DHAMI BROTHERS,,SURAT vs. THE JT. CIT, RANGE-9,, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, JM & SHRI O.P.MEENA, AM ITA No.3299/Ahd/2014 (Assessment Year 2010-11) Dhami Brothers The Jt. Commissioner of Income-tax Range-9, Surat 33-34, Jivandhara Society, Opp. Chowpaty, Varachha Road, Surat-395006.. Opp. New Civil Hospital, Majuragate, Surat. PAN/GIR No.AABFD4987E Appellant) .. Respondent) Assessee by Shri Hiren R. Vepari Revenue by Ms. Anupama Singla (Sr. DR)

Date of Hearing 22/10/2019 Date of Pronouncement 27/11/2019 O R D E R PER AMARJIT SINGH (J.M): The assessee has filed the present appeal against the order dated 08.10.2014 passed by the Commissioner of Income Tax (Appeals) –V, Majura Gate, Surat [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010-11. 2. The assessee has raised the following grounds: - (I) Rejection of book result: (1) The learned Commissioner of Income-tax (Appeals) erred in confirming rejection of books of accounts when the appellant has been pursing the same method of accounting as was pursued by it in earlier years when its book result was accepted, (2) The appellant submits that for A.Y.2004-05, the Income-tax Appellate Tribunal by its order dt.06-08-2010 had accepted the book result as shown by the appellant. (II) Addition of Rs. 2,16,74,372: (1) The learned Commissioner of Income-tax (Appeals) erred in disallowing loss of Rs.2,16,74,372 when the loss was incurred as the appellant was in the process of closing its business and had to sell goods lying unsold since long at loss. (2) The appellant submits that the appellant having furnished complete quantitative details in respect of goods sold, there was no justification for disallowing loss. (3) On the facts and circumstances of the case and as per law, the learned Commissioner of Income-tax (Appeals) ought to have allowed the loss claimed. III Adjustment of unabsorbed depreciation and carry forward of business loss (1) The Ld. Commissioner of Income-tax (Appeals) ought to have granted adjustment of unabsorbed loss/carry forward of depreciation. IV Miscellaneous

ITA No. 3299/Ahd/2014 A.Y.2010-11 (i) On the facts and circumstances of the case and as per law, the Ld. Commissioner of Income-tax (Appeals) ought to have deleted charger of interest u/s 234A, 234B, 234C and 234D. (2) The appellant craves leave to add, alter or vary any of the grounds of appeal.” 3. The brief facts of the case are that the assessee filed its return of income on 16.07.2010 declaring total income to the tune of Rs.86,09,040/- for the A.Y. 2010-11. The return was processed u/s 143(1) of the I. T. Act. The case was selected for scrutiny, therefore, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee was a partnership firm engaged in the business of Sale of Polished Diamond and Land & Building. The diamond manufacturing activities were closed by the assessee since September 2005 and only closing stock of finished diamond was being sold year after year. The land & building was converted into stock in trade and was sold during the year under consideration. The total turnover was of Rs.6,19,09,570/- and the GP was of Rs.1,36,51,641/- i.e. 22.05%. The corresponding figures for the previous year were respectively Rs.20,00,940/- and GP was of Rs.13,01,359/- i.e. 65.06%. On verification, it was found that the assessee has shown the opening stock of polished diamonds at Rs.4,31,70,942/-. The said opening stock was sold at Rs.2,14,96,570/-. The assessee incurred the loss in sum of Rs.2,16,74,372/-. The Assessing Officer found the same improbable and in genuine, therefore, the loss in sum of Rs.2,16,74,372/- was rejected. The total income of the assessee was assessed to the tune of Rs.3,21,03,870/-. Feeling aggrieved, the assessee filed an the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied, therefore, the assessee has filed the present appeal before us. ISSUE NO.1 to 4 4. All the issues are inter-connected, therefore, are being taken up together for adjudication. At the very outset, the Ld. Representative of the assessee has argued that the issue has squarely covered by the decision of the Hon'ble ITAT in the assessee’s own case for the A.Y.2008-09 dated 19.06.2015, therefore, the claim of the assessee is liable to be allowed in the interest of justice. However, on

ITA No. 3299/Ahd/2014 A.Y.2010-11 the other hand, the Ld. Representative of the revenue has refuted the said contention. The copy of order dated 19.06.2015 for the A.Y. 2008-09 passed by Hon'ble ITAT in the assessee’s own case is on the file in which the relevant finding has been given in para no.16 to 18 which are hereby reproduced as under:- “16. We have heard the rival submissions and perused the orders of the lower authorities and material available on record. In the instant case the assessee sold diamond out of its opening stock brought-forward from earlier years costing Rs.3,76,70,953/- for Rs.2,40,08,065/- and claimed loss of Rs.1,36,62,888/-. The A.O. observed that the assessee has not maintained quality-wise details of diamonds. The assessee could not explain the reasons for incurring of the loss on sale of diamonds. In the immediately preceeding Assessment Year 2007-08 loss claimed by the assessee of Rs.6,36,74,996/- on turnover of Rs.11,72,77,128/- on account of sale out of stock lying with it was disallowed and the assessee accepted the same and did not file any appeal there against to any higher authority. Therefore he disallowed the loss of Rs.1,36,62,888/-. 17. On appeal, the CIT (A) confirmed the order of the A.O. by observing that no satisfactory explanation for the loss was given by the assessee and no documentary evidence was also filed for the same. The contention of the assessee is that not preferring an appeal in A.Y. 2007-08 against the disallowance of claim of loss cannot be a ground for making disallowance in the year under appeal as each assessment year is a different assessment year. Further, it is also the contention of the assessee that non maintenance of quality-wise details of diamonds does not allow the A.O. to disallow the loss claimed by the assessee. He submitted that the A.O. in the assessment order himself has stated that the assessee has valued the opening stock and closing sock of diamonds at an average cost of Rs. 9904 per karat. It is also the contention of the assessee that the assessee filed copies of sales invoices with complete address and PAN Nos. of the parties to whom the diamonds were sold. No inquiry was made by the A.O. as well as by the CIT (A) before disallowing the claim of loss to the assessee. Thus it was the submission that the disallowance made should be deleted. 18. We find force in the contention of the assessee that disallowance of loss cannot be made on the ground that in the preceeding assessment year, the assessee accepted the disallowance of loss on sale of diamonds as each assessment year is a separate unit of assessment. The Assessing Officer is expected to carry out verification of the claim of the assessee with the evidences produced before him and thereafter arrive at the independent conclusion about the allowability or disallowability of the claim expenditure or loss. Further, in the year under consideration the assessee filed copies of sales invoices with the complete address of the parties and their PAN Nos., No adverse material was brought on record by making due inquiry. Further the contention of the assessee is also that the sale consideration was received by the assessee through banking channel. The A.O. has brought no material on record after examining the parties to whom the sales were made by the assessee to show that the assessee has under invoiced the sale of diamonds or that the sales invoiced do not reflect the correct sale-price of the diamond. In absence of any such material being brought on record in our considered view the A.O. as well as the CIT (A) were not justified in disallowing the loss of Rs.1,36,62,888/- to the assessee. On a

ITA No. 3299/Ahd/2014 A.Y.2010-11 similar facts this Bench of the Tribunal in the case of Shri Asokkumar H. Kothari vs. ITO in ITA No.386/Ahd/2009 A.Y. 2005-06 order dated 16-1-2015 deleted the addition for the reason that the name and address of the parties to whom the diamonds in question were sold were made available to the A.O. by filing copy of the bills for sale of diamond and the Revenue did not bring any material on record to show that the rough diamonds of 1240.10 kts was not sold on 4-4-2005 for Rs.18,40,177/- and the same in fact was sold at a higher value. We therefore, set aside the orders of the lower authorities and direct the A.O. to allow the loss of Rs.1,36,62,888/- on sale of diamonds claimed by the assessee. GroundNo.2 of the appeal is that CIT (A) has erred in confirming the addition of Rs. 2,83,775/- under section 50C of the Act.” 5. Since the issue has squarely covered by the decision of the Hon'ble ITAT in the assessee’s own case bearing ITA. No.2163/Ahd/2011 dated 19.06.2015 (supra), therefore, by honoring the same, we set aside the finding of the CIT(A) on these issues and allowed the claim of the assessee. All the issues are decided in the favour of the assessee against the revenue. 6. In the result, the appeal filed by the assessee is hereby ordered to be allowed. Order pronounced in the open court on this 27/11/2019 Sd/- Sd/- (O. P. MEENA) (AMARJIT SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER सुरत/ Surat, Dated: 27/11/2019/Vijay Pal Singh, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat