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TMI Blog2011 (2) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... /polishing in the national and international market; that as per the method of accounting consistently followed by the assessee it valued closing stock at cost or market value whichever is less ; that on the last date of every year, the assessee takes detailed physical quality-wise stock of diamonds and then the market value of such stock is worked out. The assessee has taken the market value where the market value is lesser than the cost and in the case of remaining diamonds it has taken the cost. The complete quality wise inventory of the closing stock of diamond is at page nos.30 and 31 of the paper book; that to support the assessee s contention that market value of the part of the stock of the diamond was less than the cost, the assessee has given sale value of such diamond in the subsequent year. Complete details of sale of each and every diamond are given at page no.36 and 37 of the assessee s paper book. He therefore submitted that valuation made by the assessee is duly supported by the documentary evidences in the form of sale bill of such diamonds in the immediately subsequently year; that the AO adopted the average cost for determining the value of the closing stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the sale at page no.36 37, not a single item tallies with the each other. Therefore, the contention of the assessee that the market value of the closing stock was less than the cost has not been established; that the value of diamond depends upon the quality of the diamond. Lower quality of the diamond is purchased at the lower rate and therefore the same is sold at a lower rate after processing. The assessee has sold various lots of diamonds for much higher rate than the cost price. The details of which is given at page no.11 and 12 of the assessment order which proves that various pieces of the diamonds were sold by the assessee at as high as ₹ 36941/- per carrat as against the average cost of ₹ 9,943/- per carrat; that in fact the assessee selected certain sale instances where the diamond was of inferior quality and the same was sold at lower rate and attached those sale bills to claim that the market value of the diamond was lower than the cost; that the assessee has not given item-wise cost and market value of each lot. Moreover, the assessee has not given the market value of entire closing stock. He further submitted that burden is upon the assessee to estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of closing stock i.e. cost or market value whichever is lower , the value of the closing stock works out to ₹ 10,30,98,508/-. The assessee has given the details of lotwise physical stock of the closing stock of polished diamonds. The same is at page no.30 and 31 of the assessee s paper book which is reproduced below for ready reference: Sr. No. Description of diamonds Cts. 1 Cut Polished Diamond 185.99 2 D/Cut Tilc + 9 Vs 1 167.93 3 D/Cut Tilc -9 Vs 1 167.14 4 D/Cut Tilc-6.5 Vs 1 110.11 5 F Cut White Vs 1 20.29 6 F Cut White Vs 1 20.55 7 F Cut White Vs 1 20.28 8 Cut Polished Diamond 277.56 9 Cut Polished Diamond 923.63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WH TAP BUG 1 3 132.88 40 D/Cut TTLB PK 1,2 42.97 41 D/Cut TTLB VS 1,2 47.38 42 TAP/BUG TTLB PK 1,2 228.96 43 D/Cut TLB PK 1,2 119.74 44 TAP/BUG TTLC S1 1,2 50.00 45 White Buggets PK 2 (PL) 72.32 46 White Buggets PK 2 (PL) 5.78 47 D Cut TTLB S1 1 2 37.52 48 Scut TTLB PK 2 3 21.47 49 S Cut TLB PK 1 2 61.89 50 D CUT TTLC PK 1 2 50.00 51 PRN TTLC S1 1 2 106.34 52 D Cut TTLB PK 1 2 177.33 53 TAP + BUG TTLB S1 1 2 36.84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F Cut TTLC VS 2 32.35 85 Cut Polished Diamond 250.09 86 P/C White I 3 303.60 Total 13345.87 7. While valuing the closing stock, the assessee has claimed that 9405.61 carat of the diamonds was having less value than the cost. The working given by the assessee at page no.36 and 37 reads as under: VALUATION SHEET FOR COSTING DONE AT MARKET VALUE BECAUSE THE SAME IS LOWER THAN COST OF ₹ 9,943/- PER CARAT. Sr. No. Description Supporting Sale Bill No. Market Value Per Carat as on 31-03-07 Quantity (In Carats) Amount (Rs.) 1 CUT POLISHED DIAMONDS 2 9,000.00 277.56 2,498,041 2 CUT POLISIIED DIAMONDS 4 5,100.00 660.33 3,367,683 3 CUT POLISHED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 569,640.00 42.97 244,774 20 D/CUT TTLB VS 1 2 13 8,362.80 47.38 396,229 21 TAP/BUG TTLB PK 1 2 13 3,555.20 228.96 813,999 22 D/CUT TLB PK 1 2 13 5,534.80 119.74 662,737 23 TAP/BUG TTLC SI 1 2 13 8,201.20 50.00 410,060 24 White Buggets PK-2 (PL) 14 8,524.40 72.32 616,485 25 White Buggets PK -2 (PL) 14 8,524.40 5.78 49,271 26 D CUT TTLB SI - 1 2 15 8,484.00 37.52 318,320 27 S CUT TTLB SI - 2 3 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 243,381 44 F/CUT WHITE PK - 2 25 6,082.50 30.00 182,475 45 F/CUT WHITE PK - 3 25 4,055.00 21.51 87,223 46 WHITE FULLCUT PK -2 27 7,704.50 19.07 146,925 47 WHITE FULL CUT PK - 1 27 8,718,25 13.50 30,514 48 WHITE FULLCUT PK-2 27 7,299.00 44.00 321,156 49 WHITE FULLCUT PK - 3 27 6,690.75 22.31 149,271 50 F/C WHITE SI -3 28 9,022.50 1143.83 1,297,706 51 F/C WHITE PK -1 28 7,517.55 154.28 1,159,608 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,17,981 ii) Stock value at cost (3940.26 carrat) : Rs.3,91,08,527 Total : Rs.10,30,98,527 8. It was claimed by the assessee that out of 13,347.87 carrat of the closing stock, the market value of 9,405.61 carrat was less than the cost and therefore the assessee adopted market value while for the remaining stock of 3940.26 carrat market value was more than the cost, therefore, the assessee adopted cost price. He has also claimed that the assessee has a right of following cost or market value whichever is lower as its method of accounting for valuation of closing stock and such method is being consistently followed by the assessee since past several years and being accepted by the Revenue as such. 9. So far the legal argument is concerned that the assessee has right to follow cost or market value whichever is lower method for valuation of closing stock is concerned, we entirely agree with the assessee and hold that the assessee has the right to follow this method. However, the question is with regard to determination of cost as well as market value of the closing stock as on 31-3-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12810.68 16.04.07 2 12735.89 17.04.07 3 32108.06 10.05.07 5 12416.43 18.05.07 6 25765.22 21.05.07 7 23871.60 21.05.07 8 10346.96 25.05.07 9 11174.62 28.05.07 10 12435.00 29.05.07 11 25536.67 13.06,07 14 10165.48 18.06.07 16 11392.80 22.06.07 17 11900.27 09.07.07 20 14844.55 10.07.07 21 11398.85 11.07.07 22 11556.75 23.07.07 23 14951.70 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, we may reiterate that the description and quantity given in the sale instances does not tally with the description and quantity given in the details of the lot-wise physical stock of the inventory. In the absence of such co-relation the contention of the assessee that the market value of the part of the diamond was lower than the cost cannot be accepted. Except some sale bills, no other evidences was produced by the assessee to establish that the market value of the diamond was lower than the cost. When any assessee claims that the market value of the closing stock was lower than the cost, burden would be upon the assessee to establish so by producing the documentary evidences. If the closing stock is of diamond, this burden would be even heavier because the assessee is claiming that the market value of 9405.61 carrat of the closing stock of diamond out of the total closing stock of 13,345.87 carrat was lower than the cost. No evidence is produced by the assessee to establish this contention. The sale bills produced by the assessee in respect of sale of diamonds from April, 2007 onwards cannot be said to be the evidences for lower market value of the part of the closing stock as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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