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TMI Blog2010 (2) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... shed diamonds of ₹ 1,94,28,535/- and of rough diamonds of ₹ 8,72,083/- totaling to ₹ 2,03,00,636/-. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A), Surat ought to have upheld the order of the Assessing Officer on the above issues. 3. It is, therefore, prayed that the orders of the learned CIT(A) may be set aside and that of the A.O. may be restored to the above extent. 2. The brief facts of the case are that the assessee-firm is doing the business of manufacture and export of diamonds. The assessee imports diamond and after getting the diamond manufactured from outsiders, export the same. The assessee filed its return of income for Assessment Year 2004-05 declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that there are no defects found in the books of account. It is admitted by the Assessing Officer that the final/end product of the assessee-company cannot be of the identical price. Thus, the final/end product is of a varying nature in the terms of colour, clarity, cut and carat. Therefore, it is impossible to have complete result of the production from rough diamonds which are in lacs. In this line of business, the assessee gets the value of closing stock valued by an approved valuer and based on his report, the value is being declared after reducing percentage of Gross Profit thereon. All diamonds are not equal and, therefore, applying the average rate by averaging out the opening stock and the purchases will lead to inconclusive re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock he would have to revalue the opening stock as well and the impact of such revaluation would become visible only thereafter. Thirdly, by making the additions to the closing stock, the AO had enhanced the GP rate to 51.94% which was not only unrealistic but was illogical as well. Therefore, I am of the view that there was simply no basis for rejecting the valuation of the closing stock of polished diamonds which was shown by the Assessee at ₹ 1,94,94,881/-. The AO is therefore, directed to delete the addition of the sum of ₹ 1,94,28,535/-. 4. As regards, valuation of rough diamonds, the Learned CIT(Appeals) held that the assessee has valued such stock on the basis of last purchase in the month of February and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This deduction is available for the last time and not from Assessment Year 2005-06. If the assessee really wants to have benefit, it will artificially increase the value of closing stock, so that the opening of subsequent year is taken at higher figure resulting into less income of subsequent year. The ITAT Ahmedabad Bench B in the case of ITO vs. M/s.B.Sureshkumar Co. by way of ITA No.2632/Ahd/2003, vide order dated 19/12/2007, held that application of average method on the basis of sales bill was not justified. The assessee consistently following such method of valuation of closing stock. This has always been accepted and no defect is found in the same. Therefore, the addition was rightly deleted by the Learned CIT(Appeals). 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 but in the subsequent year when such higher opening stock is adopted, the total income subsequent year will be equally reduced. Therefore, the assessee do not stand to gain by disclosing lower value of closing stock. In such circumstances, the Assessing Officer is not justified in valuing the closing stock at higher value by averaging out the cost, rather than going by the approved valuer s report for the same. 10. As regards of valuation of rough diamonds, we find the valuation is at cost and on the basis of last purchase price paid. Therefore, the same being in accordance with the accepted method of valuation applying any other method is not permissible under the law. 11. In the result, the appeal of the Revenue is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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