M/s Dhami Brothers, Surat v. The ACIT, Circle-9, Surat

ITA 2309/AHD/2008 | 2004-2005
Pronouncement Date: 06-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 230920514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2309/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 19 day(s)
Appellant M/s Dhami Brothers, Surat
Respondent The ACIT, Circle-9, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 06-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 06-08-2010
Date Of Final Hearing 22-07-2010
Next Hearing Date 22-07-2010
Assessment Year 2004-2005
Appeal Filed On 17-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND T.K. SHARMA JUDICIAL MEMBER) ITA.NO.2309/AHD/2008 [ASSTT. YEAR: 2004-2005] M/S.DHAMI BROTHERS NEAR KAMNATH MAHADEV MANDIR KAPODRA CHAR RASTA VARACHHA ROAD SURAT. VS. ACIT CIR.9 SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.N.VEPARI REVENUE BY : SHRI K.M. MAHESH O R D E R PER G.D. AGRAWAL VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V SURAT DATED 10-3-2008 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. IN THIS APPEAL ASSESSEE HAS RAISED VARIOUS GROU NDS WHICH READ AS UNDER: I. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CIT(A) ERRED IN CONFIRMING REJECTION OF BOOK RESULTS MADE BY THE AO . 2. THE APPELLANT SUBMITS THAT THE CIT(A) FAILED TO APPRECIATE THE NATURE OF DIAMOND BUSINESS AND ALSO THE FACT TH AT IT IS IMPOSSIBLE TO HAVE QUALITATIVE DETAILS IN CASE OF D IAMONDS AS THERE ARE NO QUALITIES OF DIAMONDS AS EACH DIAMOND IS QUALITY BY ITSELF. II. 1. WHILE THE AO HAS MADE ADDITION OF RS.4616 251 AS UNDERVALUATION OF CLOSING STOCK THE CIT(A) HAS ENH ANCED INCOME TO 4% OF THE NET PROFIT. 2. THE APPELLANT SUBMITS THAT THE CIT(A) WAS NOT JU STIFIED IN ENHANCING INCOME BY ESTIMATING NET PROFIT OF 4% WHE N THE AO HAD ASSESSED IT BY ADDING TO VALUATION OF CLOSING S TOCK. ITA.NO.2309/AHD/2008 -2- 3. THE APPELLANT SUBMITS THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE THE ADDITION MADE BY THE AO FOR UNDERV ALUATION OF CLOSING STOCK AND ENHANCEMENT BY THE CIT(A) OF 4% W AS NOT JUSTIFIED. 4. WITHOUT PREJUDICE TO THE ABOVE THE CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERATION THE COMPARABLE RATES OF PR OFIT SHOWN BY SEVERAL CONCERNS MENTIONED BY HIM ON PAGE 36 OF THE APPELLATE ORDER. 5. THE APPELLANT FURTHER SUBMITS THAT THERE WAS NO BASIS TO COMPARE THE CASE OF RAVJIBHAI DHAMELIYA WHO WAS MER ELY PROCESSOR OF DIAMONDS AND THE APPELLANT IS NOT AWAR E OF THE PARTICULARS OF OTHER THREE CASES MENTIONED BY HIM. 6. THE APPELLANT SUBMITS THAT THE ESTIMATE OF NET P ROFIT AT 4% IS ARBITRARY AND HIGHLY EXCESSIVE. III. THE LD.CIT(A) OUGHT TO HAVE DELETED INTEREST U/S.23 4B AND 234C OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE DERIVES INCOME FROM PROCESSING AN D EXPORT OF DIAMOND. THAT THE AO REJECTED THE ASSESSEES VALUATION OF CLOSING STOCK AND HELD THAT THERE WAS SUPPRESSION IN THE VALUE OF THE CLOSING STOCK B Y RS.46 16 251/-. THE AO ALSO FOUND THAT THERE WAS FALL IN THE GP RATE AS CO MPARED TO THE PRECEDING YEAR. THE ASSESSEE GAVE EXPLANATION THAT THERE WAS LOSS O F RS.2 32 75 007/- DUE TO FOREIGN EXCHANGE FLUCTUATIONS. THE FALL IN THE GP WAS MAINLY ON ACCOUNT OF LOSS ON FOREIGN EXCHANGE FLUCTUATION. CONSIDERING THE ABOVE EXPLANATION THE AO ADOPTED THE GP RATE AT 7.19% AGAINST THE 6.94% D ISCLOSED BY THE ASSESSEE WHICH RESULTED IN GP ADDITION OF RS.19 49 526/-. H OWEVER SINCE THE ADDITION TO THE CLOSING STOCK MADE BY HIM WAS MORE THAN GP A DDITION IN THE FINAL COMPUTATION OF INCOME HE DID NOT MAKE ANY ADDITION ON ACCOUNT OF LOW GP. 4. ON APPEAL BY THE ASSESSEE THE CIT(A) UPHELD THE REJECTION OF THE BOOKS OF ACCOUNTS AND DIRECTED THAT THE NET PROFIT RATE O F 4% SHOULD BE APPLIED. IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THE ABOVE DIR ECTION OF THE CIT(A) ITA.NO.2309/AHD/2008 -3- AMOUNTS TO ENHANCEMENT OF THE ASSESSEES INCOME. H E ALSO STATED THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS SALES/PURCHASE AS WELL AS EVERY EXPENDITURE IS DULY VOUCHED AND VERIFIABLE. MERELY BECAUSE THE ASSESSEE COULD NOT MAINTAIN QUALITATIVE DETAILS OF PRODUCTIO N OF DIAMOND FROM EACH LOT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJ ECTED. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE FOLLOWING ORDERS OF THE ITAT: I) PANKAJ DIAMOND SURAT VS. ACIT ITA NO.555/AHD/2008 DATED 5-9-2008; II) ACIT VS. GAMI EXPORTS ITA NO.3146/AHD/2007 DATED 12-02-2010; III) ITO VS. B. SURESHKUMAR & CO. ITA NO.2632/AHD/2003 DATED 19/1/2007. 5. WITH REGARD TO THE VALUATION OF CLOSING STOCK H E SUBMITTED THAT THE ASSESSEE MADE PROPER AND DETAILED VALUATION OF CLOS ING STOCK WHICH IS ALSO ACCEPTED BY THE AUDITORS. THAT MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE METHOD OF VALUATION OF SUCH CLOSING STOCK THE REJECTION OF VALUATION OF CLOSING STOCK BY THE ASSESSEE AND THE ESTIMATION OF VALUE OF CLOSING STOCK BY THE AO CANNOT BE JUSTIFIED. THAT THE CLOSING STOCK OF THE ASSESSEE AS PER THE BOOKS WAS RS.54.23 CRORES AND IT WAS NOT POSSIBLE TO GIVE QUALITATIVE DETAILS OF EACH AND EVERY ITEMS OF DIAMOND IN SUCH CLOSING STOCK. HE THEREFORE SUBMITTED THAT THE ADDITION TO THE CLOSING STOCK BY THE AO SHOULD BE DELETED AND ALSO THE ADDITION DIRECTED TO BE MADE BY THE CIT(A) BY ESTIM ATING THE NET PROFIT AT 4% SHOULD BE DELETED AND THE TRADING RESULTS AS DISCL OSED BY THE ASSESSEE MAY BE ACCEPTED. 6. THE LEARNED DR ON THE OTHER HAND RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT NOWADAYS WITH THE AID OF COMPUTERS IT IS POSSIBLE TO MAINTAIN QUALITATIVE DETAILS OF EACH AN D EVERY PIECE OF DIAMOND AND THEREFORE IF THE ASSESSEE HAS FAILED TO MAINTAIN SU CH DETAILS THE AO WAS FULLY JUSTIFIED IN REJECTING THE ASSESSEES BOOKS OF ACCO UNTS. HE FURTHER SUBMITTED ITA.NO.2309/AHD/2008 -4- THAT THE ESTIMATION OF NET PROFIT AT 4% BY THE CIT( A) IS FAIR AND REASONABLE AND THE SAME SHOULD BE SUSTAINED. 7. WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE SID ES AND PERUSED THE MATERIAL PLACED BEFORE US. THE AO HAS REJECTED THE ASSESSEES BOOKS OF ACCOUNTS AND ESTIMATED THE VALUE OF CLOSING STOCK A S WELL AS GP. THE REASONING GIVEN BY THE AO FOR REJECTING THE BOOKS OF ACCOUNTS READS AS UNDER: 5.8 IT WOULD NOT BE OUT OF PLACE TO MAKE A MENTION IN THIS CONTEXT THAT AS PER THE PROVISIONS OF SECTION 44AA OF THE I.T. ACT EVERY PERSON CARRYING ON BUSINESS IS COMPULSORILY REQUIRED TO KE EP AND MAINTAIN SUCH BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AS MAY ENABLE THEM AO TO COMPUTE THE ASSESSEES TOTAL INCOME IN ACCORDANCE W ITH THE PROVISIONS OF THE I.T. ACT. FROM THIS IT FOLLOWS THAT THE PU RPOSE AND INTENTION OF THE LEGISLATURE IN ENACTING THE PROVISIONS OF SECTION O F 44AA OF THE ACT IS TO PUT AN OBLIGATION ON THE ASSESSEE TO MAINTAIN AND K EEP PRIMARY RECORDS ON THE BASIS OF WHICH THE TAX AUTHORITIES ARE ABLE TO ASCERTAIN AND COMPUTE THE ASSESSEES CORRECT INCOME. FROM THIS IT ALSO FOLLOWS THAT IT IS NOT ALWAYS THE PREROGATIVE OF THE ASSESSEE TO MA INTAIN THE RECORDS THE MANNER IN WHICH IT LIKES. HOWEVER AS NOTICED IN THE PRECEDING PARAS THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUN TS AND DOCUMENTS ON THE BASIS OF WHICH THE INCOME DECLARED IN THE RE TURN COULD BE ASCERTAINED. IF THE PRIMARY RECORDS WERE MAINTAINE D BY THE ASSESSEE THEY WERE NOT PRODUCED FOR EXAMINATION TO COMPUTE T HE CORRECT INCOME. 5.9 HERE IT WOULD BE PERTINENT TO MENTION THAT THE ASSESSEE HAS SHOWN CLOSING STOCK OF POLISHED DIAMONDS OF THE QUANTITY OF 44299.10 CTS. AT RS.54 23 81 050/-. THE DETAILED INVENTORY OF THE S TOCK IN TERMS OF QUALITY IS NOT FURNISHED. THEREFORE IN ABSENCE OF DETAILS IN TERMS OF QUALITY WISE PRODUCTION OF DIAMONDS FROM EACH LOT I T IS NOT ASCERTAINABLE WHICH TYPE OF DIAMONDS WAS PRODUCED FROM A PARTICUL AR LOT IN ORDER TO DETERMINE THE VALUE. THEREFORE IN VIEW OF THIS I T WOULD RATHER BE CORRECT TO SAY THAT THE VALUATION OF STOCK IS NOT V ERIFIABLE. HERE IT WOULD BE PERTINENT TO MENTION THAT THE HONBLE SUPREME CO URT IN THE CASE OF BRITISH PRINTS INDIA LTD. REPORTED IN 188 ITR 44 H AS BEEN HELD THAT WHERE THE ACCOUNTS ARE PREPARED WITHOUT DISCLOSING THE REAL COST OF THE STOCK IN TRADE ALBEIT ON SOUND EXPERT ADVISE IN THE INTEREST OF EFFICIENT ADMINISTRATION OF BUSINESS IT IS THE DUTY OF THE A O TO DETERMINE THE TAXABLE INCOME BY MAKING SUCH COMPUTATION AS HE THI NGS FIT. THEREFORE THE CLAIM OF THE ASSESSEE THAT IT IS ASSESSEES OPT ION TO MAINTAIN THE BOOKS OF ACCOUNTS IN THE MANNER THAT SUITS TO IT CA N NO LONGER BE ACCEPTED AND HAS TO BE REJECTED. IN THIS CONTEXT RELIANCE IS ALSO PLACED ITA.NO.2309/AHD/2008 -5- UPON THE MUMBAI ITATS DECISION IN THE CASE OF DCIT VS. SAMIR DIAMONDS EXPORT PVT. LTD. REPORTED IN 71 ITD 75. 5.10 I THEREFORE IN VIEW OF THE ABOVE DEFECTS IN THE SYSTEM OF METHOD OF ACCOUNTING REJECT THE BOOK RESULTS OF THE ASSES SEE UNDER SECTION 145(3) OF THE I.T. ACT AND PROCEED TO ESTIMATE THE VALUE OF CLOSING STOCK AND ESTIMATE THE GROSS PROFIT AS UNDER: IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE AS SESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED. EACH I TEMS OF SALE/PURCHASE IS VERIFIABLE. THE ONLY DISPUTE IS WITH REGARD TO MAI NTENANCE OF QUALITATIVE DETAILS FOR THE PROCESSING OF THE DIAMOND BY THE ASSESSEE. THE ASSESSEE MAINTAINED COMPLETE DATE-WISE DETAILS OF QUANTITY OF EACH LOT OF THE DIAMOND GIVEN FOR THE PROCESSING AS WELL AS POLISHED DIAMONDS RECEIVED AF TER THE PROCESSING. SUCH DATE WISE DETAILS OF THE PROCESSING OF THE DIAMONDS WERE FURNISHED BEFORE THE AO AND COPY OF WHICH IS ALSO ENCLOSED FROM PAGE NO. 63 TO 149 OF THE ASSESSEES PAPER BOOK. THE AO HAS STATED THAT IN T HESE DETAILS QUALITY OF THE DIAMOND IS NOT MENTIONED. IT IS SUBMITTED BY THE L EARNED COUNSEL THAT IT IS NOT PRACTICAL TO MAINTAIN THE QUALITY WISE DETAILS OF E ACH AND EVERY DIAMOND. EACH AND EVERY DIAMOND IS OF A SEPARATE QUALITY DEPENDIN G UPON ITS COLOUR CLARITY CUT ETC. AND THIS IS ALMOST IMPOSSIBLE TO MAINTAIN QUALITY WISE DETAILS FOR EACH AND EVERY PIECE OF DIAMOND. THAT THE ASSESSEE IS M AINTAINING THE QUANTITATIVE DETAILS IN THE SAME FASHION SINCE PRECEDING MANY YE ARS AND IT WAS ALWAYS ACCEPTED IN THE PAST. SECTION 145(3) WHICH EMPOWER S THE AO TO REJECT THE ASSESSEES TRADING RESULTS AND MAKE THE ASSESSMENT IN THE MANNER PROVIDED UNDER SECTION 144 READS AS UNDER: 145. METHOD OF ACCOUNTING.--(1) INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OR 'I NCOME FROM OTHER SOURCES' SHALL BE COMPUTED IN ACCORDANCE WITH THE M ETHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE (2) ....... (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR THE COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE O R WHERE NO METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ITA.NO.2309/AHD/2008 -6- ASSESSEE THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144. 8. FROM THE ABOVE IT IS EVIDENT THAT IF THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR THE COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE HE MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 . IN THIS CASE THERE IS NO DISPUTE ABOUT THE CORRECTNESS OF THE ASSESSEES ACC OUNTS. AS PER THE AO FOR WANT OF QUALITATIVE DETAILS OF THE PROCESSING OF DI AMONDS THE ACCOUNTS OF THE ASSESSEE CANNOT BE SAID TO BE COMPLETE. WE ARE UNA BLE TO AGREE WITH THE ABOVE VIEWS OF THE AO. SECTION 44AA PROVIDES FOR MAINTEN ANCE OF THE BOOKS OF ACCOUNTS. AS PER THE SUB-SECTION (2) EVERY PERSON CARRYING ON BUSINESS OR PROFESSION IS REQUIRED TO KEEP AND MAINTAIN SUCH BO OKS OF ACCOUNTS AND OTHER DOCUMENTS AS MAY ENABLE TO THE AO TO COMPUTE THE TO TAL INCOME OF ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT. SUB-SE CTION (3) OF SECTION 44AA EMPOWERS THE CENTRAL BOARD OF DIRECT TAX TO PRESCRI BE BY RULES THE BOOKS AND OTHER DOCUMENTS TO BE KEPT AND MAINTAINED BY THE AS SESSEE. THE CBDT AS PER RULE 6F HAS PRESCRIBED THE BOOKS OF ACCOUNTS AND OT HER DOCUMENTS TO BE KEPT AND MAINTAINED BY THE PERSONS CARRYING ON CERTAIN S PECIFIC PROFESSION. HOWEVER NO BOOKS OF ACCOUNTS ARE PRESCRIBED FOR TH E PERSON CARRYING ON BUSINESS. THUS THE ASSESSEES CARRYING ON BUSINESS ARE REQUIRED MAINTAIN SUCH BOOKS OF ACCOUNTS AS WILL ENABLE THE AO TO COMPUTE THE INCOME OF THE ASSESSEE. THE PRESENT ASSESSEE HAS MAINTAINED THE REGULAR BOO KS OF ACCOUNTS WHICH WERE DULY AUDITED. THE SALE AND PURCHASE OF THE ASSESSE E IS VOUCHED AND VERIFIABLE. THE ASSESSEE HAS ALSO MAINTAINED QUANTITATIVE DETAI LS 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 CA NNOT BE COMPUTED FROM THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. IN O UR OPINION THE QUALITATIVE DETAILS OF EACH PIECE OF DIAMOND IS NOT NECESSARY F OR 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 ASS ESSEE. IN VIEW OF THE ABOVE WE ARE UNABLE TO AGREE WITH THE AO THAT THERE IS DE FECT IN THE SYSTEM OF METHOD ITA.NO.2309/AHD/2008 -7- OF ACCOUNTING OF THE ASSESSEE WHICH REQUIRES REJECT ION OF THE BOOK RESULTS UNDER SECTION 145(3) OF THE ACT AND ESTIMATION OF THE GP. 9. NOW WE COME TO THE VALUATION OF THE CLOSING STOC K. THE ASSESSEE HAS SHOWN THE CLOSING STOCK OF POLISHED DIAMOND AMOUNTI NG TO RS.54 23 81 050/-. HOWEVER NO DETAILS WITH REGARD TO THE VALUATION OF THE CLOSING STOCK OF THE POLISHED DIAMOND ARE FURNISHED BEFORE US. IT SEEMS THAT NO SUCH DETAILS WAS FURNISHED BEFORE THE AO OR CIT(A). IN THE ABSENCE OF ANY DETAILS OF THE CLOSING STOCK AND VALUATION THEREOF THE AO CANNOT VERIFY T HE CORRECTNESS OF THE VALUATION OF CLOSING STOCK. IN SUCH CIRCUMSTANCES THE AO HAS WORKED OUT THE VALUATION OF CLOSING STOCK OF POLISHED DIAMOND IN T HE FOLLOWING MANNER: COST OF PRODUCTION ROUGH DIAMOND WEIGHT IN CARAT VALUE OPENING STOCK OF ROUGH DIAMOND 31 260.38 RS.5 07 64 125 PURCHASE OF ROUGH DIAMOND 5 26 599.94 RS.83 50 69 208 (-)EXCHANGE RATE DIFFERENCE RS.4 88 64 619 LESS: REJECTION OF ROUGH DIAMOND 2 44 040.73 RS.14 64 244 LESS: CLOSING STOCK OF ROUGH DIAMOND 41 797.32 RS.2 76 75 407 CONSUMPTION OF ROUGH DIAMOND RS.80 78 29 063 ADD: MANUFACTURING EXPS. LABOUR RS.7 47 46 302 WAGES RS.85 23 662 ELECTRICITY RS.44 42 262 SALARY 70% OF RS.45 28 976 RS.31 70 283 RS.9 08 82 509/- TOTAL 95 834.68 RS.89 78 05 777/- OPENING STOCK OF POLISHED DIAMOND 38 151.91 RS.37 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 89 687.49 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 ITA.NO.2309/AHD/2008 -8- 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 C OUNSEL FOR THE ASSESSEE COULD NOT POINT OUT ANY MISTAKE IN THE ABOVE WORKIN G OF THE VALUATION OF THE CLOSING STOCK BY THE AO. A SPECIFIC QUESTION WAS A LSO ASKED TO HIM THAT IN THE ABSENCE OF DETAILS OF THE VALUATION OF THE CLOSING STOCK BY THE ASSESSEE HOW THE VALUE SHOWN BY THE ASSESSEE CAN BE VERIFIED? THE L EARNED COUNSEL FOR THE ASSESSEE WAS UNABLE TO REPLY TO SUCH QUESTION AND MADE AN ALTERNATE REQUEST THAT IF THE VALUE OF THE CLOSING STOCK OF THIS YEAR IS INCREASED THEN THE DIRECTION SHOULD BE GIVEN THAT THE OPENING STOCK OF THE NEXT SHOULD ALSO BE INCREASED BY THE SUM OF RS.46 16 251/-. THE LEARNED DR HAD NO O BJECTION TO THE ABOVE REQUEST OF THE LEARNED COUNSEL. IT IS A SETTLED LA W THAT THE CLOSING STOCK OF ONE YEAR WOULD BE THE OPENING STOCK OF NEXT YEAR. THER EFORE IF THE AO INCREASED THE VALUE OF CLOSING STOCK IN THIS YEAR AUTOMATICA LLY THE OPENING STOCK OF THE NEXT YEAR IS TO BE INCREASED. AFTER CONSIDERING TH E ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE WE ARE OF THE OPINION TH AT SINCE THE ASSESSEE WAS UNABLE TO FURNISH THE DETAILS OF THE CLOSING STOCK AND VALUATION THEREOF THE AO WAS JUSTIFIED IN WORKING OUT THE VALUE OF CLOSING S TOCK. NO MISTAKE IN THE VALUATION OF THE CLOSING STOCK BY THE AO WAS POINTE D OUT BY THE LEARNED COUNSEL. WE THEREFORE ACCEPT THE VALUE OF THE CLOS ING STOCK DETERMINED BY THE AO. HOWEVER ACCEPTING THE ALTERNATE PLEA OF THE L EARNED COUNSEL WE DIRECT THAT THE VALUE OF THE CLOSING STOCK WILL BE TAKEN A S VALUE OF OPENING STOCK OF THE NEXT YEAR. THUS THE ADDITION OF RS.46 16 251/- MADE BY THE AO TO THE VALUATION OF THE CLOSING STOCK IS UPHELD. THE DIRE CTION OF THE CIT(A) TO MAKE THE ADDITION BY WORKING OUT THE NET PROFIT AT THE R ATE OF 4% IS HEREBY QUASHED. 11. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE CHARGING OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. BOTH THE P ARTIES AGREED THAT IT IS ITA.NO.2309/AHD/2008 -9- CONSEQUENTIAL WE THEREFORE DIRECT THE ASSESSING OF FICER TO RECALCULATE THE INTEREST IF ANY AFTER DETERMINATION OF THE INCOME AS PER OUR ABOVE ORDER. 12. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 6 TH AUGUST 2010. SD/- SD/- (T.K. SHARMA) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 06-08-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD