Sanghi Jewellers Pvt.Ltd.,Hy, Hyderabad v. ACIT, Cir-3(1), Hyderabad

ITA 1326/HYD/2011 | 2008-2009
Pronouncement Date: 26-12-2011 | Result: Partly Allowed

Appeal Details

RSA Number 132622514 RSA 2011
Assessee PAN AAFCS5934D
Bench Hyderabad
Appeal Number ITA 1326/HYD/2011
Duration Of Justice 5 month(s) 12 day(s)
Appellant Sanghi Jewellers Pvt.Ltd.,Hy, Hyderabad
Respondent ACIT, Cir-3(1), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 26-12-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 26-12-2011
Assessment Year 2008-2009
Appeal Filed On 14-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI H.S. SIDHU JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER S.A. NO. 107/HYD/2011 ARISING OUT OF ITA NO. 1326/HYD/2011 ASSESSMENT YEAR : 2008-09 ITA NO. 1326/HYD/2011 ASSESSMENT YEAR : 2008-09 M/S. SANGHI JEWELLERS PVT. LTD. HYDERABAD PAN: AAFCS5934D VS. ACIT CIRCLE-3(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI Y. RATNAKAR RESPONDENT BY: SHRI V. SRINIVAS DATE OF HEARING: 0 9 .1 2 .2011 DATE OF PRONOUNCEMENT: 26.12.2011 O R D E R PER CHANDRA POOJARI AM: THE APPEAL AND THE STAY APPLICATION BY THE ASSESSE E ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV HYDERA BAD DATED 30.6.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE RAISED THE FIRST GROUND OF APPEAL WITH REGARD TO SUSTAINING THE PARTIAL DISALLOWANCE OF THE ADDITION AT RS. 1 32 01 183 OUT OF THE DISALLOWANCE OF RS. 7 46 50 849 MADE BY THE ASSESSING OFFICER TOWARDS PRODUCTION LOSS DUE T O WASTAGE AT 5.403%. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURING AND SALE OF GOLD AND SILVE R ORNAMENTS SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 2 BESIDES TRADING IN BULLION. THE ASSESSEE HAD CLAIM ED WASTAGE OF GOLD SILVER AND REAL STONES. AS REQUIRED BY THE R EVENUE AUTHORITIES THE SUBMITTED A 'NOTE ON WASTAGE' STAT ING THAT GOLD BULLION IS PROCESSED IN THEIR FACTOR FOR MANUFACTUR ING OF JEWELLERY. SOME ITEMS ARE GIVEN TO THE KARIGARS TO CARRY ON JE WELLERY MAKING ON JOB WORK BASIS. OTHER ITEMS ARE MANUFACTURED IN IN-HOUSE FACTORY. REGARDING THE JOB WORK GIVEN TO THE KARI GARS ISSUES TO THEM AND RECEIPTS FROM THEM ARE RECORDED IN OPERATI ONAL SHEETS. ENTRIES ARE PASSED EVERY MONTH ON THE BASIS OF THE DETAILS AVAILABLE IN RESPECT OF THE KARIGARS. WITH REGARD TO THE FACTORY PRODUCTION PRODUCTION ACTIVITIES ARE CARRIED ON IN THE FOLLOWING DEPARTMENTS: A) CASTING DEPARTMENT B) GHAT-1 DEPARTMENT C) GHAT-II DEPARTMENT (HAND WORK) D) BUFFING DEPARTMENT E) SETTING DEPARTMENT F) TAGGING DEPARTMENT 4. IT WAS EXPLAINED THAT LOSS OF MATERIAL HAPPENS IN T HESE DEPARTMENTS. PHYSICAL STOCK IS TAKEN ONCE IN A MON TH IN ALL THESE DEPARTMENTS. THE DIFFERENCE BETWEEN THE STOCK AS P ER BOOKS AND PHYSICAL STOCK IS