TaxTMI 
TaxTMI 
2020 (5) TMI 402
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....cases are that the assessee has shown GP of Rs. 8,12,24,118/- @ 3.7% on the turnover of Rs. 2,18,98,74,418/- in comparison to the earlier years GP of Rs. 9,50,28,006/- @ 6.14% on the total turnover of Rs. 1,54,61,22,671/-. Thus, there is fall in GP by 2.44%. It was further noticed that the assessee has claimed the profit in excess as a sum of Rs. 2.31 crore, in the gross receipt if the foreign exchange fluctuation rate is reduced from the GP ratio, then 1% of the GP will further reduced of the assessee. Therefore, the assessee was asked to furnish the details of diamond manufacturing quantitywise and qualitywise and the basis of valuation of closing stock along with supporting evidences. But the assessee neither furnished any explanation with regard to the above details asked for nor he produced the books of accounts for the verification purposes which are called on several times. Therefore, the AO observed that the assessee has prevented his office from verifying the books of accounts. Further, the assessee has not maintained qualitywise details of polished diamonds which has been manufactured. The assessee has not provided closing stock details qualitywise and piecewise which wil....
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....ted that the noncompliance before the AO was not unintentional and not deliberate as such details were handed over to the counsel, but who failed to produce the same before the AO for the reasons best known to that counsel. During the remand proceedings, the assessee has produced the books of accounts and other details before the AO. The AO vide remand report submitted that the books of account have been rightly rejected as the labour charges to the extent of Rs. 17,76,00,000/- entered in the register were found to be defective as same were not bearing proper signature. There was variation in signatures of managers and karigars. However, the CIT(A) was of the view that the AO does not have the necessary expertise to examine and comment that the signatures are different as it is the work of a hand writing expert. The prima facie variation of signatures appearing in the registers cannot be sole basis of considering the books of account as defective and not verifiable. The gross of consumption of rough diamond in AY.2008-09 is 13.87% while in AY.2009-10; it has come down to 9.32%. Therefore, the rejection of books of accounts merely on the ground of difference in signature is not jus....
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....of Rs. 11211/- considering by the AO in the remand report. In view of these facts, the GP addition of Rs. 5,58,41,797/- was deleted and the electricity expenses amounting to Rs. 52,30,244/- was directed to be added to the manufacturing cost to calculate the closing stock at average cost of Rs. 11318.91/- per carat which has been arrived after reducing the GP margin of 3.71% from average export price of Rs. 11756.69 per carat, hence, the ground was partly allowed. 5. Being aggrieved, the Revenue has filed this appeal before this Tribunal against the deletion of GP addition of Rs. 5,58,41,797/- and the assessee has also filed an appeal against the order of the CIT(A) directing the revaluation of closing stock after considering the electricity expense of Rs. 52,30,244/- The ld. CIT(DR) submitted that the ld. CIT(A) has not appreciated the facts that during the course of remand report proceedings, the AO observed that the assessee failed to prove the genuineness of salary register. Further, during the assessment proceedings, the AO observed that the assessee has failed to genuineness of karigars wages register, hence, the genuineness of books of account is not proved, therefore, the ....
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....ng expenses which includes labour, wages and electricity expenses to work out the total cost of manufactured polished diamond. Therefore, the CIT(A) has correctly directed that the electricity bill's expenses to be included towards the manufacturing cost and consequently in the closing of manufactured diamonds. 8. We have heard the rival submissions and perused the relevant material available on record. We find that the books of accounts were rejected by the AO merely on the basis of variation of signatures of karigars, workers as appearing in the salary register. However, no specific defects have been pointed out by the AO. Therefore, the difference in signature cannot be a ground to reject the books of accounts. The CIT(A) has rightly observed that the AO is not hand writing expert to distinguish the signature of the karigar. Therefore, we are of the considered opinion that the CIT(A) has rightly allowed the ground of rejection of books of accounts u/s.145(3) of the Act in favour of the assessee. So far, the deletion of GP addition of Rs. 5,58,41,797/- is concerned. We find that the assessee has produced the relevant records in form of export bills, purchased bills and cash boo....
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....AO observed that it is not delivery based transaction. As per section 43(5) of the Act, the transaction which is settled otherwise than actual delivery will be a speculative transaction. Therefore, the forward contract loss was a speculation in nature; hence, the AO relying on the CBDT Circular No.23 dated 12-09-1961 has disallowed the same. 11. Being aggrieve, the assessee carried the matter before CIT(A), wherein it was submitted that the net exchange difference gain on export of Rs. 8,65,35,472/- after setting off loss on cancellation of forward contract of Rs. 7.55 crore. Since, the both items being linked with fluctuation in exchange rate, set-off which is very much allowable. The assessee has also filed a copy of ledger account of exchange difference on export as also exchange difference on imports. The CIT(A) observed that the perusal of details reveals that the appellant is in the business of export of diamonds. It is a known fact that persons who are engaged in the business of import/ export are exposed to the risk of fluctuation in the exchange rate of currency. The AO has held that the forward cancellation loss is speculative in nature and is not delivery based transac....
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....siness and profession. 13. Per contra, the ld. counsel for the assessee submitted that the assessee business activity comprises of import of diamonds and its manufacturing polished diamonds, the same are exported. Therefore, in this business activity, the assessee is very much exposed to exchange rate risk and in order to safeguard its business interest, the assessee enters into forward exchange contract. Therefore, the gain or loss arising on its foreign exchange contract is not anything but gain or loss arising in the course of business contract, predominantly entered by the importer or exporter to hedge against the loss. The assessee had booked foreign exchange in the forward market with bank. Such loss has been rightly allowed by the CIT(A) for which the assessee has placed reliance on the decision of Hon'ble Gujarat High Court in the cases of CIT v. Panchmahal Steel Ltd. (2013) 215 taxman 140 (Guj) (HC), CIT v. Friends & Friends Shiping Pvt. Ltd (2013) 34 taxman.com 553 (Guj) (HC) and CIT v. Badridas Gauridu Pvt. Ltd (2004) 134 taxmann 376 (Bom) (HC). 14. We have heard the rival submissions and perused the relevant material available on record. We find that the assessee has ....
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....AY.2010-11 by way of increase in value of opening stock. 19. We have heard the rival submissions and perused the material available on record. As we have uphold that finding of CIT(A) to consider, the electricity expenses of Rs. 52,30,244/- in manufacturing expenses and thereby increase the value of closing stock. Since the value of closing stock has been increased during this year, it becomes opening stock for the next year. Therefore, the AO is directed to consider to increase the opening stock of the equal amount of Rs. 52,30,244/- in AY.2010-11 in the opening stock. Therefore, this ground of appeal of the assessee is allowed. 20. In the result, this appeal of assessee for AY.2009-10 is partly allowed. In ITA No.2833/AHD/2014/AY.2009-10 by the Revenue:- 21. The grounds raised by the assessee reads as under:- "(i) On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in holding that the Assessing officer has committed an error while giving effect to the Appeal order that he should have calculated the closing stock by adopting the cost of sale at Rs. 11,318.91/- per carat, after reducing the G.P. margin of 3.71%, without appreciating the fact that ....
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....see. Therefore, the new direction of the CIT(A) vide his order dated 01-08-2014 is vague and ambiguous. The above grounds of appeal raised by the Revenue are against the calculation of closing stock by adopting the cost of sale @11318.91 per carat. Hence, these are being considered together. 23. Briefly stated the facts of the cases are that in this case an order Section 143(3) dated 23-12-2011 was passed by the AO, wherein addition of Rs. 13,13,99,254/- as against the return income of Rs. 6,94,479/- were made. The assessee has filed an appeal before the CIT(A)-V, Surat who vide his order dated 18-04-2013, partly allowed the appeal of the assessee with certain directions to the AO for calculation of the closing stock. In consequence to which the AO passed an order u/s.250 dated 10-06-2013, giving effect to the order of the CIT(A) against the said order, the assessee filed an application u/s.154 dated 15-10-2013, claiming that there was an error in the calculation of relief allowed to it u/s.250 dated 10-06-2013. However, the AO has rejected this application u/s.154 vide his order dated 07-10-2013 holding that the order passed u/s.250 was as per the directions of CIT(A). The asse....