Manraj Jewellers Pvt. Ltd., V. Joint Commissioner of Income-tax,

ITA 998/PUN/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4327 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-07-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 02-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Assessee Lawyers: S U PATHAK
• Keywords: Gross profit estimation; Business income; Set aside
• Section: 143(3); 142(2A)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.998/PUN/2015 / ASSESSMENT YEAR : 2010-11 M/S. MANRAJ JEWELLERS PVT. LTD., 169, BALAJI PETH, JALGAON 425 001. PAN : AADCM3254C. . / APPELLANT V/S THE JT. CIT, RANGE-1, JALGAON. . / RESPONDENT . / ITA NO.1070/PUN/2015 / ASSESSMENT YEAR : 2010-11 THE DCIT, CIRCLE-1, JALGAON. . / APPELLANT V/S M/S. MANRAJ JEWELLERS PVT. LTD., 169, BALAJI PETH, JALGAON 425 001. PAN : AADCM3254C. . / RESPONDENT . / ITA NO.1179/PUN/2016 / ASSESSMENT YEAR : 2011-12 THE ACIT, CIRCLE-1, JALGAON. . / APPELLANT V/S M/S. MANRAJ JEWELLERS PVT. LTD., 169, BALAJI PETH, JALGAON 425 001. PAN : AADCM3254C. . / RESPONDENT ASSESSEE BY : SHRI S.U. PATHAK. REVENUE BY : SHRI HITENDRA NINAVE. 2 / ORDER PER ANIL CHATURVEDI, AM : 1. THE CROSS-APPEALS FILED BY ASSESSEE AND REVENUE EM ANATE OUT OF CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME-TAX ( A) II, NASHIK DT.29.05.2015 FOR THE ASSESSMENT YEAR 2010-11. T HE APPEAL IN ITA NO.1179/PUN/2016 FILED BY THE REVENUE EMANATE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A) II, NASHIK DT.29.05.2015 FOR THE ASSESSMENT YEAR 2011-12. 2. BEFORE US, AT THE OUTSET, BOTH THE PARTIES SUBMITTED THAT THOUGH THE APPEALS FILED BY THE ASSESSEE AND REVENUE AR E FOR TWO DIFFERENT ASSESSMENT YEARS BUT THE FACTS AND ISSUES INVOLV ED IN ALL THE APPEALS ARE IDENTICAL EXCEPT FOR THE ASSESSMENT YEA RS AND THE AMOUNTS INVOLVED AND THEREFORE THE SUBMISSIONS MADE BY T HEM WHILE ARGUING ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHER APPEALS ALSO AND THUS, ALL THE APPEALS CAN BE HEARD TO GETHER. IN VIEW OF THE AFORESAID SUBMISSION OF BOTH THE PARTIES, WE, FO R THE SAKE OF CONVENIENCE, PROCEED TO DISPOSE OF ALL THE APPEALS OF BY A CONSOLIDATED ORDER BUT HOWEVER, PROCEED WITH NARRATING THE FACTS IN ITA NO.998/PUN/2015 FOR A.Y. 2010-11. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUS INESS OF MANUFACTURING AND TRADING OF GOLD, SILVER ORNAMENTS / JE WELLERY HOARDINGS AND GENERATION OF ELECTRICITY USING WINDMILL. ASSESS EE / DATE OF HEARING : 12.12.2018 / DATE OF PRONOUNCEMENT: 12.03.2019 3 ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 02.09.2010 DECLARING TOTAL INCOME OF RS.NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAM ED U/S 143(3) OF THE ACT VIDE ORDER DT.26.09.2013 AND THE TOTAL IN COME WAS DETERMINED AT RS.1,98,50,070/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.29.05.2015 (IN APPEAL NO.NSK/CIT(A)-II/1012/13-14) GRANT ED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 4. THE GROUNDS RAISED BY THE ASSESSEE IN ITA NO.998/PU N/2015 FOR A.Y. 2010-11 READS AS UNDER : 1. TIME BARRED ASSESSMENT. THE ASSESSMENT IS TIME BARRED AS THE LIMITATION PERI OD IS EXTENDED BY THE TIME TAKEN BY THE SPECIAL AUDITOR I N SUBMITTING THE AUDIT REPORT U / S 142(2A) AND BECAUSE THE REFERENCE FOR SPECIAL AUDIT WAS NOT JUSTIFIED IN LAW 1.1 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT A. THE REFERENCE TO THE SPECIAL AUDITOR COULD NOT B E VALIDLY MADE FOR SUCH ISSUES LIKE COMPUTATION OF DISALLOWANCE U/S 40A(2) AND THEREFORE, THE REFERENCE WAS NOT VALID AND THUS, TH E ASSESSMENT LIMITATION COULD NOT GET EXTENDED BY THE TIME TAKEN B Y THE SPECIAL AUDITOR . B. EVEN OTHERWISE, THE ASSESSMENT . IS TIME BARRED AS THE LIMITATION U / S 153 EXPIRED BEFORE 26.09 . 2013 I.E. THE DATE OF ASSESSMENT . C. THE EXTENSION FOR SPECIAL AUDIT REPORT WAS GRANT ED ON 03.06.2013 I.E. AFTER THE EXPIRY OF THE EARLIER PERIOD GRANTED FOR AUDIT TILL 31 . 05 . 2013 AND THUS, THE EXTENSION WAS NOT VALID AND THE EXTENDED PERIOD COULD NOT BE TAKEN INTO ACCOUNT FOR DETERMIN ING THE LIMITATION FOR ASSESSMENT . D. THE LEARNED CIT(A) IS NOT CORRECT WHEN HE VIDE P ARA 7 . 1 OF HIS ORDER SAYS THAT THE APPELLANT HAD NOT I) SUBSTANTIATED ITS CONTENTION THAT THE EXTENSION FOR SPECIAL AUDIT REPORT WAS GRANTED ON 3-6-2013 I . E. AFTER THE EXPIRY OF THE EARLIER PERIOD GRANTED FOR AUDIT TILL 31- 5-2013 AND II) PRODUCED ANY DOCUMENTS TO PROVE THAT THE FIRST PERI OD WAS GRANTED TILL 31-5-13 AND THIS PERIOD WAS FURTHE R EXTENDED ON 3-6-13 . 4 IN ASMUCHAS THE ISSUE WAS WELL DISCUSSED AND IN FAC T COPIES OF ALL RELEVANT CORRESPONDENCE WAS PLACED ON RECORD S VIDE ANNEXURE - 1 TO OUR SUBMISSION DT 5 TH MAY, 2014. 2. GROSS PROFIT ADDITION 2.1. THE LEARNED CIT (A) ERRED IN ENHANCING THE ASSESSME NT B Y MAKING AN ADDITION OF RS. 3 , 04 , 89 , 6701- ON THE GROUND OF ALLEGED LOW GROSS PROFIT , WHEN NO ADDITION WAS MADE BY THE LEARNED AO IN THE ASSESSMENT . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE SAID ADDITION BE CANCELLED. 2.2. ESTIMATING GROSS PROFIT AT 1 . 50% AS AGAINST 0 . 72% DECLARED BY THE APPELLANT ON THE TOTAL SALES OF RS. 391,69 , 01 , 697 WITHOUT BRINGING ON RECORD ANY MATERIAL TO JUSTIFY THE SAME DESERVES TO BE CANCELLED ESTIMATION BEING THE RESULT OF GUESS WORK AND SURMISES. 2.3. THE ACTION OF THE LEARNED CIT (A) IN ESTIMATING G.P. AT 1 . 50% AND MAKING A CONSEQUENTIAL ADDITION OF RS. 3,04,89,670 MERELY RELYING UPON THE DECISION OF THE HON'BLE ITAT IN THE CASE O F M/S. RAJMAL LAKHICHAND FOR A.Y . 2009-10 (A RELATED PARTY) CANNOT BE SUSTAINED EITHER ON FACTS OR IN LAW . 