TaxTMI 
TaxTMI 
2012 (11) TMI 898
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.... Qty (carats) Value (Rs) Avg. Rate/carat Value adopted by the assessee 7214.82 61,44,415 851,65 Value determined by applying avg. rate 7214.82 1,03,91,840 1440.34 Difference in value 4,24,47,425 Less: deduction u/s 80HHC @ 30%. Undervaluation of closing stock of rough diamonds (A) 12,74,227 29,73,198 B. CUT & POLISHED DIAMONDS Value adopted by the assessee 3199.24 26466760 5090.50 Value determined by applying avg. rate 5199.24 39804052 7655.85 Difference in value 1,33,37,292 Less: deduction u/s 80HHC @ 30%. Undervaluation of closing stock of rough diamonds (B) 40,01,187 93,36,525 Total under valuation of closing stock i.e. A + B = 1,23,09,723/- 2.1 In response to the notice issued u/s 148, the assessee appeared before the A.O. from time to time and furnished the required details. During the course of assessment proceedings it was submitted that the balance of 7214.82 carats of rough diamonds which were lying with the assessee as closing stock includes r....
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....ndia) Ltd. v. ITO reported in 259 ITR 19 was cited before the A.O. and it was submitted that the same has not been followed. 2.4 It was submitted that rough diamonds of 2038.04 carats valued at Rs. 14,88,646/- had been imported in A.Y. 1987-88 in respect of which the assessee had a dispute with the supplier. This consignment was not consumed during the pendency of proceedings before the Hon'ble Bombay High Court and the Debt Recovery Tribunal. The assessee also submitted that the valuation of polished diamonds varies widely upon various factors and that to determine correct and true profit it is necessary to value the stock according to its class and category. It was submitted that during A.Y. 2003-04, the assessee has submitted valuation of closing stock adopting the cost qua each category in respect of rough diamonds as well as cut and polished diamonds which was accepted. The Accounting Standards of the I.C.A.I. requiring the valuation of stock by its class was brought to the notice of the A.O. It was submitted that the method followed by the assessee is an accepted method which has been consistently followed and has been accepted by the A.O. in two assessments framed u/s 143....
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....egory of rough diamonds and how much of it was left in the stock and what was the return of cut and polished diamonds from that stock of rough diamonds and what category of diamonds they produced and the yield rate of each category of rough diamonds. According to the ld. CIT(A) unless these details are filed to show the valuation of rough diamonds as per quality, the contention of the assessee cannot be accepted. However, he directed the A.O. to take into consideration the quantity of rough rejected diamonds which have to be valued at their estimated value as shown by the assessee. Similarly, he held that the stock of disputed diamonds for which purchase value had been taken at Rs. 14.84 lakhs from the year of import has to be taken at the same value. As regards the addition on account of cut and polished diamonds, he held that the valuation is based on the own choice of the assessee without any scientific basis or on some accounting principle. There are no details in the closing stock of different diamonds, quality-wise on the basis of which value of the diamonds can be taken as per the quality and colour of each lot of diamonds. He accordingly upheld the action of the A.O. in ....
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.... goods for the year ended 31.3.2004. Referring to page 37 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to the quantitative details of rough stock for the year ended 31.3.2004. He submitted that the entire rough stock was purchased from Mamata Exports in shape of four invoices. Referring to page 34 to 36 of the paper book, the ld. counsel for the assessee drew the attention of the Bench to the details of party-wise labour bill register (paid) during the year 2003-04. Referring to page 38 of the paper book read with page 42 to 45 the ld. counsel for the assessee drew the attention of the Bench to the details of bills and purchases. He submitted that the closing stock is out of purchases made only from one party i.e. Mamta Exports and the assessee exports to only party. The ld. Counsel for the assessee referring to the copy of stock register of finished goods, drew the attention of the Bench to the item-wise opening balance, receipt, exports and closing balance carat-wise. Similarly he referred to the valuation of the finished goods and submitted that the closing stock of 5199.84 carats valued at Rs. 2,60,26,683/- has been arrived at after consid....
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....od adopted by the assessee distorts the profits of a particular year. He submitted that there will a chain effect if the method followed by the assessee is disturbed. According to him closing stock of this year will become opening balance of next year. Therefore unless the opening stock is also adjusted it will give distorted figure. Since the assessee has filed all the bills and no defect was pointed out by the department, therefore, there cannot be any addition on account of under-valuation of closing stock. Referring to the copy of the assessment order for A.Y. 2006-07 passed u/s 143(3), he submitted that no such addition on account of under-valuation of closing stock has been made by the A.O. He accordingly submitted that the reopening proceedings initiated by the A.O. and upheld by the ld. CIT(A) is bad in law and no addition can be made on account of under-valuation of closing stock in view of rule of consistency and in absence of any defects pointed out by the Revenue Authorities. 4. The ld. D.R., on the other hand, relied on the order of the ld. CIT(A). He submitted that full details were not filed before the A.O. Therefore, the various submissions now produced by ....