CONSIDERED AS WASTAGE IN THE FACT ORY AND ENTRY IS PASSED AT THE END OF THE MONTH AND THE WASTAGE IN T HE FACTORY AND THE WASTAGE IN THE PROCESS OF JOB WORK IS THE TOTAL WASTAGE. IN THE YEAR UNDER CONSIDERATION THE WASTAGE IN FACTORY IS 46296 GRAMS AND THE WASTAGE IN THE JOB WORK IS 12668 GRAMS AND THE TOTAL SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 3 WASTAGE IS 58964 GRAMS (INCLUDING CONSUMPTION IN PL ATING OF 2024.600 GRAMS). 5. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WA S CLAIMING WASTAGE PURELY ON ESTIMATE BASIS AND NO DA Y TO DAY ACCOUNTS OF LOSS OF GOLD IN THE FORM OF WASTAGE HAD BEEN MAINTAINED. THE CONTENTION OF THE ASSESSEE THAT 'E NTRIES HAVE BEEN PASSED EVERY MONTH ON THE BASIS OF DETAILS AVA ILABLE IN RESPECT OF THE KARIGARS' THE ASSESSING OFFICER NOT ED THAT THE SAME APPLIED ONLY TO THE WASTAGE OCCURRING IN THE PROCES S OF JOB WORKS WITH KARIGARS. THE ASSESSING OFFICER OPINED THAT T HE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN ANY REASON FOR THE LOSS OC CURRING AT THE FACTORY IN THE FORM OF WASTAGE. THE ASSESSING OFFI CER CONCLUDED THAT THE ASSESSEE IS MAKING ENTRIES TOWARDS 'WASTAG E' AS PER ITS OWN CONVENIENCE WITHOUT FOLLOWING ANY ACCOUNTING P RINCIPLES AND HAD NOT MENTIONED THE QUANTUM OF LOSS IN ANY STATUT ORY REGISTER REQUIRED TO BE MAINTAINED FOR STOCK FOR VARIOUS AUT HORITIES. THE ENTRIES ARE BEING PASSED ON MONTHLY BASIS ON THE BA SIS OF THE DETAILS AVAILABLE IN RESPECT OF THE KARIGARS FOR W HICH NO DAY TO DAY ACCOUNTS ARE MAINTAINED. THE ASSESSING OFFICER FEL T THAT HAVING SUCH A HUGE TURNOVER THE ASSESSEE SHOULD HAVE MAIN TAINED DAY TO DAY ACCOUNTS FOR THE LOSS OF METALS DUE TO WASTAGE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE FAILED TO SUBSTANTIA TE ITS CLAIM OF WASTAGE HE DISALLOWED THE ENTIRE AMOUNT OF RS. 7 4 6 50 849 SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 4 CLAIMED BY THE ASSESSEE. ON APPEAL THE CIT(A) ALL OWED THE WASTAGE AT 3%. 6. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US SU BMITTED THAT THERE WAS WASTAGE FOR THE EARLIER YEAR AND ALS O SUBSEQUENT YEARS AS FOLLOWS: PARTICULARS ASSESSMENT YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 COMMODITY GOLD GOLD GOLD GOLD GOLD GOLD UNIT OF MEASUREMENT GRAMS GRAMS GRAMS GRAMS GRAMS GRAMS OPENING STOCK 11586.79 45631.02 52709.08 65933.60 1 02800.88 79419.36 ADD: PURCHASE DURING YEAR (LESS PURCHASE RETURN 426791.89 641507.26 726790.82 1090582.13 661054.93 604977.27 438778.68 687138.28 779499.89 1156515.73 763855.81 684396.63 LESS CLOSING STOCK 45128.45 52709.08 65933.60 10280 0.88 79419.35 64446.56 PRODUCTION DURING THE YEAR (INCLUDING PRODUCTION LOSS) 393250.23 634429.21 713566.30 1053714.85 684436.46 619950.07 PRODUCTION LOSS (WASTAGE) 13519.76 30400.00 46415.72 56940.06 29851.36 23240. 