THE ITO 5(3)(4), MUMBAI v. M/S. SUNDARAM GEMS P. LTD, MUMBAI

ITA 6356/MUM/2007 | 2003-2004
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 635619914 RSA 2007
Assessee PAN AADCS9509C
Bench Mumbai
Appeal Number ITA 6356/MUM/2007
Duration Of Justice 2 year(s) 6 month(s) 30 day(s)
Appellant THE ITO 5(3)(4), MUMBAI
Respondent M/S. SUNDARAM GEMS P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 14-05-2010
Date Of Final Hearing 27-04-2010
Next Hearing Date 27-04-2010
Assessment Year 2003-2004
Appeal Filed On 15-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J BEFORE SHRI N.V. VASUDEVAN (JM) & PRAMOD KUMAR (AM) I.T.A.NO. 6356/MUM/07 (ASSESSMENT YEAR : 2003-04) ITO 5(3)(4) ROOM NO. 565 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. SUNDARAM GEMS P. LTD. 310 PANCHRATNA OPERA HOUSE MUMBAI-400 004. APPELLANT RESPONDENT PAN/GIR NO. : AADCS9509C ASSESSEE BY : SHRI K. SHIVARAM & PARAS S. SAVLA DEPARTMENT BY : SHRI L.K. AGRAWAL ORDER PER N.V. VASUDEVAN JM :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 28.8.2007 OF LEARNED CIT(A)-V MUMBAI RELATING TO A .Y. 2003-04. 2. GROUNDS RAISED BY THE REVENUE READ AS FOLLOWS :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) ERRED IN HOLDING THAT THERE IS NO JU STIFICATION IN INVOKING THE PROVISIONS OF SECTION 145 WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HA D ELABORATELY DISCUSSED THE REASONS FOR DOING SO IN H IS ASSESSMENT ORDER. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) ERRED IN HOLDING THAT THE COMPARISON OF G.P. IS UNWANTED AND INCOMPARABLE WITHOUT GIVING ANY COG ENT REASONS. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ONUS IS ON THE ASSESSEE TO PRODUCE THE PARTIES TO VERIFY TH E SALES AND PURCHASES WHEN THE LETTER OF ENQUIRY WERE RETUR NED BY THE POSTAL AUTHORITIES UNSERVED. M/S. SUNDARAM GEMS P. LTD. 2 3. ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS. THE ASSESSEE PURCHASES BOTH RO UGH AND POLISHED DIAMONDS AND SELLS THE SAME. THE TOTAL TURNOVER SHO WN BY THE ASSESSEE DURING THE PREVIOUS YEAR WAS RS. 33.10 CRORES AS AG AINST RS. 22.94 CRORES IN THE IMMEDIATELY PROCEEDINGS YEAR. GROSS P ROFIT DURING THE PREVIOUS YEAR WAS RS. 93.25 LAKHS GIVING UP GP MARG IN OF 2.82%. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER ISSUED NOTICE U/S. 133(6) TO 19 PARTIES. THESE PARTIES HAD ENTERE D INTO TRANSACTIONS OF PURCHASE OR SALE WITH THE ASSESSEE DURING THE PREVI OUS YEAR. OUT OF THE 19 PARTIES 2 PARTIES RESPONDED TO THE NOTICE ISSUE D BY THE ASSESSING OFFICER. THE NOTICES SENT TO 4 PARTIES WERE RETURNE D UNSERVED BY THE POSTAL AUTHORITIES. NAMES AND ADDRESSES OF THESE PA RTIES WERE AS FOLLOWS:- S.NO. NAME OF THE PARTY ADDRESS 1 M/S. SHRUTI GEMS 204 VIABHAV CHAMBERS RAGHUNATHPURA MAIN ROAD SURAT 2 M/S. ANMOL RATNA 204 VIABHAV CHAMBERS RAGHUNATHPURA MAIN ROAD SURAT 3 M/S. SANSKAR OVERSEAS 407 DEVRATNA APARTMENTS RAMPURA MAIN ROAD SURAT 4 M/S. VINAYAK OVERSEAS 407 DEVRATNA APARTMENTS RAMPURA MAIN ROAD SURAT IN RESPECT OF THE 13 PARTIES NOTICES U/S. 133(6) W ERE SERVED; BUT NO REPLY WAS RECEIVED BY THE ASSESSING OFFICER FROM THEM. WH EN THE ABOVE FACT WAS POINTED OUT BY THE ASSESSING OFFICER TO THE ASS ESSEE THE ASSESSEE SUBMITTED THAT 4 PARTIES TO WHOM NOTICES SENT WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES HAD CLOSED DOWN THEIR BUS INESS OR HAVE SHIFTED THEIR OFFICES AND THAT THE ASSESSEE WAS TRYING TO C ONTACT THEM AND SUBMIT ALL THE INFORMATION THAT MAY BE REQUIRED BY THE ASS ESSING OFFICER. IN RESPECT OF THE 13 PARTIES WHO DID NOT SENT ANY REP LY TO THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THAT THEY ARE MAKIN G EFFORTS TO GET M/S. SUNDARAM GEMS P. LTD. 3 NECESSARY REPLIES FROM THEM. LATER ON THESE PARTIES I.E. THE 4 PARTIES ON WHOM NOTICES COULD NOT BE SERVED AND THE 13 PARTIES WHO DID NOT SEND REPLY TO THE ASSESSING OFFICER FILED THEIR REPLIES BEFORE THE ASSESSING OFFICER GIVING ALL DETAILS LIKE COPY OF ACCOUNTS C OPY OF ACKNOWLEDGMENT OF RETURN OF INCOME COPY OF AUDITED ACCOUNTS ETC. AFT ER RECEIPT OF SUCH DETAILS THE ASSESSING OFFICER NOTICED THAT 4 PARTI ES ON WHOM NOTICES COULD NOT BE SERVED HAS SENT THEIR REPLY ON 13.3.2 006 FROM THE VERY SAME POST OFFICE. FURTHER THE ASSESSING OFFICER AL SO NOTICED THAT THE TURNOVER AND NET PROFIT AS REFLECTED IN THE DETAILS SUBMITTED BY THESE 4 PARTIES WERE SIMILAR. IN RESPECT OF OTHER 13 PARTIE S THE ASSESSING OFFICER NOTICED THAT 5 PARTIES HAD SENT THE REPLIES ON THE SAME DATE FROM THE SAME POST OFFICE AND 3 OTHER PARTIES HAD ALSO SENT THE REPLIES ON THE SAME DATE AND THE SAME TIME. THE ASSESSING OFFICER THEREFORE CONSIDERED ALL THE REPLIES RECEIVED AS NOT GENUINE. IN ONE OF THE REPLIES FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DATED 16.3.20 06 THE ASSESSEE SPECIFICALLY REQUESTED THE ASSESSING OFFICER TO INV OKE HIS POWERS U/S. 131 OF THE ACT AND SUMMON ALL THE PARTIES FOR EXAMINATI ON. THIS REQUEST WAS MADE BY THE ASSESSEE WITHOUT PREJUDICE TO HIS UNDER TAKING TO GET THE NECESSARY CONFIRMATION AND OTHER DETAILS FROM 17 PA RTIES. THE ASSESSING OFFICER HOWEVER DID NOT CHOOSE TO ISSUE SUMMONS T O 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 NO T CAPABLE OF VERIFICATION. THIS IS ONE OF THE GROUNDS FOR THE AS SESSING OFFICER TO REJECT BOOK RESULT OF THE ASSESSEE. 