TaxTMI 
TaxTMI 
2010 (5) TMI 939
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....tances of the case and in law, learned CIT(A) failed to appreciate the fact that the onus is on the assessee to produce the parties to verify the sales and purchases when the letter of enquiry were returned by the postal authorities unserved. 3. Assessee is a private limited company engaged in the business of trading in diamonds. The assessee purchases both rough and polished diamonds and sells the same. The total turnover shown by the assessee during the previous year was Rs. 33.10 crores as against Rs. 22.94 crores in the immediately proceedings year. Gross profit during the previous year was Rs. 93.25 lakhs giving up GP margin of 2.82%. In the course of assessment proceedings, the Assessing Officer issued notice u/s. 133(6) to 19 parties. These parties had entered into transactions of purchase or sale with the assessee during the previous year. Out of the 19 parties, 2 parties responded to the notice issued by the Assessing Officer. The notices sent to 4 parties were returned unserved by the Postal Authorities. Names and addresses of these parties were as follows:- S.No. Name of the party Address 1 M/s. Sh....
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....ever, did not choose to issue summons to any of the parties; but on the other hands, chose to treat the price at which the assessee carried out transactions of purchase or sale, as not capable of verification. This is one of the grounds for the Assessing Officer to reject book result of the assessee. 4. Another reason given by the Assessing Officer was that GP shown by the assessee was less compared to the GP shown by similar assessees in the same line of business. The Assessing Officer had given the following details in this regard :- S.No. Name of the party Turnover (Rs. in crores) Gross profit (Rs. in crores) Percentage GP 1 Susashish Diamonds Ltd. 750.69 76.54 10.2% 2 Shrenju & Co. Ltd. 293.8 32.58 11.09% 3 Shital Gems P. Ltd. 22.47 1.11 4.9% 5. On the above stand of the Assessing Officer, the assessee submitted that difference GP for the current year was much better than the GP shown in the past and furnished following details :- Financial year Assessment year G.P. rate 1997-98 1998-99 0.63 1998-99 1999-2000 1.25 1999-2....
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....previous year, Custom Authorities have appraised and found the value to be in order; and therefore no adverse inference can be drawn. The assessee also pointed out that the order passed by the DRI has been set aside by CESTAT and the matter has been remanded for fresh valuation. The assessee thus pointed out that this aspect cannot also be the basis to doubt the correctness of the accounts of the assessee. 7. The Assessing Officer also was of the view that the assessee was not maintaining quality-wise stock Register for rough and polished diamonds. In this regard, the assessee pointed out that it was not possible to maintain quality-wise stock register. The assessee also submitted that all diamond merchants maintain records on carat basis and this is the practice prevalent in the diamond industry. The Assessee also pointed out that even Gems and Jewellery Export Promotion Council has recommended maintenance of stock of diamond on carat basis. The Assessing Officer, however, was of the view that maintaining carat-wise stock will not give clear picture of the business of the assessee. In this regard, the Assessing Officer also referred to the decision of ITAT Mumbai in the c....
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.... further scrutiny and rejection of books of accounts as there was decline in GP from earlier years. The law laid down by Hon'ble Allahabad High Court is till holds good on this issue i.e. absence of stock registers, cash memos, vouchers etc. and existence of low profits are relevant factors; where absence of a stock register, cash memos etc., if coupled with other factors like absence of vouchers in support the existence expenses and purchases and existence of low profit, may give raise to a legitimate inference that all is not well with the books and the same cannot be relied upon to assessee the income, profit or gains of an assessee, the authorities would be justified in rejecting the account books under section 145(2) and in making the assessment in the manner contemplated in that provisions- Awadesh Pratap Singh Abdul Rehman & Bros Vs. CIT, 76 Taxman 106 (All). Nevertheless, as held by Hon'ble Gauhati High court, even additions made straightaway on the grounds of low profits rate cannot be sustained - Additions to the profits of the assessee made solely on the ground that it was low without giving a specific finding that the accounts of the assessee were not correct an....
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....berate in detail in view of the above discussion and in the facts and circumstances of the instant case as detailed in this order above. Accordingly, the impugned addition is deleted and the Assessing Officer is directed to accept the disclosed GP." 10. Aggrieved by the order of learned CIT(A), the Revenue has preferred the present appeal before the Tribunal. We have heard the rival submissions. Learned DR relied on the order of the Assessing Officer. Learned counsel for the assessee reiterated the stand of the assessee as made before the learned CIT(A). 11. We have considered the rival submissions. We are of the view that the order of learned CIT(A) does not call for any interference. Admittedly all 19 parties to whom the Assessing Officer issued notices u/s. 133(6) of the Act ultimately had filed required details called for by the Assessing Officer. The Assessing Officer, if he had any doubt on the veracity of the reply sent by these parties, ought to have examined them by issuing summons and without doing so, he was not entitled to draw any adverse inference. In fact, the assessee had made a specific request for issue of summons u/s. 131 of the Act to all the p....