62 PERCENTAGE (%) 3.44 4.79 6.50 5.40 4.36 3.75 7. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUT ATTENTION TO THE RATE OF NET PROFIT AS BELOW: ASSESSMENT YEAR % OF NP 2005-06 1.23 2006-07 1.59 2007-08 1.68 2008-09 1.92 2009-10 1.50 2010-11 2.25 8. FROM THE ABOVE HE SUBMITTED THAT FOR THE A.Y. 2008 -09 THE RATE OF NET PROFIT IS 1.92% WHICH IS HIGHER THAN TH E EARLIER YEAR AND AS SUCH BOOKS OF ACCOUNT ARE TO BE CONSIDERED AS TR UE AND CORRECT AND THERE CANNOT BE ANY CHANCE FOR ESTIMATION OF WA STAGE OR ESTIMATION OF INCOME BY THE LOWER AUTHORITIES. FUR THER HE SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 5 SUBMITTED THAT THE CIT(A) RELIED ON THE NOTIFICATIO N ISSUED UNDER CUSTOMS ACT BEARING NO. 52/2003 DATED 31 ST MARCH 2003 WHEREIN WASTAGE IN CASE OF (A) PLAIN JEWELLERY AND ARTICLES THEREOF UN- STUDDED IS AT 3.5% AND (B) STUDDED JEWELLERY AND AR TICLES THEREOF AT 9%. HE SUBMITTED AS PER THE CIRCULAR THE WASTAGE C LAIMED BY THE ASSESSEE IS WITHIN THE PERMITTED FIGURES OF WASTAGE PRESCRIBED BY THE NOTIFICATION RECEIVED UNDER CUSTOMS ACT. FURTH ER HE SUBMITTED THAT THEREAFTER NEW NOTIFICATION HAS BEEN ISSUED BY CUSTOMS DEPARTMENT BEARING NO. 84/2007 CUSTOMS DAT ED 6.7.2007 AND 47/2008 NEW DELHI DATED 11 TH APRIL 2008. HOWEVER THERE WAS NO CHANGE IN THE PERCENTAGE OF W ASTAGE PRESCRIBED THEREIN. FURTHER HE SUBMITTED THAT THE ASSESSEE'S CLAIM OF WASTAGE AT 5.403% IS LESS THAN THE RATE OF WASTAGE CLAIMED BY DIFFERENT UNITS IN THIS LINE OF BUSINESS . HE ALSO RELIED ON THE JUDGEMENT OF DELHI HIGH COURT IN THE CASE O F CIT VS. AERO CLUB (336 ITR 443) WHEREIN IT WAS HELD AS UNDER: 'THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FOOTWEAR. THE ASSESSE E FILED ITS RETURN FOR THE ASSESSMENT YEAR 1994-95 BU T DID NOT ANNEX THE AUDIT REPORT. THE ASSESSING OFFICER ESTIMATED THE PROFIT AND ADOPTED THE INCOME OF RS. 17 28 389. BEFORE THE COMMISSIONER (APPEALS) THE ASSESSEE CONTENDED THAT THE ASSESSEE'S GROUP WAS MERELY IN THE BUSINESS OF EXPORTS TO THE USSR AND AFTER ITS DISINTEGRATION THE ASSESSEE HAD STARTED THE BUSINESS OF LOCAL MANUFACTURE AND SALES. THIS BEIN G THE INITIAL YEAR OF BUSINESS THE TURNOVER WAS LOW. THE ASSESSEE WAS INCURRING LOSSES. IT WAS POINTED OUT BY CITING THE COMPARABLE CASE OF B THAT IN THE YEAR 19 94 THE DECLARED PROFIT BEFORE TAX WAS 0.19 PER CENT A ND IF THIS RATE WAS APPLIED TO THE TURNOVER OF THE ASSESS EE AS ACCEPTED BY THE ASSESSING OFFICER THE NET PROFIT I N THE SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 6 CASE OF THE ASSESSEE WOULD COME TO RS. 1 19 415 WHEREAS THE ASSESSEE HAD DECLARED A PROFIT OF RS. 6 60 883 IN ITS AUDITED PROFIT AND LOSS ACCOUNT. T HE COMMISSIONER (APPEALS) HELD THAT THE NET PROFITS AS DECLARED BY THE ASSESSEE COULD NOT BE DISTURBED. T HIS WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT: HELD DISMISSING THE APPEAL THAT THE COMMISSIONER (APPEALS) AND THE TRIBUNAL RIGHTLY SET ASIDE THE BE ST JUDGEMENT ASSESSMENT OF THE ASSESSING OFFICER ON TH E GROUND THAT THE ASSESSING OFFICER HAD NOT BROUGHT O N RECORD ANY COMPARABLE CASE WHEREIN THE NET PROFIT DECLARED BY A TAXPAYER IN A SIMILAR BUSINESS WAS HIGHER THAN THE ONE DECLARED BY THE ASSESSEE. THE PROFIT MARGINS OF A TAX PAYER AS DECLARED BY HIM C OULD BE VARIED AND DISTURBED ONLY IF THE PROFIT MARGINS IN THE CASE OF OTHER ASSESSEES ENGAGED IN SIMILAR BUSINESS ARE HIGHER. THE ASSESSEE HAD BROUGHT ON RECORD EVIDENCE THAT IN THE CASE OF A COMPANY HAVING SIMIL AR BUSINESS THE DECLARED PROFITS WERE IN FACT LOWER T HAN THE PROFITS DECLARED BY THE ASSESSEE. THE ASSESSIN G OFFICER IN HIS REMAND REPORT WAS ALSO UNABLE TO COMMENT ON THE COMPARABLE CASE OF B AND A RELIED UPON BY THE ASSESSEE. IN THE CIRCUMSTANCES THE TRIBUNAL RIGHTLY HELD THAT THE NET PROFIT AS DECLAR ED BY THE ASSESSEE WAS NOT REQUIRED TO BE DISTURBED.' 9. FURTHER HE SUBMITTED THAT THE ASSESSEE METICULOUSL Y MAINTAINED THE STOCK REGISTER AND THERE IS NO REJEC TION OF ACCOUNTS BY THE ASSESSING OFFICER. WITHOUT REJECTING THE BO OKS OF ACCOUNT WASTAGE CANNOT BE DETERMINED ARBITRARILY. HE DREW OUR ATTENTION TO PAPER BOOK PAGE NOS. 80 TO 84 WHERE THE ASSESSEE QUANTIFIED THE WASTAGE ON PERIODICAL BASIS. 10. THE LEARNED DR STRONGLY OPPOSED THE ARGUMENT OF THE ASSESSEE'S COUNSEL AND RELIED ON THE ORDER OF THE C IT(A). SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 7 11. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE THE AS SESSING OFFICER MADE DISALLOWANCE TOWARDS WASTAGE ON THE REASON THA T THE ASSESSEE DID NOT MAINTAIN DAY TO DAY ACCOUNT OF WAS TAGE. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IS MAKING ENTRIES REGARDING WASTAGE AS PER HIS CONVENIENCE AND NO CONTEMPORANEOUS RECORDS HAVE BEEN MAINTAINED REGARD ING QUANTIFICATION. BUT THE ASSESSING OFFICER LOST SIG HT OF THE FACT THAT THERE IS WASTAGE WHILE MANUFACTURING GOLD JEWELLERY AND THE WASTAGE CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED A ND IT SHOULD BE ON REASONABLE BASIS. AS SEEN FROM THE NET PROFI T DECLARED BY THE ASSESSEE THE NET PROFIT FOR THE PRESENT ASSESS MENT YEAR IS AT 1.92%. HOWEVER THE SAME IS 2.25 FOR ASSESSMENT YE AR 2010-11. FURTHER WASTAGE CLAIMED BY THE ASSESSEE FOR ASSESSM ENT YEAR 2008-09 IS 5.4%. HOWEVER THE SAME FOR ASSESSMENT YEAR 2009-10 IS 4.36% AND THE WASTAGE CLAIMED BY THE ASSESSEE I S AS FOLLOWS: PARTICULARS ASSESSMENT YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 COMMODITY GOLD GOLD GOLD GOLD GOLD GOLD UNIT OF MEASUREMENT GRAMS GRAMS GRAMS