENT : 10.10.2013 ORAL ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 23 RD JULY, 2013 OF LD. CIT (APPEALS)-II, JAIPUR RAISES THE FOLLOWING GROUNDS :- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 2,13,8 50/- BY NOT ACCEPTING THE CLAIM OF REJECTION IN THE STOCK OF LA PIS ROUGH AND EMERALD. HE HAS FURTHER ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO INCREASE THE CLOSING STOCK FOR THE YEAR BY SUCH AMOUNT. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 3. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2. ON ASSESSEES APPLICATION FOR ADJOURNMENT OF HEA RING, THE APPELLATE TRIBUNAL HAS PASSED THE FOLLOWING ORDER. 2 NONE FOR ASSESSEE DESPITE EFFECTIVE OPPORTUNITY HAV ING BEEN AFFORDED TO HIM. DILATORY TACTICS APPEAR TO HAVE BE EN ADOPTED BY APPELLANT IN ORDER TO VEX THE PROCEEDINGS COUPLED W ITH THE FACT THAT THE APPELLANT HIMSELF HAS SHOWN DELIBERATE DEFIANCE IN NOT ASSISTING THIS TRIBUNAL FOR DECIDING THE APPEAL EXPEDITIOUSLY . THE PETITION FOR ADJOURNMENT BEING DEVOID OF ANY MERIT AND THE SAME HAVING BEEN OPPOSED BY LD. D.R. SHRI D.C. SHARMA, J.C.I.T., THE REQUEST SO MADE AND LAID ON RECORD STANDS REJECTED. ACCORDINGL Y, THE LD. D.R. WAS REQUIRED TO ASSIST THE TRIBUNAL IN HEARING AND DISPOSAL OF THE APPEAL. 3. THE LD. D.R. SHRI D.C. SHARMA PRODUCED ASSESSMEN T RECORD AND UPON DIRECTIONS, THE BALANCE SHEET, TRADING OF PROFIT AN D LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AS WELL AS ASSESSEES SUBMISSIONS WER E PRODUCED, SUPRA RECORD AND COPY THEREOF HAS ALSO BEEN LAID ON TRIBUNALS RECOR D. IT HAS BEEN CONTENDED BY THE LD. D.R. THAT THE APPELLANT IS A PARTNERSHIP FIRM A ND ENGAGED IN TRADING OF PRECIOUS AND SEMI PRECIOUS GEMS. THE TRADING RESULTS AS ARE EVIDENT FROM PAGE-2 OF ASSESSMENT ORDER SHOW DECLINING TREND. THE APPELLAN T HAS DISCLOSED A GROSS PROFIT RATE ON 16.26% FOR THE ASSESSMENT YEAR 2005-06, WHI CH STOOD REDUCED TO 12.22% IN ASSESSMENT YEAR 2006-07, WHEREAS THE RESULTS DEC LARED FOR THE YEAR UNDER CONSIDERATION, SHOW GROSS PROFIT RATE OF 12.43% ONL Y. THE ASSESSING OFFICER EXAMINED BOOKS OF ACCOUNT. THE ASSESSEE HAD NOT MAI NTAINED ANY QUALITATIVE DETAILS. THE VALUATION OF CLOSING STOCK WAS MADE ON ESTIMATE BASIS. HUGE REJECTION OF GOODS WERE CLAIMED IN STOCKS WITHOUT LAYING ANY BASIS OR PROOF THEREOF. EVIDENCE FOR DISPOSAL OF ANY REJECTED GOODS NOT APP EARING IN THE CLOSING STOCK HAS ALSO NOT BEEN LAID ON RECORD. SHE, THEREFORE, REJEC TED THE BOOKS OF ACCOUNT. SINCE, 3 TRUE PROFITS COULD NOT BE DEDUCED FROM THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER WORKED OUT THE VALUE OF REJECTED QUANTITY OF EMERAL D 106.02 CTS. AT RS. 56,605/- AND VALUE OF REJECTED LAPIS ROUGH WEIGHING 664.56 K G. AT RS. 1,57,254/- AND ADDED THE SAME TO THE DECLARED INCOME OF THE ASSESSEE. 4. LD. CIT(A) HAS REPRODUCED THE WRITTEN SUBMISSION S OF THE APPELLANT AT INTERNAL PAGE-3 OF THE IMPUGNED ORDER AS UNDER:- IT MAY BE NOTED THAT THE NATURE OF BUSINESS OF ASS ESSEE IS SUCH THAT IT MAKES PURCHASE OF STONES IN PACKETS/LOTS. THEREAFTE R THESE PACKETS/LOTS ARE ASSORTED/DRESSED. AT THE TIME OF S UCH ASSORTING/DRESSING, IF THE ASSESSEE FINDS THAT ANY PIECE IS NOT SALEABLE, THE SAME IS REDUCED FROM THE STOCK REGISTER AS REJE CTION. THIS IS AN ONGOING PROCESS AND THEREFORE AS AND WHEN SUCH ASSO RTING/DRESSING IS CARRIED OUT AND THE REJECTED ITEM IS IDENTIFIED, THE SAME IS REDUCED FROM THE STOCK REGISTER AS REJECTION. IN CASE OF EM ERALD, OUT OF 2077.78 CTS OF STOCK REJECTION IS CLAIMED AT 106.02 CTS I.E. 5.10%. SIMILARLY IN CASE OF LAPIS ROUGH OUT OF STOCK OF 95 15.14 KG, REJECTION IS CLAIMED AT 664.56 KG I.E. 6.98%. SUCH REJECTION IS REASONABLE IN THIS LINE OF TRADE. IN EARLIER YEARS ALSO SIMILAR R EJECTION HAS BEEN CLAIMED BY THE ASSESSEE. OTHERWISE ALSO STOCK NEED TO BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LOWER. THEREFORE, WHEN ANY ITEM IN STOCK IS REJECTED NO VALUE CAN BE ASSIGNED TO IT. I T IS NOT THE CASE OF A.O. THAT ASSESSEE HAS SOLD SUCH REJECTED STOCK OUT OF BOOKS. REJECTION IN STOCK IS A REGULAR PHENOMENA IN THIS L INE OF TRADE. FOR SUCH REJECTION THERE CANNOT BE ANY EVIDENCE EXCEPT THE DECISION OF THE PRUDENT BUSINESSMAN. HENCE, THE ADDITION MADE B Y THE A.O. ONLY ON SURMISES AND CONJUNCTION IS UNJUSTIFIED. 4.1 THE LD. CIT(A), THEREAFTER CONSIDERING THE ENTI RE FACTS ON RECORD, REJECTED THE ASSESSEES GROUND IN APPEAL AS THE CLAIM WAS NO T SUPPORTED BY ANY MATERIAL OR DOCUMENTARY EVIDENCE AND ALSO THE CLAIMS WERE FOUND TO HAVE BEEN MADE ARBITRARILY AND WITHOUT ANY BASIS. HE ALSO DID NOT FIND ANY MERIT IN THE PLEA OF THE ASSESSEE THAT HAD HE INCLUDED THE VALUE OF SUCH CLO SING STOCK, THE SAME WOULD HAVE 4 BEEN NIL VALUE. THE LD. D.R., THEREFORE, CONTENDS T HAT THERE IS NO MERIT IN THE GROUND RAISED IN APPEAL AND THE APPEAL IS LIABLE TO BE DISMISSED. 5. I HAVE HEARD LD. D.R. WITH REFERENCE TO THE MATE RIAL ON RECORD. THE BALANCE SHEET AND TRADING ACCOUNT LAID ON RECORD REVEAL THE OPENING STOCK OF RS. 51,03,250/-. THE ASSESSEE HAS MADE LITTLE PURCHASES OF THE VALUE OF RS. 3,01,485/- ONLY. IT HAS EFFECTED SALES OF RS. 35,74,288/- AND VALUED ITS CLOSING STOCK AT RS. 22,74,809/- WITHOUT INCLUDING THEREIN THE VALUE OF REJECTED GOODS. THE APPELLANT HAS ALSO NOT DISCLOSED ANY STOCK OF REJECTED GOODS CLAIMED FOR 106.02 CTS. FOR EMERALD AND 664.56 KG OF LAPIS ROUGH IN ITS CLOSIN G INVENTORY. THE SCRAP VALUE OR SALE VALUE OF ANY SUCH CLAIM REJECTED GOODS IS ALSO NOT DECLARED AS HIS INCOME. NO PROOF OF ITS DISPOSAL, IF ANY, MADE DURING THE YEAR HAS BEEN LAID ON RECORD. THE APPELLANT HAS CLAIMED THAT IT HAS VALUED ITS OPENIN G AS WELL AS CLOSING STOCK AT COST OR MARKET PRICE, WHICHEVER IS LOW. THE APPELLANT AS FOUND HEREINBEFORE WAS HOLDING OPENING STOCK AS ON 01/4/2006 OF THE VALUE OF RS. 51,03,250/-. OUT OF SUCH STOCK HELD AS OPENING STOCK, THE APPELLANT REDUCED QUANTITY WEIGHING 41.98 CTS. OF EMERALD ON 1 ST APRIL, 2006 ITSELF OUT OF THE STOCK WEIGHING 1774. 