4. ANOTHER REASON GIVEN BY THE ASSESSING OFFICER W AS THAT GP SHOWN BY THE ASSESSEE WAS LESS COMPARED TO THE GP SHOWN BY S IMILAR ASSESSEES IN THE SAME LINE OF BUSINESS. THE ASSESSING OFFICER HA D 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% M/S. SUNDARAM GEMS P. LTD. 4 3 SHITAL GEMS P. LTD. 22.47 1.11 4.9% 5. ON THE ABOVE STAND OF THE ASSESSING OFFICER TH E ASSESSEE SUBMITTED THAT DIFFERENCE GP FOR THE CURRENT YEAR WAS MUCH BE TTER 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 1999-2000 2000-01 1.84 2000-01 2001-02 1.34 2001-02 2002-03 1.29 2002-03 2003-04 2.82 THE ASSESSEE ALSO POINTED OUT THAT COMPARABLE INSTA NCES POINTED OUT BY THE ASSESSING OFFICER WERE MAINLY ENGAGED IN EXPORT OF DIAMONDS IN WHICH THERE EXISTS GOOD MARGIN; WHEREAS THE ASSESS EE DEALS IN LOCAL MARKET IN WHICH MARGIN ARE ALWAYS NOT HIGH COMPARE D TO EXPORT MARKET. THE ASSESSING OFFICER HAD RELIED ON THE DECISION OF MUMBAI BENCH OF THE ITAT IN THE CASE OF DCIT VS. SAMIR DIAMONDS EXPORTS PVT. LTD. 71 ITD 75; WHEREIN ITAT UPHELD REJECTION OF BOOKS OF ACCOU NT PURELY ON THE BASIS OF DECLINE IN THE TRADING RESULT. THE ASSESSE E POINTED OUT THAT IN THE AFORESAID CASE THERE WAS A STEEP FALL IN THE G P; WHEREAS IN THE CASE OF THE ASSESSEE GP MARGIN HAD INCREASED COMPARED TO EARLIER YEARS. THE ASSESSEE ALSO SUBMITTED THAT IN THE AFORESAID CASE DEFECTS WERE POINTED OUT IN THE BOOKS OF ACCOUNT; WHEREAS IN THE CASE OF THE ASSESSEE BOOKS OF ACCOUNT ARE COMPLETE AND CORRECT DULY SUPPORTED BY STOCK REGISTER PURCHASE BILLS SALE BILLS VOUCHERS AND BANK STATE MENT. THE ASSESSING OFFICER HOWEVER REFERRED TO A LIST OF CASES ASSES SED IN HIS RANGE HAVING COMPARATIVE TURNOVER; WHEREAS GP SHOWN WAS MUCH HI GHER. THESE DETAILS ARE GIVEN AT PAGE NO. 14 OF THE ASSESSING O FFICERS ORDER AND THE LOWEST GP IN THE CASE OF 4 DIAMOND TRADERS WERE GIV EN. THE LOWEST GP SHOWN THEREIN WAS 7%. THE ASSESSING OFFICER WAS THE REFORE OF THE VIEW THAT THE GP SHOWN BY THE ASSESSEE WAS LOWER. M/S. SUNDARAM GEMS P. LTD. 5 6. THE ASSESSING OFFICER ALSO REFERRED TO THE FACT THAT INFORMATION HAD BEEN RECEIVED REGARDING ACTION CARRIED OUT IN THE C ASE OF THE ASSESSEE BY THE DIRECTORATE OF REVENUE INTELLIGENCE (DRI) MUMBA I; WHEREIN IN RESPECT OF CERTAIN CONSIGNMENT OF ROUGH DIAMONDS IMPORTED B Y THE ASSESSEE IT WAS FOUND THAT THE VALUATION WAS MUCH LESS THAN THE VALUE DECLARED IN THE IMPORT DOCUMENTS. THE CONSIGNMENT HAD BEEN IMP ORTED FROM DUBAI AND HONG KONG. THE ASSESSING OFFICER FURTHER NOTICE D THAT DURING THE PREVIOUS YEAR ALSO THE ASSESSEE HAD IMPORTED ROUGH DIAMONDS FROM DUBAI AND HONG KONG AMOUNTING TO RS. 13.33 CRORES. ON THE ABOVE ASPECT POINTED OUT TO THE ASSESSING OFFICER THE AS SESSEE SUBMITTED THAT THE ACTION OF LEARNED DRI DID NOT RELATE TO THE PRE VIOUS YEAR. THE ASSESSEE POINTED OUT THAT IN RESPECT OF IMPORT MARG IN OF ROUGH DIAMOND WORTH RS. 13.33 CRORES DURING THE PREVIOUS YEAR CU STOM AUTHORITIES HAVE APPRAISED AND FOUND THE VALUE TO BE IN ORDER; AND THEREFORE NO ADVERSE INFERENCE CAN BE DRAWN. THE ASSESSEE ALSO P OINTED OUT THAT THE ORDER PASSED BY THE DRI HAS BEEN SET ASIDE BY CESTA T 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 A ND POLISHED DIAMONDS. IN THIS REGARD THE ASSESSEE POINTED OUT THAT IT WAS NOT POSSIBLE TO MAINTAIN QUALITY-WISE STOCK REGISTER. T HE ASSESSEE ALSO SUBMITTED THAT ALL DIAMOND MERCHANTS MAINTAIN RECOR DS ON CARAT BASIS AND THIS IS THE PRACTICE PREVALENT IN THE DIAMOND I NDUSTRY. THE ASSESSEE ALSO POINTED OUT THAT EVEN GEMS AND JEWELLERY EXPOR T PROMOTION COUNCIL HAS RECOMMENDED MAINTENANCE OF STOCK OF DIAMOND ON CARAT BASIS. THE ASSESSING OFFICER HOWEVER WAS OF THE VIEW THAT MA INTAINING CARAT-WISE STOCK WILL NOT GIVE CLEAR PICTURE OF THE BUSINESS O F THE ASSESSEE. IN THIS REGARD THE ASSESSING OFFICER ALSO REFERRED TO THE DECISION OF ITAT MUMBAI IN THE CASE OF DCIT VS. M/S. SANGHAVI DIAMOND EXPOR TS P. LTD. 71 ITD 75. M/S. SUNDARAM GEMS P. LTD. 6 8. AFTER REJECTING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER ESTIMATED INCOME OF THE ASSESSEE AND MADE AN ADDITI ON OF RS. 43 69 211/- TO THE TOTAL INCOME OF THE ASSESSEE OBS ERVING AS FOLLOWS :- CONSIDERING THE TOTALITY OF FACTS AS SPECIFIED ABO VE IT IS EVIDENT THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE AND THE SAME ARE THEREFORE LIABLE TO BE REJECTED. I THER EFORE REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ESTIMATED THE GP AT THE AVERAGE OF 4.9% (WHICH IS THE MINIMUM GP SHOWN AMON G THE CASES QUOTED IN THE SHOW CAUSE NOTICE OR IN THE TAB LE REPRODUCED ABOVE_ AND THE GP OF THE ASSESSEE WHICH IS 2.26% {I T MAY BE MENTIONED THAT THE GP OF 2.82% AS PER THE AUDIT REP ORT IS ERRONEOUS AND THE CORRECTED GP OF THE ASSESSEE WOUL D COME TO RS. 75 12 837/- (33 10 00 811 32 34 87 974) WHICH IS 2.26%]. THE SAME WORKS OUT TO 3.58%. THE ABOVE ESTIMATION RESUL TS IN AN ADDITION OF RS. 43 69 211/-. 9. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LEARNED CIT(A). BEF ORE CIT(A) THE ASSESSEE POINTED OUT AS TO HOW THE ORDER OF THE ASS ESSING OFFICER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE IS N OT SUSTAINABLE IN LAW. IN THIS REGARD THE ASSESSEE HIGHLIGHTED AS TO HOW IT HAD DEMONSTRATED VARIOUS QUERIES RAISED BY THE ASSESSING OFFICER WER E NOT VALID CIRCUMSTANCE FOR REJECTING BOOK RESULT OF THE ASSES SEE. BESIDES THE ABOVE THE ASSESSEE RELIED UPON CERTAIN JUDICIAL PRONOUNCE MENTS IN SUPPORT OF ITS CONTENTION THAT REJECTION OF BOOKS OF ACCOUNT B Y THE AO WAS NOT PROPER. ON CONSIDERATION OF ALL THE ABOVE SUBMISSIO NS LEARNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING AS FOLLOWS :- I HAVE GONE THROUGH THE ARGUMENTS AND SUBMISSIONS OF LEARNED AR OF THE ASSESSEE AS WELL AS THE CONTENTS OF THE I MPUGNED ASSESSMENT ORDER. I FIND FORCE IN THE SUBMISSIONS A ND ARGUMENTS OF THE APPELLANT THAT THE ACTION OF LEARNED ASSESSI NG OFFICER TO INVOKE THE PROVISIONS OF SECTION 145 OF THE I.T. AC T 1961 FOR ANY OF THE REASONS MENTIONED IN THE IMPUGNED ORDER IS NOT JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. I HAVE ALSO GONE THROUGH THE CASE LAW RELIED UPON BY LEARNED ASSESSI NG OFFICER AND FIND THERE WAS A CASE FOR FURTHER SCRUTINY AND REJE CTION OF BOOKS OF ACCOUNTS AS THERE WAS DECLINE IN GP FROM EARLIER YE ARS. THE LAW LAID DOWN BY HON'BLE ALLAHABAD HIGH COURT IS TILL H OLDS GOOD ON THIS ISSUE I.E. ABSENCE OF STOCK REGISTERS CASH ME MOS VOUCHERS M/S. SUNDARAM GEMS P. LTD. 7 ETC. AND EXISTENCE OF LOW PROFITS ARE RELEVANT FACT ORS; WHERE ABSENCE OF A STOCK REGISTER CASH MEMOS ETC. IF CO UPLED WITH OTHER FACTORS LIKE ABSENCE OF VOUCHERS IN SUPPORT THE EXI STENCE 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 TH E ASSESSMENT IN THE MANNER CONTEMPLATED IN THAT PROVI SIONS- AWADESH PRATAP SINGH ABDUL REHMAN & BROS VS. CIT 7 6 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 G IVING A SPECIFIC FINDING THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT AND COMPLETE OR THAT THE INCOME COULD NOT BE PROPERLY DETERMINED AND DEDUCTED FROM THE ACCOUNTING METHOD EMPLOYED BY THE ASSESSEE IS NOT JUSTIFIED. THE MERE FACTS THAT THE RE WAS A LESS RATE OF GROSS PROFIT DECLARED BY AN ASSESSEE AS COMPARED TO THE PREVIOUS YEAR WOULD NOT BY ITSELF BE SUFFICIENT TO JUSTIFY THE ADDITION- ALUMINIUM INDUSTRIES (P) LTD. VS. CIT 80 TAXMAN 184 (GAUHATI). THE FACT THAT APPELLANTS GP IS PROGRESS IVE AND NO OTHER SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS IS FOUND C AN NOT BE IGNORED IN THE BACKDROP THAT THE DEPARTMENT IN THE APPELLANTS OWN CASE IN EARLIER YEARS HAS NEVER DOUBTED IN THE BOOK RESULTS. THUS SIMPLY BECAUSE A CASE HAS COME TO THE KNOWLED GE OF LEARNED ASSESSING OFFICER WHEREIN THE HON'BLE ITAT HAS UPHE LD THE NON- MAINTENANCE OF STOCK REGISTER TO BE ONE OF THE DEFE CTS IN THE BOOKS OF ACCOUNTS WITHIN THE MEANING OF THE PROVISIONS OF SECTION 145 OF THE I.T. ACT 1961 IN THEIR SPECIFIC FACTS AND CIRC UMSTANCES WHEN THEIR OWN GP FALL WAS UNEXPLAINED. LEARNED ASSESSIN G OFFICER WOULD NOT ASSUME THE JURISDICTION U/S. 145 OF THE I .T. ACT 1961. I FIND THAT THERE IS NO DISPUTE THAT THE GP IN THE AP PELLANTS CASE IS MUCH PROGRESSIVE FROM THE PAST YEARS AND THUS IT C AN NOT LEAD TO THE CONCLUSION THAT THE BOOKS OF ACCOUNTS ARE DEFEC TIVE AND DO NOT SHOW THE CORRECT PROFIT OF THE IMPUGNED YEAR AS NO CLEAR CUT DEFECT IN THE BOOKS OF ACCOUNT COULD BE ESTABLISHED EVEN O N THE BASIS OF ENQUIRIES DONE BY THE ASSESSING OFFICER. I HAVE ALS O PERUSED THE UNREPORTED JUDGMENT OF HON'BLE ITAT (ITA NO. 3833/B OM/91) OF E BENCH RELIED UPON BY THE APPELLANT AND I FIND T HAT THE RELIANCE PLACED BY THE APPELLANT ON THIS UNREPORTED JUDGMENT OF MUMBAI ITAT (ITA NO. 3833/BOM/91) OF E BENCH IS QUITE PR OPER AS THE HON'BLE JURISDICTIONAL ITAT IN THIS CASE HAS DISCUS SED AND DISTINGUISHED THEIR OWN DECISION IN THE CASE OF DCI T VS. SAMIR DIAMONDS EXPORTS PVT. LTD. 71 ITD 75 RELIED UPON B Y ASSESSING OFFICER. THIS CLEARLY DEMONSTRATES THAT THE RATIO O F DCIT VS. SAMIR DIAMONDS EXPORTS PVT. LTD. 71 ITD 75 CANNOT BE APP LIED UNIVERSALLY IN ALL CASES OF DIAMOND DEALERS INCLUDI NG THE APPELLANT. THUS I DO NOT FIND ANY JUSTIFICATION TO INVOKE THE M/S. SUNDARAM GEMS P. LTD. 8 PROVISIONS OF SECTION 145 OF THE I.T. ACT 1961 AND ESTIMATE THE INCOME BY ENHANCING THE PROGRESSIVE GP ON THE BASIS OF UNWANTED COMPARISONS WITH APPARENTLY INCOMPARABLE CASES ON W HICH THERE IS NO NEED TO DELIBERATE IN DETAIL IN VIEW OF THE A BOVE DISCUSSION AND IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT C ASE AS DETAILED IN THIS ORDER ABOVE. ACCORDINGLY THE IMPUGNED ADDI TION IS DELETED AND THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE DISCLOSED GP. 10. AGGRIEVED BY THE ORDER OF LEARNED CIT(A) THE R EVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. LEARNED DR RELIED ON THE ORDER O F THE ASSESSING OFFICER. LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE STAND OF THE ASSESSEE AS MADE BEFORE THE LEARNED CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT THE ORDER OF LEARNED CIT(A) DOES NOT CALL FOR ANY I NTERFERENCE. ADMITTEDLY ALL 19 PARTIES TO WHOM THE ASSESSING OFFICER ISSUED NOTICES U/S. 133(6) OF THE ACT ULTIMATELY HAD FILED REQUIRED DETAILS CALLE D 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 T O DRAW ANY ADVERSE INFERENCE. IN FACT THE ASSESSEE HAD MADE A SPECIFI C REQUEST FOR ISSUE OF SUMMONS U/S. 131 OF THE ACT TO ALL THE PARTIES. IT IS THE PLEA OF THE ASSESSEE THAT NONE OF THE PARTIES ARE RELATED TO TH E ASSESSEE AND ALL THE RECEIPTS AND PAYMENTS ARE BY ACCOUNT PAYEE CHEQUES. IN FACT THE VERY SAME TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN EARLIER YEARS. IN FACT IN A.Y. 2002-03 AND 2004-05 THE AS SESSING OFFICER RAISED QUERIES AND WAS SATISFIED WITH REPLIES GIVEN BY THE ASSESSEE. THUS ON THIS GROUND NO ADVERSE INFERENCE COULD HAVE BEEN DR AWN BY THE ASSESSING OFFICER. 