GRAMS GRAMS GRAMS OPENING STOCK 11586.79 45631.02 52709.08 65933.60 1 02800.88 79419.36 ADD: PURCHASE DURING YEAR (LESS PURCHASE RETURN 426791.89 641507.26 726790.82 1090582.13 661054.93 604977.27 438778.68 687138.28 779499.89 1156515.73 763855.81 684396.63 LESS CLOSING STOCK 45128.45 52709.08 65933.60 10280 0.88 79419.35 64446.56 PRODUCTION DURING THE YEAR (INCLUDING PRODUCTION LOSS) 393250.23 634429.21 713566.30 1053714.85 684436.46 619950.07 PRODUCTION LOSS (WASTAGE) 13519.76 30400.00 46415.72 56940.06 29851.36 23240. 62 PERCENTAGE (%) 3.44 4.79 6.50 5.40 4.36 3.75 SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 8 12. THE AVERAGE WASTAGE WORKS OUT AT 4.71%. CONSIDERIN G THE RATE OF NET PROFIT AT 1.92% FOR THE PRESENT ASSESSM ENT YEAR WHICH IS HIGHER THAN ALL EARLIER YEARS GIVING WEIGHTAGE T OWARDS THIS WE MAKE WASTAGE AT A ROUND FIGURE OF 5% CONSIDERING TH E FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER WE MAKE IT CLE AR THAT OUR OBSERVATION IS ONLY TO THE PRESENT YEAR UNDER CONSI DERATION AND THIS FINDING SHALL NOT PREJUDICE THE ASSESSING OFFI CER WHILE COMPLETING THE ASSESSMENT FOR ANY OTHER ASSESSMENT YEAR. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 13. THE NEXT GROUND IS WITH REGARD TO ADDITION TOWARDS STOCK VARIATION. BRIEF FACTS OF THE ISSUE ARE THAT THER E WAS DIFFERENCE IN CLOSING STOCK SHOWN BY THE ASSESSEE IN BANK STATEME NT AS COMPARED TO THE RETURN OF INCOME WHICH IS AS FOLLOW S: S. NO. METAL AS PER BANK STATEMENT (RS.) AS PER RETURN OF INCOME (RS.) DIFFERENCE (RS.) 1. GOLD 12 03 97 265.00 9 91 87 965.00 2 12 09 300.00 2. SILVER 2 039.11 1 651.00 388.11 3. OTHER METALS 2 67 44 498.69 2 00 97 029.00 6 47 469 69.00 TOTAL 2 78 57 157.80 14. THE ASSESSING OFFICER MADE ADDITION OF RS. 2 78 57 158. ON APPEAL THE CIT(A) SUSTAINED THE ADDITION ONLY TO TH E EXTENT OF RS. 9 27 810 WITH REFERENCE TO THE VARIATION IN THE QUA NTITY. THERE IS EXCESS STOCK OF 45 CT OF DIAMONDS. AGAINST THIS TH E ASSESSEE APPEAL IS IN APPEAL BEFORE US. 15. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER ADDED A SUM OF RS. 2 78 57 158 ON ACCOUNT OF SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 9 DIFFERENCES IN THE VALUATION OF CLOSING STOCK AS PE R STATEMENT FURNISHED TO BANK AND AS PER BOOKS OF VARIOUS ITEMS . OUT OF THIS ADDITION THE CIT(A) HAS CONFIRMED ADDITION OF RS. 9 27 810 AND DELETED THE BALANCE ADDITION OF RS. 2 69 29 348. T HE LEARNED COUNSEL FOR THE ASSESSEE INVITED THE ATTENTION OF B ENCH TO PARA 18.5 OF THE ORDER OF THE CIT(A) WHICH SHOWS THE QUA NTITY OF STOCKS AS PER BOOKS AND THAT AS PER BANK STATEMENT. THE T OTAL QUANTITY OF DIAMONDS WHICH INCLUDES POLKA AND URD AS PER STA TEMENT GIVEN TO BANK AS ON 31.3.2008 IS 1605 CT AND THE QU ANTITY OF STOCK AS PER BOOKS IS 1560 CT. THERE IS A VARIATION OF 4 5 CT AND THE CIT(A) VALUED THE DIFFERENCE AT RS. 20 618 PER CT A S SHOWN IN THE BANK STATEMENT. DOING SO THE VALUE CAME TO RS. 2 97 810 WHICH WAS SUSTAINED BY THE CIT(A). 16. REGARDING THE VARIATION IN THE QUANTITY OF STOCK T HE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVERY MONTH STOCK STATEMENT HAS TO BE FILED BEFORE 5 TH OF THE SUCCEEDING MONTH. THE TIME IS SO SHORT THAT THERE ARE BOUND TO BE SOME VA RIATIONS IN THE QUANTITIES AND VALUATION DUE TO ARITHMETICAL AND CA LCULATION ERRORS. THE STOCK STATEMENT FILED WITH THE BANK IS ACCEPTED EVEN IF THERE ARE ANY VARIATIONS AS LONG AS THEY ARE MARGIN AL. THE ASSESSEE DOES NOT GO INTO PRECISE CALCULATIONS WHIL E PREPARING STOCK STATEMENT TO THE BANK. MOSTLY QUANTITIES ARE ROUNDED OFF WHILE CALCULATING. IF THE VARIATION IS CONSIDERED IN RELATION TO THE TOTAL STOCKS HELD IT IS MARGINAL IN NATURE. THE C LOSING STOCK SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 10 VALUATION FOR THE PURPOSE OF BOOKS IS MORE AUTHENTI C FIGURE AS THE SAME IS PREPARED WITH BETTER CARE AND PRECISION. E VERY EFFORTS IS MADE TO RECTIFY ERROR IF ANY WHILE VALUING THE STO CKS FOR THE PURPOSE OF BOOKS. THE STOCK STATEMENTS FILED WITH THE BANKS ARE PRIMARILY MADE TO ASSURE THE BANK THAT THEIR LOANS ARE WELL SECURED AND THEREFORE SMALL VARIATIONS ARE GENERA LLY IGNORED FOR RECONCILIATION OF THE FIGURES STATED IN THE STATEME NT TO BANK WITH ACTUAL STOCKS. ACCORDINGLY THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN THE PHYSICAL QUANT ITY OF STOCKS AT 45 CT MAY BE IGNORED AND NO ADDITION IS WARRANTED. 17. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT EVEN THE VALUE TAKEN AT RS. 20 618 PER CT IS NOT CO RRECT. THE DIFFERENCE OF 45 CT (EVEN IF TRUE) IS TAKEN AS ENTI RELY THAT OF DIAMONDS WHEREAS THE GROUPING IS DIAMOND POLKA DIA MONDS AND URD. THE VALUE IS AS FOLLOWS: DESCRIPTION VALUE AS PER BANK STATE (RATE PER CT.) VALUE AS PER BOOKS (RATE PER CT.) DIAMOND POLKI RS. 700 (MOSTLY REJECTS) RS. 12 465 DIAMONDS RS. 20618 RS. 11 665 DIAMONDS (URD) - RS. 17 976 18. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT THE DIFFERENCE COULD HAVE OCCURRED EITHER IN DIAMON D POLKI OR DIAMONDS OR DIAMOND URD BECAUSE THEY ARE GROUPED AS PER UNIT. VALUE SHOWN IN BOOKS IS AT COST WHILE VALUES AS PER BANK STATEMENT IS APPROXIMATE REALISABLE VALUES. THEREF ORE VALUING THE DIFFERENCE OF 45 CT AT RS. 20 618 PER CT IS NOT JUS TIFIED. IN ANY SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 11 EVENT THE DIFFERENCE OF 45 CT IS ONLY DUE TO CALCU LATION ERRORS IN THE STATEMENT BUT PHYSICALLY THE SAID STOCK NEVER EXISTED. IT WOULD BE UNJUST TO TREAT ANY DIFFERENCE BETWEEN THE STOCK STATEMENT AND BOOK STOCK AS IF THE SAID STOCK EXIST ED BUT NOT DECLARED. SINCE THE STOCK STATEMENTS ARE INTENDED FOR THE BANK TO BE SATISFIED ABOUT THE AVAILABILITY OF ADEQUATE SEC URITY TO COVER ITS LOAN THE STATEMENT IS SO PREPARED WITH REASONABLE ACCURACY BUT NOT TALLYING THE SAME TO THE LAST GRAM OR LAST CT O R TO THE LAST RUPEES. AS FAR AS THE ASSESSEE IS CONCERNED IT TR IED TO BE AS PRECISE AS POSSIBLE WHILE REPORTING THE EXISTENCE O F STOCKS TO THE BANK BUT VARIATIONS ARE BOUND TO BE THERE IN ANY SU CH STATEMENTS GIVEN TO BANK BECAUSE OF THE FACTORS EXPLAINED ABOV E. ACCORDINGLY THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VARIATION OF 45 CT DESERVES TO BE IGNORED AND NO ADDITION IS CALLED FOR AND WITHOUT PREJUDICE IT IS CONTENDED THAT THE VALUATI ON SUSTAINED BY THE CIT(A) AT RS. 9 27 810 IS EXCESSIVE. 1 19. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN THE PRESENT CASE THERE IS VARIATION IN QUANTITY AT 45 CARATS OF DIAMONDS IN THE STOCK STAT EMENT SUBMITTED TO THE BANK AS COMPARED TO THE BOOKS OF A CCOUNT. AS PER BANK STATEMENT IT IS 1605 CT AND AS PER CLOSING STOCK IT IS 1560 CT OF DIAMONDS IN BOOKS OF ACCOUNT. WHEN THE ASSE SSEE CLAIMS THAT BOOKS OF ALONE IS CORRECT AND INFLATED STOCK S TATEMENTS GIVEN SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 12 TO BANK ARE MOTIVATED HEAVY BURDEN LIES ON THE ASS ESSEE TO PROVE THE CORRECTNESS OF THE CLAIM. THE PRACTICE OF INFL ATION OF STOCK IN STATEMENTS GIVEN TO BANK IS NOT SHOWN TO EXIST NOR THAT IT HAS BEEN RECOGNISED IN COMMERCIAL CIRCLE OR BY THE COURT EVE N ASSUMING THAT SUCH PRACTICE EXISTS WE ARE NOT EXPECTED TO T AKE JUDICIAL NOTICE OF SUCH PRACTICE SO AS TO ENABLE THE ASSESSE E TO GO BACK ON HIS OWN STATEMENT GIVEN TO THE BANK AS TO THE STOCK HELD OR HYPOTHECATED TO THE BANK. IN VIEW OF THIS WE ARE OF THE OPINION THAT THE STOCK REGISTER OF THE ASSESSEE IS NOT RELI ABLE AND ON THIS COUNT THE ADDITION MADE IS SUSTAINED. THIS GROUND OF THE ASSESSEE IS DISMISSED. 21. THE ASSESSEE FILED STAY APPLICATION NO. 107/HYD/201 1 SEEKING STAY OF DEMAND OF RS. 1 54 29 528 AND THE S AME BECOMES INFRUCTUOUS AS WE HAVE DISPOSED OF THE APPEAL ITSEL F. 22. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AND THE STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON _26 TH DECEMBER 2011. SD/- SD/- SD/- (H.S. SIDHU) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD DATED THE _26 TH DECEMBER 2011 SA NO. 107 & I.T.A NO 1326/HYD/2 011 M/S. SANGHI JEWELLERS PVT. LTD. =============================== 13 COPY FORWARDED TO: 1. M/S. SANGHI JEWELLERS PVT. LTD. C/O. SHRI Y. RATNA KAR ADVOCATE TILAK ROAD HYDERABAD. 2. ASST. COMMISSIONER OF INCOME - TAX CIRCLE - 3(1) HYDERABAD. 3. THE CIT(A) - IV HYDERABAD . 4. THE CIT - I II HYDERABAD. 5. THE DR A BENCH ITAT HYDERABAD TPRAO