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TMI Blog2011 (1) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... without appreciating the facts of the case. 3. The brief facts leading to the above issue are that assessee is engaged in the business of manufacture, importer, trader and exporter of diamonds. The assessee has filed its return of income for the year under consideration on 24-10-2005 declaring total income of ₹ 40,32,786/-. The Assessing Officer during the course of assessment proceedings noted that assessee has shown yield of polished diamond @ 30.77% on the basis of data of Hansal diamond, Mitul Gems, Pavasiya Exports Miraj Gems. The AO required the assessee to explain the suppressed yield and assessee replied that in diamond industry the yield of rough diamond depends not only on the basis of rough diamond but on the size, purity, colour and shape of diamond etc. The assessee claimed that if one wants more yield then purity of diamond will be low and cannot be sold at higher price. He stated that procedure in every unit has its own and that also own quality, own customer and own market. They have workers who can polish the diamond of specific quality, size, colour and cutting. He narrated example that from the rough diamond of ₹ 3,000/- per carat one can get yi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppressed yield at 1% and further estimated the suppressed yield addition at ₹ 29,74,132/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) deleted the addition by giving following finding at pages 2-3 of his appellate order:- I have carefully considered the contention of appellant as well as that of the assessing officer. I find that assessee has produced all the books of account other records before assessing officer for his verification he has not pointed out any defects in the same. He has also not rejected the book results by invoking provisions of section 145 of the Act. However, he made addition to the income of assessee on account of suppression of yield on the ground that yield shown by assessee is lower than that shown by other assessee s engaged in this line of activity. However, in my opinion addition to the income of assessee cannot be made purely on this ground as there should be some other cogent evidence on record which indicates that there is suppression of income. Even in respect of comparable instances cited by assessing officer, I find that even in those cases there is variation in yield. For e.g. in the case of M/s. Hansal Diamon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called for were furnished by assessee and placed on record by AO. The assessee has filed complete details of supplier and customers and comparative gross profit. The AO has simply rejected the book results on the basis that yield is less by 3%. We are in full agreement with the findings of CIT(A) that simply yield is less that cannot be reason for rejection of book results. Accordingly, we uphold the findings of CIT(A) and this issue of Revenue s appeal is dismissed. 5. The next issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition of ₹ 6,12,797/- made by Assessing Officer on account of labour charges. For this, Revenue has raised the following ground No.2:- 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of ₹ 6,12,797/- made by the A.O on account of excess labour charges, without appreciating the facts of the case. 6. The Assessing Officer during the course of assessment proceedings noted that labour charges were charged at ₹ 375/-, which is very high as per comparable in the same line of business as against labour charges paid in comparable diamond ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me before Assessing Officer and who indicated labour charges of ₹ 250/- to ₹ 350/-, whereas assessee has shown higher wages and at the same time getting lesser yield than the comparable cases mentioned in the assessment order. We find that there is no reason why AO has disallowed the labour charges paid by assessee at ₹ 375/- per carat as there is no evidence except a general statement that as per market comparable the labour charges are at ₹ 250/- to 375/-per carat and this statement of Revenue is not supported by any evidence whatsoever rather the claim of assessee is supported by bills and vouchers, as the bills and vouchers were produced by assessee are supported by the payment made by assessee at ₹ 375/- per carat. Accordingly, we are of the view that CIT(A) has rightly deleted the addition and we confirm the same. This issue of Revenue s appeal is dismissed. 8. The next issue in this appeal of Revenue is against the order of CIT(A) treated the loss on account of forward contract as business loss. For this, Revenue has raised the following ground No.3:- On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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