TaxTMI 
TaxTMI 
2010 (2) TMI 636
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....hroughout the year ? (iv) Whether on the facts and circumstances of the case, the Tribunal ought to have sent the matter back to the Commissioner of Income-tax (Appeals) to adjudicate the ground of appeal before him of section 80HHC deduction in respect of the above added or addible income of Rs. 17,50,00,000 or Rs. 72,91,666 ?" 2. The appellant-assessee has also filed Civil Application No. 470 of 2009, praying for stay of the demand of Rs. 9,86,37,022 till the final disposal of the tax appeal. 3. This court has issued notice in tax appeal as well as in civil application onNovember 17, 2009. Since the Revenue had seized diamonds worth about Rs. 10 crores and the respondent was likely to sell off the same by auction, as indicated in the newspaper Gujarat Samachar, dated November 17, 2009, this court has granted stay to the effect that there shall be no auction of the diamonds seized from the appellant. Thereafter, onDecember 4, 2009, this court has admitted the tax appeal and detailed order was passed in civil application directing the respondent to release the diamonds on deposit of the first instalment of Rs. 10 lakhs and thereafter to deposit the same amou....
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.... rough diamonds was 2,90,701.14 carats, tallies with manufacturing jhangds, stock and consumption register of rough diamonds, labour register and manufacturing bills of polished diamonds sent from Surat office to Mumbai office. Despite this explanation, the Assessing Officer made addition of difference between wrongly typed figure and the correct figure of rough diamonds consumption. On 1,40,000 carats, at Rs. 1,250 per carat was applied and the Assessing Officer made addition of Rs. 17,50,00,000 under section 69C of the Act. 6. Being aggrieved by the said order of the Assessing Officer, the appellant has preferred an appeal before the Commissioner of Income-tax (Appeals), who, vide his order datedOctober 19, 2004, deleted the said addition. While deleting the said addition, the Commissioner of Income-tax (Appeals) has observed that the Assessing Officer should not have passed the order under section 144 of the Act without giving adequate opportunity of being heard especially when such huge addition of Rs. 17,50,00,000 was being contemplated. The Assessing Officer was not justified in making presumption or assumption or estimation of such a high magnitude behind the back of the ap....
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....ed before the Tribunal that the alleged purchases were not made by the appellant at one stroke but throughout the year. The rough diamonds purchased on a particular date were manufactured and sold within a period of 15 days from the date of purchase. Since the manufacturing, sales and realization of sale proceeds is covered in a cycle of period of 15 days, the sale proceeds realized will be reinvested in another purchase and the cycle will go on. Therefore, the maximum moneys that will be required would be Rs.72,91,666, i.e., Rs. 17,50,00,000 divided by 24 cycles. The appellant has also contended that the appellant was entitled to relief under section 80HHC on the income assessed by him. The alternative contentions were also rejected by the Tribunal and, hence, question Nos. 3 and 4 were proposed by the appellant, which are in respect of its alternative contentions. 9. Mr. J. P. Shah, learned senior counsel appearing with Mr. Manish J Shah, learned advocate, for the appellant has submitted that the Tribunal has erred in reversing the well reasoned order of the Commissioner of Income-tax (Appeals) and in upholding the order of the Assessing Officer, taxing the huge amount of....
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....e Tribunal. He has submitted that the appellant made the submission before the Assessing Officer and furnished the percentage of yield of finished diamonds, which shows the yield for the assessment year 2001-02 shown at 15.64 per cent. He further submitted that the yield for the assessment year 2001-02 comes to 15.64 per cent. only when the consumption figure is taken at 4,30,701.14 carats. On the other hand, if the figure is taken at 2,90,701.14 carats, the yield comes to 24.61 per cent. and the same is above average use admittedly shown by the assessee from the assessment year 1999-2000 to the assessment year 2003-04. Therefore, he has submitted that consumption of rough diamonds at 4,30,701.14 carats, as per the audit report, stands corrected. 11. Mr. Bhatt further submitted that during the course of appeal proceedings before the Tribunal, in the index to the paper book, the assessee has certified that the page Nos. 17 to 183 were produced before the Assessing Officer and Commissioner of Income-tax (Appeals). However, it can be seen that the affidavits appearing at pages 20 to 28 are datedApril 10, 2004, whereas the assessment order was passed onMarch 31, 2004. He has, t....
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....r. Bhatt further submitted that section 139(5) of the Act allows an assessee to rectify, in case there is a mistake being found in the return of income submitted by him by filing a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, which ever is earlier. It is an admitted position that the assessee has not submitted any revised return in accordance with the provisions of section 139(5) of the Act pointing out the omission in the original return. It is only when the Assessing Officer has asked for the explanation, on the consumption of raw materials, the appellant-assessee came out with the submission that there was a mistake on the part of the auditor, i.e., only after the expiry of more than two and half years, when the tax audit for the succeeding assessment year also was completed by the chartered accountant. In support of this submission, Mr. Bhatt has relied on the decision of the apex court in the case of CST v. H. M. Esufali H. M. Abdulali [1973] 90 ITR 271 wherein it is held that the assessee cannot be permitted to take advantage of his own illegal acts and that it was his duty to pla....
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....n any of the years, except the assessment year 2001-02. The yield which is shown by the assessee is not decreasing, on the contrary it is increasing. As a matter of fact, the Assessing Officer had come out with a new method of finding out the yield. He has further submitted that the rejection of rough diamonds cannot be included in the yield as it was done by the Assessing Officer inasmuch the rejection of rough diamonds is taken out and rejected right at the threshold and it yields nothing. It does not undergo any processing for bringing polished diamonds. If that is so, to include it in the rough diamonds from which the polished diamonds are produced, would be travesty of reality. 18. Mr. Shah further submitted that in the assessment year 1999-2000, the labour charge of rough diamonds is Rs. 222, in the assessment year 2000-01 at Rs. 239 and in the assessment year 2001-02 it is Rs. 271. Based on this, the Assessing Officer adopted the rate of Rs. 271, which is considered to be high. He further submitted that the Assessing Officer nowhere in the order mentioned that Rs. 271 per carat was not paid and, hence, no portion of labour charges was disallowed by him. Even otherwis....
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....e Commissioner of Income-tax (Appeals) has held that it is merely a typographical error whereas the Tribunal has not accepted the assessee's theory of being it a typographical error. Since the two appellate authorities have recorded different findings of fact and the Tribunal's finding is merely based on inference and unsupported by any evidence on record, this court will have to consider the assessee's plea regarding typographical error in the light of the various documents produced before the authorities below. It is the consistent stand of the assessee that the actual consumption is 2,90,701.14 carats and not 4,30,701.14 carats as erroneously reflected in annexure D to Form No. 3CD of the audit report. The actual consumption of 2,90,701.14 carats is tallied with all other figures. It is also duly supported by the statement of the auditor, the statement of the partner of the appellant-firm as well as the affidavit of the typist. These documents were brushed aside by the Tribunal only on the ground that the same were not available with the Assessing Officer. The Tribunal, has, however, failed to take note of the fact that the Commissioner of Income-tax (Appeals) has called for the....
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....umbai office. 24. If the affidavit of the typist, i.e., Suresh Natverbhai Khetani, dated April 10, 2004, is considered, he clearly admitted that he carried out the typing of audit report, financial statements and Form No. 3CD including all its annexures of M/s. M. Kantilal Exports and M/s. Anjana Exports, for the year ending March 31, 2001. He also admitted that he also entered first the data of M/s Anjana Exports in Form No. 3CD, balance-sheet, profit and loss account including all annexures thereto. He thereafter copied the entire set of audit report, Form No. 3CD, annexures, balance-sheet and profit and loss account of Anjana Exports for the purpose of entering the data of M/s. M. Kantilal Exports. He further admitted that he followed the method of typing by copying the format of M/s. Anjana Exports to the typing of M/s. M. Kantilal Exports because the nature of business of both the firms was similar. The particulars i.e. alphabetical contents and information such as stock, purchases, consumption, rejections, sales and head of the expenses remain the same. In the method of copying and then typing in case of similar formula, he saved his time of typing inasmuch he has to ....
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....g Officer under section 131 of the Act and he explained all these facts to him. He also explained that primary data were correctly prepared but due to negligence of typist, the mistake occurred. 26. The statements on the affidavits of the typist as well as the chartered accountant clearly reveal that the typist has committed the mistake in typing the figures of consumption during the year. The chartered accountant, being a professional, having his responsibility of submitting of a correct report, when a mistake was committed, which was admitted by him as well as his typist, there is no reason not to believe these vital documents. 27. As against the above version of the appellant, which was accepted by the Commissioner of Income-tax (Appeals), the Tribunal has arrived at the finding on the basis of the yield shown by the appellant at 15.64 per cent. for the assessment year under appeal becomes acceptable only when the consumption figure is taken at 4,30,701.14 carats and if the figure is taken at 2,90,701.14 carats, the yield comes to 24.6 per cent. which is very much above the average use of rough diamonds. The Tribunal further considered the affidavit of the charte....