78 CTS. HELD AS OPENING STOCK THEREOF ON 1 ST APRIL, 2006. IT IS EVIDENT FROM PAGE-3 OF THE ASSESSMENT ORDER ITSELF. NO REASON OR BASIS HAVE BE EN LAID ON RECORD TO SHOW AS TO HOW THE CLOSING STOCK HELD ON 31/3/2006 AND VALUED AT COST OR MARKET PRICE ON THAT DAY AND WHICH BECAME OPENING STOCK AS ON 01/4/2006 BECAME A REJECT WITH NO VALUE AT ALL. THE APPELLANT ALSO REDUCED THE QUANTI TY OF STOCK OF EMERALD FROM STOCK WITHOUT LAYING ANY BASIS OR RELIABLE MATERIAL ON RECORD. HE HAS ALSO NOT 5 EXPLAINED TO THE SATISFACTION OF THE ASSESSING OFFI CER AS TO HOW AND UNDER WHAT CIRCUMSTANCES, THE QUANTITY HELD AS OPENING STOCK B ECAME REJECTS WITH NO VALUE THEREOF. HE ALSO LAID NO MATERIAL ON RECORD TO SHOW AS TO HOW HE DISPOSED OF SUCH REJECTS DURING THE YEAR UNDER CONSIDERATION. LIKEWI SE THE APPELLANT REDUCED HUGE QUANTITY OF OPENING STOCK BY 664.56 KG OUT OF THE O PENING STOCK WEIGHING 9515.14 KG VALUED BY HIM AT RS. 22,52,082/- AT COST OR MARK ET PRICE WHICHEVER IS LESS. THE APPELLANT DID NOT LAY ANY RELIABLE EVIDENCE OR COGE NT MATERIAL REDUCING ARBITRARILY THE ACTUAL STOCK HELD BY HIM DURING THE YEAR AND NO BASIS HAVE BEEN LAID AS TO HOW AND TO WHOM SUCH STOCK STOOD DISPOSED OF FROM ASSES SEES PREMISES. I ALSO DO NOT FIND ANY MERIT IN ASSESSEES PLEA THAT IN THE PAST SIMILAR TREATMENT WAS GIVEN IN REDUCING ITS HOLDING OF STOCK ON ACCOUNT OF REJECTI ONS. IF THE ASSESSING OFFICER DID NOT SCRUTINIZE THE ASSESSEES CLAIM OR ALLOWED A WR ONG DEDUCTION, NO RIGHT IS VESTED IN THE ASSESSEE TO GET THE SAME WRONG DONE AGAIN IN THE YEAR UNDER CONSIDERATION. IN FACT, NO PERSON HAS A RIGHT IN THE WRONG. CONSID ERING OF ENTIRE MATERIAL FACTS AND CIRCUMSTANCES, IT IS FOUND THAT THE APPELLANT IN OR DER TO SUPPRESS HIS TRUE PROFITS, MANIPULATED ITS STOCK ACCOUNT AND REDUCED STOCK ARB ITRARILY WITHOUT LAYING ANY RELIABLE MATERIAL OR EVIDENCE ON RECORD TO DO SO. T HE ADDITION, THUS, SUSTAINED BY THE LD. CIT(A) IS FOUND JUSTIFIED. I FIND NO MERIT IN THE GROUND NO. 1 RAISED IN APPEAL. THE SAME STANDS REJECTED. 6. GROUND NO. 2 IN APPEAL IS A GENERAL GROUND AND N EEDS NO COMMENTS. THE SAME, HOWEVER, IS DEEMED AS REJECTED. 7. NO ORDER AS TO COSTS. 6 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE STANDS DISMISSED AS ANNOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2013. SD/- (B.R. JAIN) ACCOUNTANT MEMBER JAIPUR, DATED : 10/10/2013. * RANJAN COPY FORWARDED TO :- 1. M/S SAPPHIRE TRADING COMPANY, JAIPUR. 2. THE ITO, WARD 5(2), JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (ITA NO. 731/JP/2013) BY ORDER, AR ITAT JAIPUR.