2.4 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ME RE FALL IN G. P . MARGIN COULD NOT JUSTIFY THE REJECTION OF ACCOUNTS OR ESTIMATION OF PROFIT PARTICULARLY WHEN , ACCOUNTS ARE AUDITED, STOCK RECORDS ARE MAINTAINED AND NO DEFECTS IN ACCOUNTS WERE NOTICED BY THE LEARNED AO AND ITEMS DEALT IN ARE SUBJECT TO WIDE RATE FLUC TUATIONS. 2.5 WITHOUT PREJUDICE, THE ADDITION MADE BY ESTIMATING GROSS PROFIT AT 1.50% IS EXCESSIVE AND NEEDS TO BE REDUCE D SUBSTANTIALLY INTER ALIA FOR THE FOLLOWING REASONS . I. THE HON'BLE ITAT IN THE CASE OF M/S. RAJMAL LAKHICHAND AND HAD ESTIMATED GROSS PROFIT AT 1.20%, AS AGAINST 1.13 % DECLARED BY THE SAID FIRM. II. THE LEARNED AO IN APPELLANT'S OWN CASE FOR THE A. Y . 2012- 13 HAS ESTIMATED GROSS PROFIT AT 0 . 4 % AS AGAINST 0.3 % DECLARED BY THE APPELLANT ON THE TOTAL SALES OF RS. 501 . 98 CRORES. 3) ADDITION ON ACCOUNT OF UNDER VALUATION OF CLOSING S TOCK - RS. 31,61,734 3 . 1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITI ON OF RS.31,61,734/- ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE SAID ADDITION BE DELETED . 3.2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE R ATE ADOPTED FOR VALUATION OF CLOSING STOCK AS PER BOMBAY BULLION AS SOCIATION RATES WAS NOT CORRECT AND THE APPELLANT COMPANY SHOULD HA VE VALUED ITS CLOSING STOCK AS PER THE SELLING RATE TO THE CUSTOM ER AS ON 31 ST MARCH 2010. 3.3 THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED T HAT THE APPELLANT HAD FOLLOWED THE SAID PRACTICE FOR VALUING ITS CLOS ING STOCK FOR THE EARLIER YEARS AND FURTHER THE AO HAS NOT MADE ANY A DDITION ON THIS 5 SCOPE IN THE SCRUTINY ASSESSMENTS FOR THE A.Y . 2011-12 AND 2012- 12 AND AS SUCH THERE WAS NO REASON TO CHANGE THE ME THOD ADOPTED FOR VALUATION OF CLOSING STOCK. 3.4 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE APPELLA NT SUBMITS THAT THE OPENING STOCK FOR THE CURRENT YEAR SHOULD HAVE ALSO BEEN VALUED IN THE SAME MANNER. 5. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT HE DOE S NOT WISH TO PRESS GROUND NO.1. IN VIEW OF THE SUBMISSION OF LD .A.R., GROUND NO.1 OF ASSESSEE IS DISMISSED AS NOT PRESSED . 6. GROUND NO.2 IS WITH RESPECT TO GROSS PROFIT ADDITIO N. 6.1. LD.CIT(A) NOTED THAT WHILE EXAMINING THE ISSUE ON APPLICABILITY OF SEC.40A(2)(B) IN THE CASE OF M/S. RAJMAL LAKHIC HAND (RL), THE FLAGSHIP CONCERN OF THE FIRM FOR A.Y. 2009-10, TRIBUNAL HAD COME TO THE CONCLUSION THAT THE SALE AND PURCHASE OF GO LD BULLION AND GOLD ORNAMENTS WITHIN THE GROUP CONCERNS WERE ONLY PAPER TRANSACTIONS WITHOUT INVOLVING ANY REAL TRANSFER OF BULLION/ORNAMENTS. THE FIRM HAD ENTERED INTO FICTITIOUS TRANSACTIONS WITHIN THE GROUP TO INFLATE THE PURCHASES AN D SALES OF ALL THE GROUP CONCERNS. HE NOTED THAT THE FINDINGS GIVEN BY THE TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND FOR A.Y. 2009-10 WOULD BE APPLICABLE TO THE CASE OF ASSESSEE AS THE FACTS OF TH E CASE OF ASSESSEE ARE IDENTICAL TO THAT OF RAJMAL LAKHICHAND. LD.CI T(A) ALSO NOTED THAT TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND HAD DECIDED THAT THE ADOPTION OF G.P. RATE OF 1.20% AS AGAINST 1.13% DISCLOSED BY THE ASSESSEE WOULD MEET THE ENDS OF JUSTICE. LD.CIT(A) NOTED THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE IDENTICAL TO TH AT OF RAJMAL LAKHICHAND AND THE ASSESSEE HAD ALSO ENTERED INTO TRAN SACTIONS OF GOLD BULLION WHICH WERE PAPER TRANSACTIONS AND FICTITIOUS. HE THEREAFTER FOLLOWING THE REASONING AS GIVEN BY THE TRIBUNA L IN THE 6 CASE OF RAJMAL LAKHICHAND REJECTED THE BOOKS OF ACCOUN TS. HE THEREAFTER NOTED ON TOTAL SALES OF RS.391.69 CRORES, ASSES SEE HAD DISCLOSED G.P. WHICH WORKED OUT TO 0.72%. HE NOTED THAT THE TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND HAD DIRECTED TO ADOPT THE G.P. RATE OF 1.50% AS AGAINST 0.72% DISCLOSED BY THE A SSESSEE. HE THEREFORE DIRECTED THE AO TO WORK OUT THE G.P. AT 1.5 0% ON THE TOTAL SALES WHICH WORKED OUT TO RS.5,87,53,525/- AS AGAINST THE G.P. SHOWN BY THE ASSESSEE OF RS.2,82,63,855/-. ACCORDING T HE ADDITION OF THE BALANCE AMOUNT RS.3,04,89,670/- ON ACCOUN T OF G.P. WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AG GRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAD MAINTAIN ED DAY- TO-DAY STOCK REGISTER AND ALL THE PURCHASE AND SALE TR ANSACTIONS ARE VOUCHED AND THE DEFECTS POINTED OUT BY LD.CIT(A) ARE NOT THE DEFECTS AT ALL. HE FURTHER SUBMITTED THAT FOR A.Y. 2012-13, THE AO HAD MADE ADDITION OF ONLY 0.1% AS AGAINST THE G.P. OF 0.3 % SHOWN BY THE ASSESSEE. HE FURTHER SUBMITTED THAT ASSESSEE IS IN WHOLESALE BUSINESS WHILE RAJMAL LAKHICHAND WAS IN THE RETAIL BUSINESS . HE FURTHER SUBMITTED THAT TRIBUNAL FOR A.Y. 2009-10 IN THE CA SE OF RAJMAL LAKHICHAND HAS ESTIMATED THE G.P. AT 1.20% INSTEA D OF 1.13% DECLARED BY THE ASSESSEE AND THUS THE ADDITION WA S 0.07%. HE SUBMITTED THAT HOWEVER LD.CIT(A) HAD ESTIMATED GP AT 1.50% INSTEAD OF 0.72% DECLARED AND THEREFORE THE ADDITION COMES TO 0.78% WHICH IS VERY HIGH. HE FURTHER POINTED TO THE CHART OF THE VARIOUS ASSESSEES OF THE GROUP WHEREIN THE ADDITION O N ACCOUNT OF GROSS PROFIT HAS BEEN ENHANCED BETWEEN THE RANGE OF 0.0 7% TO 0.32%. HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY LD.CIT(A) 7 BE REDUCED. HE IN THE ALTERNATIVE SUBMITTED THAT THE A DDITION BE MADE @ 0.07% OR 0.09% AS MADE IN THE CASE OF RAJMAL LAKHICHAND. 8. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD.CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ESTIMATION OF GROSS PROFIT. WE FIND THAT LD.CIT(A) FOLLOWING THE ORDER OF TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND AND FOLLOWING THE SAME REASONING HAD ESTIMATED THE GROSS PROFIT AT 1.50% INSTEA D OF 0.72% DECLARED BY THE ASSESSEE AND THUS MADE ADDITION OF 0.8%. BEFORE US, IT IS ASSESSEES SUBMISSION THAT ASSESSEE IS IN WHOLESALE BUSINESS WHILE RAJMAL LAKHICHAND IS IN RETAIL BUSINESS AND THEREFORE THE BUSINESS MODEL IN BOTH THE ASSESSEES AR E DIFFERENT. BEFORE US, ASSESSEE HAS ALSO FURNISHED A CHART OF ESTIMAT ION OF GROSS PROFIT IN VARIOUS GROUPS OF ASSESSEE NAMELY, RAJMA L LAKHICHAND, RAJMAL LAKHICHAND AND SONS, R.L. GOLD PVT. LTD. WHEREIN ADDITIONS HAS BEEN ENHANCED IN THE RANGE OF 0.07 % TO 0.32%. CONSIDERING THE TOTALITY OF THOSE FACTS, WE ARE OF T HE VIEW THAT IN THE CASE OF ASSESSEE, THE ENDS OF JUSTICE SHALL BE MET IF ADDITION IS RESTRICTED TO 0.10%. WE THUS, DIRECT ACCORDIN GLY. THUS, THE GROUND NO.2 OF ASSESSEE IS PARTLY ALLOWED. 10. GROUND NO.3 IS WITH RESPECT TO ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RS.31,61,734/-. 10.1. AO NOTED THAT ASSESSEE IS VALUING ITS STOCK AT COS T OR NET REALIZABLE VALUE WHICHEVER IS LESS. THE ASSESSEE HAS CON SIDERED THE CLOSING RATE QUOTED BY BOMBAY BULLION ASSOCIATION TO DE TERMINE 8 THE NET REALIZABLE VALUE. ACCORDING TO AO, THE NET REALIZAB LE VALUE MEANS THE RATE AT WHICH THE GOLD WAS SOLD BY THE ASSE SSEE ON 31.03.2010. HE ALSO HELD THAT ASSESSEE WAS NOT JUSTIFIED IN ADOPTING THE RATE AS PER BOMBAY BULLION ASSOCIATION. HE ALSO NOTED THAT THE RATE ADOPTED BY THE ASSESSEE WAS RS. 16,320/- PER 10 GRAMS WHEREAS ASSESSEE HAS SOLD ORNAMENTS AT RS.1 6,600/- PER 10 GRAMS. AO THEREFORE ON THE BASIS OF RS.16,600/- PER 10 GRAMS HAS VALUED THE CLOSING STOCK AND MADE ADDITION OF RS.31,6 1,734/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO. AGGRIEVED BY THE O RDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 11. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAS BE EN VALUING ITS CLOSING STOCK ON THE SAME METHOD WHICH HAS B EEN FOLLOWED BY THE ASSESSEE IN EARLIER YEARS AND THAT THERE WAS NO CHANGE IN METHODOLOGY FOR VALUING ITS CLOSING STOCK FOR THE YEAR UNDER CONSIDERATION AND TO THE EARLIER YEARS AND FOR CLOS ING THE NET REALIZABLE VALUE, IT HAD ADOPTED THE RATE QUOTED BY BOMBA Y BULLION ASSOCIATION. HE FURTHER SUBMITTED THAT NO SUCH ADDITION WAS MADE BY THE AO FOR EARLIER YEAR OR SUBSEQUENT YEARS AS THE METHODOLOGY ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK WA S SIMILAR. HE FURTHER SUBMITTED THAT AO ADOPTED THE ACTUAL SELLING RATE WHICH IS NORMALLY HIGHER THAN BOMBAY BULLION RATE. HE SUBMITTED THAT IDENTICAL ISSUE AROSE IN ONE OF THE ASSESSEES GROUP CON CERNS NAMELY, R.L GOLD PVT. LTD., FOR A.Y. 2010-11, WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL (IN ITA NO.1001/PN/2015 DT.31.08.2018) BY FOLLOWING THE ORDER OF RAJMAL LAKHICHAND (IN ITA NO.670/PUN/2015 FOR A.Y. 2010-11) HAS DELETED THE ADDITIO N. HE 9 POINTED TO THE RELEVANT FINDINGS OF THE TRIBUNAL. HE SUBMITT ED THAT THE FACTS IN THE CASE FOR THE YEAR UNDER CONSIDERATION A RE IDENTICAL TO THAT OF R.L. GOLD PVT. LTD., AND THEREFORE THE ADDITION BE DELETED. 12. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LOW ER AUTHORITIES. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS W ITH RESPECT TO ADDITION ON ACCOUNT OF UNDER VALUATION OF CLOSING STOC K. WE FIND THAT IDENTICAL ISSUE AROSE IN THE CASE OF R.L. GOLD PVT. LTD., IN A.Y. 2010-11. THE CO-ORDINATE BENCH OF THE TRIBUNAL WHILE DECID ING THE ISSUE HAD FOLLOWED THE DECISION OF TRIBUNAL IN THE CASE OF RAJ MAL LAKHICHAND IN ITA NO.670/PUN/2015 FOR A.Y. 2010-11 AND D ELETED THE ADDITION BY OBSERVING AS UNDER : 10. IN GROUND NO. 3 OF APPEAL, THE ASSESSEE HAS AS SAILED ADDITION OF RS.15,53,087/- ON ACCOUNT OF UNDERVALUATION OF CLOS ING STOCK CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS ). THE CONTENTION OF ASSESSEE IS THAT TO VALUE CLOSING STO CK, THE ASSESSEE HAS BEEN CONSISTENTLY ADOPTING RATES QUOTED BY BOMB AY BULLION ASSOCIATION. THE ASSESSING OFFICER HAS ACCEPTED ASS ESSEES METHOD OF VALUATION IN THE PAST AS WELL AS IN THE SUBSEQU ENT ASSESSMENT YEARS. THESE FACTS HAVE NOT BEEN DISPUTED BY THE RE VENUE. WE FIND THAT ON SIMILAR SET OF FACTS THE ADDITION I N VALUATION OF CLOSING STOCK WAS CHALLENGED IN THE CASE OF M/S. RA JMAL LAKHICHAND JEWELLERS PVT. LTD. BEFORE THE TRIBUNAL IN ITA NO. 672/PUN/2015 (SUPRA). THE CO-ORDINATE BENCH DELETED THE ADDITION BY HOLDING AS UNDER : 19. THE GROUND NO. 4 OF APPEAL BY ASSESSEE IS WITH RESPECT TO ADDITION ON ACCOUNT OF UNDER VALUATION OF STOCK. THE CONTENTION OF LD. AR OF ASSESSEE IS THAT CLOSING ST OCK IS VALUED BY THE ASSESSEE ON COST OR NET REALIZABLE VALUE, WH ICHEVER IS LESS. FOR THE VALUATION OF STOCK THE ASSESSEE ADOPT S CLOSING RATE QUOTED BY BOMBAY BULLION ASSOCIATION. THE ASSE SSEE IS CONSISTENTLY FOLLOWING THIS METHOD OF VALUATION OF CLOSING STOCK IN THE EARLIER ASSESSMENT YEARS AS WELL AS IN THE S UBSEQUENT ASSESSMENT YEARS. NO OBJECTION WAS EVER RAISED BY T HE ASSESSING OFFICER ON THE METHOD OF VALUATION OR RAT ES ADOPTED FOR VALUATION EITHER IN THE EARLIER ASSESSMENT YEAR S OR IN THE SUBSEQUENT ASSESSMENT YEARS. A PERUSAL OF IMPUGNED ORDER SHOWS THAT THE AUTHORITIES BELOW HAVE NOT DISPUTED THE METHOD OF VALUATION BUT HAS RAISED OBJECTION TO THE ADOPTION 10 OF BOMBAY BULLION ASSOCIATION RATES FOR THE VALUATI ON PURPOSE OF STOCK. AS PER THE REVENUE THE ASSESSEE SHOULD HA VE APPLIED JALGAON RATES AS THE ASSESSEE HAS ITS BUSIN ESS AT JALGAON AND MOST OF CUSTOMERS OF THE ASSESSEE ARE L OCATED IN AND AROUND JALGAON. THE FACT THAT THE ASSESSEE HAS BEEN CONSISTENTLY VALUING ITS CLOSING STOCK AS PER RATES QUOTED BY BOMBAY BULLION ASSOCIATION IN THE EARLIER ASSESSMEN T YEARS AND SUBSEQUENT ASSESSMENT YEARS HAS NOT BEEN DISPUT ED BY THE REVENUE. THE REVENUE HAS ALSO NOT DISPUTED THAT IN THE EARLIER ASSESSMENT YEARS OR IN SUBSEQUENT ASSESSMEN T YEARS NO ADDITION HAS BEEN MADE BY ASSESSING OFFICER FOR ADOPTING BOMBAY BULLION ASSOCIATION RATES FOR VALUATION OF C LOSING STOCK BY ASSESSEE. IT IS ONLY IN THE ASSESSMENT YEA R UNDER APPEAL THAT THE ASSESSING OFFICER DEVIATED AND APPL IED JALGAON RATES INSTEAD OF RATES QUOTED BY BOMBAY BUL LION ASSOCIATION FOR VALUATION OF CLOSING STOCK. WE DO N OT FIND ANY MERIT IN THE REASONING GIVEN IN THE IMPUGNED ORDER TO DISTURB THE METHOD OF VALUATION OF CLOSING STOCK. ACCORDING LY, THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE ARE SET ASIDE AND GROUND NO. 4 RAISED IN APPE AL BY ASSESSEE IS ALLOWED. THE REVENUE HAS NOT PLACED ON RECORD ANY MATERIAL T O CONTROVERT THE FINDINGS OF TRIBUNAL IN THE AFORESAID CASE. THUS, F OLLOWING THE DECISION OF CO-ORDINATE BENCH, WE REVERSE THE FINDI NGS OF COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE A ND ALLOW THE GROUND RAISED BY ASSESSEE. 14. BEFORE US, NO DISTINGUISHING FEATURES IN THE FACTS OF THE CASE FOR THE YEAR UNDER CONSIDERATION AND THAT OF R.L. GOLD PVT . LTD. (SUPRA) HAS BEEN POINTED BY REVENUE. IN VIEW OF THE AFOR ESAID FACTS, FOLLOWING THE ORDER OF CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF R.L. GOLD PVT. LTD., (SUPRA) AND FOR SIMILAR REASONS, WE HO LD THAT AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF CLOSING STOCK. THUS, WE DIRECT ITS DELETION. THUS, GROUND NO.3 OF ASSESSEE IS ALLOWED. 15. IN THE RESULT, THE APPEAL OF ASSESSEE IN ITA NO.998/PUN/2015 FOR A.Y. 2010-11 IS ALLOWED. 16. NOW WE TAKE UP REVENUES APPEALS IN ITA NO.1070/PUN/2015 FOR A.Y. 2010-11 AND 1179/PUN/2016 FOR A.Y. 2011-12. 11 17. THE GROUNDS IN ITA NO.1070/PUN/2015 FOR A.Y. 2010-11 READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.4,08,15 ,151/- ON ACCOUNT OF DISALLOWANCE U/S 40A(2)(A) OF THE INCOME TAX ACT , 1961, WITHOUT APPRECIATING THE FACT THAT ASSESSEE HAD INDULGED IN TO FICTITIOUS PAPER TRANSACTIONS OF SALE AND PURCHASE WITH ITS SISTER C ONCERNS. THE ASSESSEE HAS INFLATED THE PURCHASE PRICE FROM ITS S ISTER CONCERNS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER OF THE LD.CIT(A)-2, NASHIK BE CANCELLED ON THE ABOV E ISSUE AND THAT OF THE AO BE RESTORED. 18. SIMILAR GROUNDS ARE RAISED BY THE REVENUE IN ITA NO.1179/PUN/2016 FOR A.Y. 2011-12. WE THEREFORE PROCEED TO DISPOSE OF BOTH THE APPEALS TOGETHER. 19. THE GROUNDS IN BOTH THE APPEALS OF REVENUE ARE INTER- CONNECTED. HENCE, THE SAME ARE CONSIDERED TOGETHER . 20. AO NOTED THAT A SPECIAL AUDIT WAS CONDUCTED IN THE C ASE OF ASSESSEE AND IN THAT SPECIAL AUDIT IT WAS FOUND THAT ASS ESSEE HAS MADE SUBSTANTIAL PURCHASES FROM ITS SISTER CONCERNS, THE PURCHASES WERE MADE AT HIGHER RATE THAN THE PURCHASES MADE FRO M THE THIRD PARTIES. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY TH E PURCHASES MADE FROM THE SISTER CONCERNS NOT BE CONSIDERED AS EXC ESSIVE AND UNREASONABLE U/S 40A(2)(A) OF THE ACT AND WHY IT SHOULD NO T BE DISALLOWED. ASSESSEE MADE DETAILED SUBMISSIONS WHICH WERE REPRODUCED BY THE AO IN HIS ASSESSMENT ORDER. THE SUB MISSIONS WERE NOT FOUND ACCEPTABLE TO THE AO. AO NOTED THAT IN THE PURCHASE BILLS FROM SISTER CONCERNS, NO TIME OF PURCHASE WA S MENTIONED AND IT DID NOT CONTAIN THE DETAILS OF ORNAMENTS OR THE DETAILS OF MAKING CHARGES AND THE BILLS ONLY CONTAINS THE D ETAILS LIKE NEW ORNAMENTS, GROSS WEIGHT, NET WEIGHT, RATE ETC. HE N OTED THAT 12 SPECIAL AUDITOR ON THE BASIS OF THE INFORMATION WORKED OUT THE EXCESS AND UNREASONABLE PRICE FOR THE PURCHASES MADE BY THE ASSESSEE FROM SISTER CONCERNS WHICH WAS WORKED OUT AT RS.4,08,15,151/- AND THE SAME WAS DISALLOWED U/S 40A(2)(A) O F THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO BY FOLLOWING THE ORDER OF TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND, A GROUP OF CONCERNS NOTED THAT THE FACTS IN THE CASE OF RAJMAL LAKHICHAND ARE IDENTICAL TO THE FACTS AND CASE OF ASSESSEE AND NOTED THAT IN CASE OF RAJMAL LAKHICHAND, IT WAS HELD THAT THE PROVISIONS OF SEC.40A(2)(A) OF THE ACT CANNOT BE INV OKED. SINCE THE FACTS ARE IDENTICAL TO THAT OF RAJMAL LAKHICHAND , HE HELD THAT THE PROVISIONS OF SEC.40A(2)(A) ARE NOT APPLICABLE IN THE CASE OF ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW BEFORE US. 21. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF LOWER AUTHORIT IES. LD.A.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD.CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD.CIT(A) WHILE COMING TO THE CONCLUSION THAT THE PROVISIONS OF SEC.40A(2)(A) OF THE ACT ARE NOT APPLICABLE TO THE CASE OF ASSESSEE HAD RELIED ON THE DECIS ION OF TRIBUNAL IN THE CASE OF RAJMAL LAKHICHAND, THE GROUP OF CON CERN OF THE ASSESSEE. HE ALSO GIVEN A FINDING THAT THE FACTS IN THE CASE OF ASSESSEE ARE IDENTICAL TO THAT OF RAJMAL LAKHICHAND. BEFO RE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMON STRATE THAT THERE IS CHANGE IN THE FACTS OF THE CASE OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND TO THE CASE FACTS OF RAJMAL LAKH ICHAND (SUPRA) NOR HAS POINTED ANY FALLACY IN THE FINDINGS OF LD.CIT(A ). IN 13 VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUNDS OF REVENUE ARE DISMISSED. 23. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE DISM ISSED. 24. TO SUM UP, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE BOTH THE APPEALS OF REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 12 TH DAY OF MARCH, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH MARCH, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-II, NASHIK. PR. CIT-2, NASHIK. '#$ %%&',) &' / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.