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Issues Involved:
1. Deletion of addition on account of excess stock of goods found during the course of search. 2. Addition on account of bogus purchases. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Excess Stock of Goods Found During the Course of Search IT(SS)A No. 13/Jp/2003 and CO No. 20/Jp/2003: The first ground concerns the deletion of an addition of Rs. 4,58,968 due to excess stock found during a search under Section 132 of the IT Act on 10th March 2000. The assessee, an exporter of precious and semi-precious stones, was found to have excess stock calculated by the AO using a GP rate of 38.26%. The CIT(A) deleted this addition, noting that the average purchase price of Agate beads was Rs. 442.68 per kg, and the correct valuation should be Rs. 400 per kg, leading to a reduction in excess valuation by Rs. 82,386. The CIT(A) also observed that the assessee, being a 100% exporter, had no need to manipulate GP rates as profits from export earnings were exempt. The Tribunal upheld the CIT(A)'s decision, agreeing that the correct GP rate of 45.68% for the current year should be applied, reducing the excess stock to Rs. 77,709, which was further explained by the overvaluation of Agate beads. IT(SS)A No. 14/Jp/2003 and CO No. 21/Jp/2003: In another case, the deletion of an addition of Rs. 43,38,522 for excess stock was contested. The AO had applied a GP rate of 20% from the preceding year, while the CIT(A) accepted the assessee's argument for an average GP rate of 22.94%. The CIT(A) deleted the addition, noting that the assessee, being a 100% exporter, had no other source of income and no need to manipulate GP rates. The Tribunal agreed, noting that the AO should have used the current year's GP rate of 24.56%, which would result in a negative stock figure, thus supporting the CIT(A)'s decision. 2. Addition on Account of Bogus Purchases IT(SS)A No. 13/Jp/2003 and CO No. 20/Jp/2003: The second ground involved an addition of Rs. 81,379 for bogus purchases, which was deleted by the CIT(A) based on reasons given in a related case (M/s Lunawat Gems Corporation). The Tribunal deferred the decision on this ground, pending the related case's outcome. IT(SS)A No. 14/Jp/2003 and CO No. 21/Jp/2003: The AO made an addition of Rs. 44,07,287 for bogus purchases based on a statement by Shri Subhash Daga, who later retracted, stating that goods were supplied by unregistered dealers when he lacked stock. The CIT(A) deleted this addition, noting that the purchases were vouched, payments were made by account payee cheques, and the assessee, being a 100% exporter, had no motive for bogus purchases as the income was exempt under Section 80HHC. The Tribunal upheld the CIT(A)'s decision, agreeing that there was no evidence of money laundering or receipt of payments back by the assessee, and the AO failed to prove the purchases were bogus. The Tribunal also noted that if no purchases were made, no addition for excess stock could be justified. Conclusion: The Tribunal dismissed the Revenue's appeals and allowed the cross-objections of the assessees, upholding the CIT(A)'s decisions in both cases.
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