DCIT CIR 3(1), MUMBAI v. AUROSTAR JEWELLERY INDIA P. LTD, MUMBAI

ITA 3972/MUM/2009 | 2005-2006
Pronouncement Date: 03-12-2010 | Result: Dismissed

Appeal Details

RSA Number 397219914 RSA 2009
Assessee PAN AAACA7307D
Bench Mumbai
Appeal Number ITA 3972/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 9 day(s)
Appellant DCIT CIR 3(1), MUMBAI
Respondent AUROSTAR JEWELLERY INDIA P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 03-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 03-12-2010
Assessment Year 2005-2006
Appeal Filed On 24-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI. J. SUDHAKAR REDDY (A.M.) AND SHRI. V.D . RAO (J.M.) ITA NO.3972/MUM/2009 ASSESSMENT YEAR : 2005-2006 D.C.I.T. CIR 3(1) R.NO. 607 AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. VS. AUROSTAR JEWELLARY INDIA P. LTD. C-64 MITTAL COURT NARIMAN POINT MUMBAI 400 021. PAN : AAACA7307D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.N. DEVDASAN RESPONDENT BY : SHRI NIRAJ BAISAL O R D E R PER V.D. RAO J.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 08.04.2009 OF THE CIT(A)-XXVIII MUMBAI RELATING T O ASSESSMENT YEAR 2005- 06. 2 . THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF JEWELLERY EMBEDDED WITH DIAMONDS AND LO OSE DIAMONDS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS OBSERVED THAT ON PERUSAL OF DETAILS OF STOCK OF ROUGH DIAMO NDS IT IS OBSERVED THAT THE ASSESSEE HAD SHOWN THE VALUE OF CLOSING STOCK OF RO UGH DIAMONDS AT LOWER RATE THAN THE PURCHASE RATE. THE DETAILS OF ROUGH DIAMONDS ARE AS UNDER: QUANTITY VALUE AVERAGE RATE OPENING STOCK 1478.00 CTS. ` 6 41 45 200 ` 43 400 PER CTS. PURCHASE AND PRODUCTION 1378.250 CTS. ` 7 74 70 329 ` 56 206 PER CTS. SALES/RAW MATERIAL CONSUMED 1913.120 CTS. ` 10 88 49 421 ` 56 896 PER CTS. CLOSING STOCK 943.13 CTS. ` 3 27 66 108 ` 34 741 PER CTS. ITA NO.3972/MUM/2009 ASSESSMENT YEAR : 2005-2006 2 3. ON PERUSAL OF THE ABOVE DETAILS THE ASSESSING O FFICER HELD THAT SEEN THAT THE AVERAGE VALUE OF OPENING STOCK OF ROUGH DI AMOND IS ` 43 400 PER CTS. AND AVERAGE RATE OF PURCHASE OF ROUGH DIAMOND DURING THE YEAR IS OF ` 56 209 PER CTS. THE TOTAL AVERAGE RATES OF THE QU ANTITY OF ROUGH DIAMOND I.E. OPENING STOCK AND PURCHASE DURING THE YEAR IS ARRIVED AS UNDER: OPENING STOCK OF DIAMOND AND PURCHASE DURING THE YEAR QUANTITY = ` 6 41 45 200 + 7 74 70 329 (1478 + 1378.250) = ` 49 580 PER CTS. 4. AS AGAINST THE AVERAGE COST OF ROUGH DIAMOND OF ` 49 580/- PER CTS. THE ASSESSEE HAD DISCLOSED THE VALUE OF CLOSING STO CK OF ROUGH DIAMOND AT ` 34 741 PER CTS. IN THIS REGARD THE ASSESSING OFF ICER HAS CALLED THE EXPLANATION FROM THE ASSESSEE. IT WAS SUBMITTED B EFORE THE ASSESSING OFFICER THAT THE POLISHED DIAMONDS ARE RECEIVED FRO M KARIGARS THEY ARE MERGED IN TO SINGLE POOL OF DIAMONDS AND THE PARCEL OF DIAMOND RECEIVED ARE CONSTANTLY SHUFFLED BASED ON FRESH PRODUCTION AND T HEREFORE EXPLAINED THAT IT IS IMPOSSIBLE TO GIVE ITEM WISE DETAILS OF CLOSI NG STOCK. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE AS SESSEE HE HAS REJECTED THE ASSESSEES VALUATION OF CLOSING STOCK OF ROUGH DIAM OND AND VALUE OF CLOSING STOCK OF ROUGH DIAMOND AT THE AVERAGE RATE OF 49 58 0/-. THE DIFFERENCE BETWEEN THE AVERAGE RATE AS DETERMINED ABOVE OF ` 49580/- AND THE AVERAGE RATE DISCLOSED BY THE ASSESSEE AT ` 34 741/- COMES TO ` 14 839/-. FOR THE CLOSING STOCK OF 943.13 CTS OF DIAMOND THE DIFFEREN CE AMOUNTS TO ` 1 39 95 254/- AND THE SAME IS ADDED TO THE VALUE OF CLOSING STOCK. 