COMMISSIONER OF INCOME TAX Vs. VAIBHAV GEMS LTD

JUDGEMENT

(1.) Instant Income Tax Appeal is directed against the order dt.18/01/2013 passed by the Income Tax Appellate Tribunal, Jaipur Bench, 'A', Jaipur (for short, "ITAT") by which the ITAT, while affirming the order passed by the Commissioner of Income Tax (Appeal) (for short, "CIT(A)"), who had deleted the Trading Addition, has dismissed the appeals filed by the appellant-revenue. It relates to the Assessment Year 2008-09.

(2.) Brief facts, as emerging on the face of record, are that the respondent-assessee is an exporter of cut precious and semi-precious stones (gems) and studded gold jewellery. During the previous year, relevant to the year under appeal, the respondent-assessee declared turnover in Domestic Tariff Area (for short, "DTA)) unit of Rs.35,07,51,711/- declaring gross profit of Rs.17027739 with GP rate of 4.85%. In the EOU the turnover disclosed was Rs.2,52,61,24,396/-, declaring gross profit of Rs.34,11,57,119/- and GP rate of 13.51%. The Assessing Officer (for short, 'AO') raised certain queries to the respondent-assessee to produce relevant details and the production of stock register, item wise, colour, luster and size-wise as also day to day manufacturing and production register. However, the respondent-assessee claims to have furnished necessary records but the AO was not satisfied with the explanation so offered, particularly of the fact that the respondent-assessee is showing the production as per its sweet will as also the fact that details of quality-wise of rough or gem stones or diamonds etc. are not maintained. Accordingly, a show cause notice was issued as to why the provisions of Sec.145(3) be not invoked and addition be not made to the trading results as the results were not fair and reasonable. It appears that the respondent-assessee replied contending therein that the trading results declared in the past years have been accepted by the department and the GP rate depends on combination of sales of different items i.e. if sale of gold jewellery is more, GP rate becomes lower and if sale of Gem Stones is more, GP rate becomes higher. The purchases, expenses and sales of the respondent-company are completely supported by bills & vouchers. It was further contended that item-wise/ stone wise quantitative details have been maintained and as such the declared trading results are fully verifiable. It was further contended that the details have been properly maintained and there is no flaw in maintenance of the said details as the same accounts are being maintained regularly and have been found to be proper in the past years.

(3.) The AO , while passing the assessment order, came to the conclusion that true profit of the firm cannot be deduced on the basis of non-maintenance of closing stock details as desired by the department and accordingly in view of CBDT Instruction No.02/2008 dt. 22/02/2008, the AO applied NP rate of 6% on its turnover in the DTA unit where the GP rate was shown as 4.85% and accordingly made trading addition of Rs.2,07,00,805/-. The results, shown being fair in EOU account, was accepted.