AI Drafter 
TaxTMI 
TaxTMI 
2011 (6) TMI 846
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.... rejection of book result on the ground that the appellant did not maintain qualitative details with regard to diamonds when that is an impossibility. II. The ld.CIT(A) was not justified in sustaining addition in valuation of closing stock polished diamonds to the extent of Rs. 4,00,000/- III. The ld.CIT(A) erred in sustaining addition of estimate of GP at 11.22% from 10.97% shown. 3. At the time of hearing before us, it is stated by the learned counsel that the assessee derives income from purchase, processing and selling of diamonds. The AO rejected the assessee's books of accounts and allowed GP rate of 11.22% as against GP disclosed by the assessee at 10.97% which resulted in addition of Rs. 6,68,813/-. He also made addition of....
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....o there is exchange difference. There was no question of reduction of the exchange difference from the sales. He also stated that if the AO was to determine the value of the closing stock at cost price, he should have simply worked out the value of the closing stock at the average of the opening stock and production. If this method would have been adopted, the value of the closing stock disclosed by the assessee is more. 4. The learned DR relied upon the orders of the authorities. 5. We have considered the arguments of the both the sides and perused the material placed before us. We find that ITAT, Ahmedabad 'C' Bench has considered identical issue in the case of M/s.Dhami Brothers (supra) wherein the ITAT held as under: "8. From t....
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....d verifiable. The assessee has also maintained quantitative details in respect of diamonds purchased and sold by it as well as for processing of diamond. There is no adverse comment from the auditor that the profit cannot be computed from the books of accounts maintained by the assessee. In our opinion, the qualitative details of each piece of diamond is not necessary for computation of the income of the assessee. Income of the assessee can be very well computed on the basis of accounts already maintained by the assessee. In view of the above, we are unable to agree with the AO that there is defect in the system of method of accounting of the assessee which requires rejection of the book results under Section 145(3) of the Act and estimatio....
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....7,16,79,847 Production of Polished diamond 95,834.68 Rs.89,78,05,777/- 1,33,986.59 Rs.126,94,85,624 Less: Sales of Polished diamond 89,834.68 Rs. 79,88,83,175 Less: Exchange difference on export Rs.2,32,75,007 Rs.77,56,18,168 Less: Cost of sale (net of GP) (6.85%) Rs.72,24,88,323 Therefore closing Stock 44,299.10 Rs. 54,69,97,301 Closing Stock as per book 44,299.10 Rs. 54,23,81,050 Therefore suppression of closing stock Rs. 46,16,251 10. At the time of hearing before us, the learned counsel for the assessee could not point out any mistake in the above working of the valuation of the closing stock by the AO.....
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....he direction of the CIT(A) to make the addition by working out the net profit at the rate of 4% is hereby quashed." 6. From the above, we find that on both the grounds, the issue is covered by the above decision of the ITAT. The assessee himself has admitted that the fact of the assessee's case is identical with the above decision of the ITAT. We therefore, respectfully following the above decision of the ITAT delete the addition of Rs. 6,68,813/- to the trading result. However, the addition of Rs. 4 lakhs to the closing stock is sustained and the AO is directed that the value of the opening stock of the next year would be modified accordingly. 7. Next ground of the assessee is against the disallowance of Rs. 32,000/- out of foreign t....