2016 (8) TMI 83 - AT - Income Tax

Addition u/s 68 - whether items sold in the present year is the same which was declared by the assessee under VDIS - Held that - As per the confirmation of the buyer M/s S. Babulal & Co., Ahmedabad, he has purchased from the assessee cut and polished Diamonds of 18.55 carat for ₹ 5,00,050/-. The dispute is only about this amount of ₹ 500,050/- and hence other bills etc. are not relevant. It is seen that although, the carats quantity as per VDIS declaration and purchase confirmation is tallying but the carat quantity alone cannot determine that both the items are same or not because the price of Diamond mainly depends upon quality of the Diamonds being its cut and colour apart from its size. Regarding this sale of Diamonds i.e. 18.55 carat, do not know the size also because in the confirmation available on page-4 of the paper book, number of pieces of Diamonds is not mentioned and therefore, its size is not known. The cut and colour of diamonds are also not known because the same is not mentioned in the purchase confirmation or in the VDIS declaration. Hence it is seen that the assessee has failed to establish that the diamonds sold in the present year and declared under VDIS are same. Thus the assessee has failed to establish this fact that he Diamonds sold in the present year are the same Diamonds which declared by the assessee in VDIS declaration 1997 as directed by the Hon ble Karnataka High Court and therefore, find no reason to interfere with the order of the ld.CIT(A). - Decided against assessee.

Summary

Issues:
Appeal against CIT(A) order for assessment year 1998-99, Addition under section 68, Discrepancy in declaration and sale invoice, Reliance on earlier appellate orders, Interest under section 234B, Proof of diamonds sold matching declaration, Applicability of Tribunal orders.

Analysis:
The appeal was filed against the CIT(A) order for the assessment year 1998-99. The grounds raised by the assessee included opposition to the additions made, denial of assessment amount, and disagreement with the findings related to the declaration and sale of diamonds. The issue of addition under section 68 of the Act was a key concern. The appellant contested the CIT(A)'s confirmation of the addition and discrepancies in the declaration and sale invoice. The reliance on earlier appellate orders and the denial of interest under section 234B were also contested by the appellant.

The matter had previously reached the Hon'ble High Court of Karnataka, which directed that if the assessee could prove that the goods sold matched those declared under the VDIS Scheme 1997, no addition under section 68 would be warranted. The appellant argued that the AO and CIT(A) repeated the addition without proper justification, citing relevant Tribunal orders to support their case. The revenue supported the lower authorities' orders, highlighting discrepancies between the sale transactions and the VDIS declaration.

During the proceedings, the valuation report submitted with the VDIS declaration and the sale bill were scrutinized. The Tribunal examined the direction of the Hon'ble High Court and assessed the facts of the case. Despite the carat quantity matching, the Tribunal noted that the price of diamonds depends on various factors like cut and color, which were not adequately established by the appellant. The Tribunal analyzed the applicability of Tribunal orders cited by the appellant, concluding that they did not support the appellant's case.

Ultimately, the Tribunal found that the appellant failed to prove that the diamonds sold matched those declared under VDIS, as directed by the Hon'ble Karnataka High Court. Consequently, the appeal was dismissed, upholding the CIT(A)'s order. The Tribunal's decision was based on the lack of evidence establishing the equivalence of the diamonds sold and those declared, emphasizing the importance of factors like size, color, and cut in determining diamond prices.