TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 30
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....at much lower rate than that arrived at by the Government valuer. (iv) Whether on the facts and circumstances of the case and in law, the learned CIT(A) was right in deleting the addition of gross profit at the rate of 3.30% made by the Assessing Officer rejecting the books of accounts, relying on the various discrepancies pointed out by the Assessing Officer in his account. 2. The assessee is a diamond merchant. Search and seizure operation u/s. 132 of the Act and survey action u/s. 133A of the Act was carried out in the case of Asian Star Group on 29.10.2010. The assessee was also covered under the search action. The assessee filed its e-return on 29.9.2011 showing income of Rs. 4.05 crores. Assessment was completed u/s. 143(3) of the Act determining total income at Rs. 10.91 crores. In the assessment order, the Assessing Officer disallowed claim of loss incurred on subsequent sale of undisclosed unaccounted diamonds found during course of search. The Assessing Officer also added gross profit estimated at 3.3% of sale of unaccounted diamond. In the appellate proceedings the learned CIT(A) deleted both the additions and hence the Revenue has filed this appeal before us. 3. At t....
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....hese loose papers were containing stock details of M/s A'Star Exports, M/s. Asian Star Diamond International P. Ltd. and M/s. Rahil Agencies. The stock mentioned in the above referred seized papers was stated as placed in one safe located at the office premises. The stock of diamonds found from the safe was valued by the Govt. Approved valuer appointed by the Income Tax Department at the time of prohibitory order execution and was valued as follows: Sr.No. Name of the entity Amount (Rs.) 1. M/s Rahil Agencies 10,56,66,666/- 2. M/s Asian Star Diamonds International Pvt. Ltd. 10,45,70,210/- 3. M/s A'Star Exports 13,47,63,640/- Total 34,50,00,516/- The statement of Shri Vipul Shah was again recorded on 27/12/2010, wherein he admitted the unaccounted stock of Rs. 34,50,00,516/- including unaccounted stock of Rs. 13,47,63,640/- pertain to the assessee. The computation of the total income of the assessee had declared undisclosed income of Rs. 13,47,63,640/- in the form of stock of polished diamonds under the head "profit and gains of the business and profession". In the course of assessment the assessee submitted .its explanation on why the undi....
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....able in the present case because in the above case the assessee was found some gold and currency by the custom authority which was confiscated by the custom department. The assessee has offered the said gold as undisclosed stock and claimed the loss on confiscation of gold as business loss. The assessee was engaged in the illegal activity of smuggling of gold and said gold and currency was found from the assessee which is illegal activity which cannot be part of business stock whereas in the present case the diamond was found from the premises of the assessee and the main object of the firm is to carrying on the business of diamond. This judgment has been considered in later decision of the Hon'ble Gujarat High Court in the case of DCIT Vs. Radhe Developers India Ltd. [2010] 29 ITR 1 and CIT Vs.Shilpa Dyeing & Printing Mills Pvt. Ltd. [Tax Appeal No.290 of 2013. In the case of DCIT Vs. Radhe Developers India Ltd. [2010] 29 ITR 1, the Hon'ble Gujarat High Court held that :- "26. The decisions of this court in the case of Fakir Mohmed Haji Hasan [2001] 247 ITR 290 (Guj) and Krishna Textiles [2009] 310 ITR 227 (Guj) are neither relevant nor germane to the issue considering the fact....
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....ns stated by the Assessing officer that in spite of revaluation by the assessee, it continue to record the value of diamond in its books at Rs. 13.47 crores. The Ld AO fail to appreciate the fact that appellant has declared income during search operation at Rs. 13.47 crores and accordingly recorded the same in its books of accounts. The valuation carried out by another Govt. Approved valuer has nothing to do with the amount declared by the assessee but the same was done to prove on the part of assessee that the value of diamond found during the search was much less therefore the assessee has to sell it at lower value. The AO has wrongly mistaken the purpose of second valuation. Thus the assessee has fully discharged its onus to disclose this stock and offer it as income. 12. With regard to AO's observation assessee maintained carat wise stock register, which is a normal practice prevalent in diamond trade. The Gems and Jewellery Export promotion Council has also recognised such practice. In fact, ACIT 16(3) Mumbai has also confirmed that diamond merchants maintained stock of diamond carat wise and this is a practice followed by diamond merchant in Mumbai as well as whole India. T....
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....be under the head income from other sources and therefore current year loss of Rs. 13,47,63,640/- have to be set off against the income in terms of provision of section 71 of the Act. Reliance can be placed on the judgment of Chensing Venture vs CIT [2007]163 Taxman 175 (Mad). 15. From the record we found that CIT(A) has recorded a categorical finding as per material placed on record and after relying on various judicial pronouncements dealt with the issue in great detail. Accordingly, we do not find any reason to interfere in the order of CIT(A). 16. In the result, appeal of the revenue is dismissed. 17. It was argued by ld. DR that provisions of Section 115BBE is specific provisions of the Act, according to which business loss cannot be set off against income declared during the course of search. 18. On the other hand, it was contended by ld. AR that Section 115BBE was inserted w.e.f.1.4-2013, whereas the assessment year under consideration is 2011-2012, hence this section is not relevant in this case, whereas the contention of ld. DR was that amendment is retrospective in nature and hence, applicable in this year also. 19. We have considered rival contentions and found....
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.... without any basis is not tenable. Further, it is not a matter of insertion of explanation or clarification to some existing provisions of law. It is a new section inserted barring claim of expenses/ allowance against particular income. Therefore any bar or restrictions of a claim cannot be applied retrospectively. It is well settled rule of interpretation allowed by time and sanctified by judicial decisions that retrospective operation should not be given to a statute so as to effect, alter or destroy an existing right or create a new liability or obligation. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only as per ratio of Hon'ble Supreme Court in the case of Govinddas Vs. ITO, (1976) 103ITR 123 (SC). A statue which deals with matter of substantive law and taxation is matter of substantive law-would not be construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary implication. 22. As per our considered view, Section 115BBE bar from claiming any expenses or allowance from the income taxable under section 68, 69, 69A,....