12. AS FAR AS GP MARGIN IS CONCERNED THE ASSESSIN G OFFICER COMPARED PROFITS OF THE ASSESSEE WHO IS LOCAL DEALER WITH TH E PROFITS OF PERSONS ENGAGED IN EXPORT OF DIAMONDS WHERE MARGIN WAS MUC H HIGHER. AS FAR AS THE ASSESSEE IS CONCERNED GP OF THE ASSESSEE HAS I NCREASED COMPARED TO EARLIER YEARS. IT HAS BEEN HELD BY DELHI BENCH OF I TAT IN THE CASE OF JCIT M/S. SUNDARAM GEMS P. LTD. 9 VS. VIDEO ELECTRONICS LTD. 99 ITD 342; WHERE THE A SSESSEE HAS EXPLAINED THE REASONS FOR DECLINED IN GP NO ADDITION CAN BE MADE. 13. AS FAR AS MAINTENANCE OF STOCK REGISTER IS CON CERNED ASSESSEE MAINTAINED CARAT WISE STOCK REGISTER WHICH IS A NO RMAL PRACTICE PREVALENT IN DIAMOND TRADE. THE GEMS AND JEWELLERY EXPORT PROMOTION COUNCIL HAS ALSO RECOGNIZED SUCH PRACTICE. THE ASSE SSEE MAINTAINED REGISTER OF POLISHED DIAMONDS AND ROUGH DIAMONDS. I N FACT ACIT 16(3) MUMBAI HAS ALSO CONFIRMED THAT DIAMOND MERCHANTS MA INTAINED STOCK OF DIAMONDS CARAT WISE AND THIS IS A PRACTICE FOLLO WED BY DIAMOND MERCHANT IN MUMBAI. THIS CORRESPONDENCE IS AT PAGE 115 AND 116 OF THE ASSESSEES PAPER BOOK. EVEN MUMBAI BENCH OF THE TRI BUNAL IN THE CASE OF DHARAMCHAND PARASCHAND EXPORTS VS. ACIT IN ITA NO. 2833/BOM/91 HAS EXPRESSED THE VIEW THAT CARAT-WISE STOCK WOULD BE SUFFICIENT. 14. AS FAR AS PROCEEDINGS BY DRI AGAINST THE ASSES SEE ARE CONCERNED THOSE PROCEEDINGS RELATED TO ASSESSMENT YEAR 2004-0 5. PROCEEDINGS OF DRI WERE SUBJECT MATTER OF APPEAL BEFORE CESTAT WH ICH HAD SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF CUSTOMS. TH EREFORE PROCEEDINGS BEFORE THE DRI WHICH DO NOT RELATE TO THE PRESENT ASSESSMENT YEAR CANNOT HAVE ANY BEARING ON CONCLUSI ON DRAWN BY THE ASSESSING OFFICER. 15. WE ARE OF THE VIEW THAT THE BOOKS OF ACCOUNT C ANNOT BE REJECTED WITHOUT POINTING OUT DEFECTS IN THE SAME. THE ASSES SING OFFICER HAS NOT POINTED OUT ANY DEFECTS WHATSOEVER IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IN THIS REGARD THE ASSESSEE HAS RELIED ON SEVERAL JUDICIAL PRONOUNCEMENTS BEFORE US; BUT WE DEEM IT A PPROPRIATE TO REFER TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CA SE OF R.B. BANSIL ABIRCHAND SPINNING AND WEAVING MILLS VS. CIT 75 IT R 260 (BOM); PANDIT BROTHERS VS. CIT 26 ITR 159 (PUNJAB) AND ASHOK RET RACTORIES CO. P. LTD 279 ITR 457. CONSIDERING FACTS AND CIRCUMSTANCES P REVAILING IN THE PRESENT CASE WE ARE OF THE VIEW THAT LEARNED CIT(A ) WAS RIGHT IN DELETING M/S. SUNDARAM GEMS P. LTD. 10 THE ADDITION MADE BY THE ASSESSING OFFICER. THE ORD ER OF LEARNED CIT(A) IS THEREFORE UPHELD AND THE APPEAL OF THE REVENUE I S DISMISSED. 16. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. ORDER HAS BEEN PRONOUNCED ON 14 TH DAY OF MAY 2010. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 14 TH MAY 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS