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TMI Blog2010 (8) TMI 817X X X X Extracts X X X X X X X X Extracts X X X X ..... We therefore accept the value of the closing stock determined by the AO. However, accepting the alternate plea of the learned counsel, we direct that the value of the closing stock will be taken as 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 direction of the CIT(A) to make the addition by working out the net profit at the rate of 4% is hereby quashed. charging of interest u/s 234B and 234C - HELD THAT:- Both the parties agreed that it is consequential, we therefore direct the AO to recalculate the interest, if any, after determination of the income as per order. In the result, assessee s appeal is partly allowed. - Shri G. D. Agarwal And T. K. Sharma,JJ. For the Petitioner : Shri R. N. Vepari For the Respondent : Shri K. M. Mahesh ORDER Per G. D. Agrawal, Vice-President: This is assessee s 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 grounds which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke 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 of 4% should be applied. It is submitted by the learned counsel that the above direction of the CIT(A) amounts to enhancement of the assessee s income. He 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 production of diamond from each lot, the books of accounts of the assessee cannot be rejected. 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, he submitted that the assessee made proper and detailed valuation of closing stock which is also accepted by the auditors. That merely because the assessee could not produce the method of valuation of such closing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records were maintained by the assessee they were not produced for examination to compute the 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 stock in terms of quality is not furnished. Therefore, in absence of details in terms of quality wise production of diamonds from each lot it is not ascertainable which type of diamonds was produced from a particular lot in order to determine the value. Therefore, in view of this, it would rather be correct to say that the valuation of stock is not verifiable. Here, it would be pertinent to mention that the Hon ble Supreme Court in the case of British Prints India Ltd. reported in 188 ITR 44, has 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 AO to determine the taxable income by making such computation as he things fit. Therefore, the claim of the assessee that it is assessee s option to maintain the books of accounts in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer may make an assessment 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 assessee s accounts. As per the AO for want of qualitative details of the processing of diamonds, the accounts of the assessee cannot be said to be complete. We are unable to agree with the above views of the AO. Section 44AA provides for maintenance 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 books of accounts and other documents as may enable to the AO to compute the total income of assessee in accordance with the provisions of this Act. Sub-section (3) of section 44AA empowers the Central Board of Direct Tax to prescribe by rules the books and other documents to be kept and maintained by the assessee. The CBDT as per rule 6F has prescribed the books of accounts and other documents to be kept and maintained by the persons carrying on certain specific pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the sum of Rs.46,16,251/-. The learned DR had no objection to the above request of the learned counsel. It is a settled law that the closing stock of one year would be the opening stock of next year. Therefore, if the AO increased the value of closing stock in this year, automatically, the opening stock of the next year is to be increased. After considering the arguments of both the sides and the facts of the case, we are of the opinion that 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 stock. No mistake in the valuation of the closing stock by the AO was pointed out by the learned counsel. We therefore accept the value of the closing stock determined by the AO. However, accepting the alternate plea of the learned counsel, we direct that the value of the closing stock will be taken as 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 direction of the CIT(A) to make the addition by working out the net profit at the rate of 4% is hereby quashed. 11. Ground no.2 of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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