5. ON BEING AGGRIEVED THE ASSESSEE CARRIED OUT MATT ER BEFORE THE LEARNED CIT(A) AND SUBMITTED AS FOLLOWS: A) THE CLOSING STOCK AS ON 31.03.2005 WAS ` 943.13 CTS B) THE VALUE AS PER THE INVOICE WAS ` 3 27 66 108/- C) THAT THE CLOSING STOCK IS VALUED AT COST CONSIST ENTLY FOR THIS YEAR AND FOR EARLIER YEARS ALSO D) WHILE VALUING THE CLOSING STOCK THE FIRST IN FIR ST OUT (FIFO) METHOD IS CONSISTENTLY FOLLOWED HENCE THE CLOSING STOCK IS V ALUED AS PER THE LAST INVOICE PRICE. E) IN SUPPORT OF THE VALUATION OF THE CLOSING STOCK THE ASSESSEE ENCLOSED THE INVOICES PERTAINING TO CLOSING STOCK AS ON 31.03.20 03 AND AS ON 31.03.2004. ITA NO.3972/MUM/2009 ASSESSMENT YEAR : 2005-2006 3 6. THE LEARNED CIT(A) HAS EXTRACTED THE RELEVANT DE TAILS IN PAGE 3 PARA 5.1 OF THE CIT(A) ORDER. BY CONSIDERING THIS DETA ILS THE CIT(A) HAS OBSERVED THAT THE OPENING STOCK OF 1478 CTS OF ROUGH DIAMOND PURCHASED ON 25.03.2004 FOR AN AMOUNT OF ` 6 41 45 200/- ITS TALLIES WITH THE CLOSING STOCK AS ON 31.03.2004 PERTAINING TO ASSESSMENT YEA R 2004-05. DURING THE ACCOUNTING YEAR ONLY 2 LOTS WERE PURCHASED AS MENTIONED IN THE TABLE. OUT OF THE STOCK AVAILABLE SOME DIAMONDS WERE ISSU ED TO PARTIES FOR POLISHING AT DIFFERENT INTERVALS. AT THE END OF T HE YEAR DIAMONDS 943.130 CTS. WERE AVAILABLE. THIS PERTAINS TO INVOICE DAT ED 17.12.2005. THE COST OF DIAMONDS HAS COME DOWN DUE TO THE APPRECIATION OF R UPEE IN TERMS OF INDIAN RUPEES. IT HAS BEEN VERIFIED WITH REFERENC E TO CLOSING STOCK AS ON 31.03.2003 31.03.2004 AND 31.03.2005 THAT THE ASSE SSEE HAS CONSISTENTLY FOLLOWING FIRST IN FIRST OUT METHOD AND THE DIAMOND S WERE VALUED AT CORRECT COST AS PER THE LAST INVOICE. IN VIEW OF THE ABOV E OBSERVATION THE LD CIT(A) HELD THAT ASSESSING OFFICER IS NOT CORRECT IN ADOPT ING THE AVERAGE PRICE IN VALUING THE CLOSING STOCK WITHOUT APPRECIATING THE FACT THAT THE COST OF THE DIAMOND HAS COME DOWN AND THE ASSESSEE CONSISTENTL Y FOLLOWING THE SAME METHOD OF ACCOUNTING OF CLOSING STOCK AND THE ADDIT ION MADE BY THE ASSESSING OFFICER WAS DELETED. 7. ON BEING AGGRIEVED REVENUE CARRIED MATTER BEFORE THE TRIBUNAL. THE LD D.R. HAS SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND THE LD COUNSEL FOR THE ASSESSEE HAS POINTED OUT FROM PAGE NO.69 OF THE PAPER BOOK STATING THAT THE ASSESSEE ONLY MADE A SINGLE PURCHA SE ON 07.02.2005 BY INVOICE PRICE OF THE ABOVE PURCHASE $7 46 38 060/- OF U.S.$ COUNTED AT THE PREVAILING RATE OF ` 4390 WOULD COME TO 3 27 66 108/-. HE ALSO SUPPOR TED THE ORDER PASSED BY THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES GONE TO THE ORDER S OF THE AUTHORITIES BELOW. FROM THE ASSESSMENT ORDER WE FIND THAT TH E AO IN THIS CASE HAS WRONGLY CALCULATED THE CLOSING STOCK AT AVERAGE RAT E. THE CLOSING STOCK OF 943.13 CTS. PERTAINS TO A SINGLE PURCHASE MADE ON 0 7.02.2005 VIDE SHIPMENT NO. BSD02/05 (PAGE NO.69 OF THE PAPER BOOK ). THE INVOICE PRICE ITA NO.3972/MUM/2009 ASSESSMENT YEAR : 2005-2006 4 WAS $ 746380.60. THIS AMOUNT WHEN CONVERTED THEN T HE PREVAILING RATE OF ` 43.90 WOULD COME TO ` 3 27 66 108/-. THE ASSESSEE ALSO PRODUCED COPY TH E NOTIFICATION ON RATE OF EXCHANGE DATED 25.01.2005. IT ALSO DEMONSTRATED THE ENTIRE OPENING STOCK AND ALL THE PURCHASES EXCEPT T HE LAST PURCHASE ON 17.02.2005 WAS SOLD AND HENCE WERE NOT PART OF THIS STOCK. IN ANY EVENT THE ASSESSEE IS FOLLOWING FIFO METHOD. AFTER CONSIDER ING THE ENTIRE FACTUAL MATRIX OF THIS CASE WE FIND NO INFIRMITY IN THE ORD ER PASSED BY THE CIT(A). WE THEREFORE UPHOLD THE ORDER OF THE CIT(A). 9. IN THE RESULT THE APPEAL FILE BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 3 RD DAY OF DECEMBER 2010. SD/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER SD/- (V.D. RAO) JUDICIAL MEMBER MUMBAI DATED 3 RD DECEMBER 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- MUM BAI 4. COMMISSIONER OF INCOME TAX CITY- MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI