GEMS & GEMS (REGISTERED PARTNERSHIP FIRM) 5 Vs. COMMISSIONER OF INCOME TAX-II, NEW CENTRAL REVENUE BUILDING STATUE CIRCLE, JAIPUR

JUDGEMENT

(1.) By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the department reversing the view taken by the CIT(A).

(2.) This Court while admitting the appeal on 20.12.2016, framed the following substantial question of law:

(3.) The facts of the case on the basis of synopsis submitted by appellant are that appellant partnership firm is engaged in the business of manufacturing processing and trading of various types of precious and semi-precious stones. The appellant has been maintaining complete books of accounts including stock register, quantity wise and weight wise separately for each type of stone. It has been valuing its closing stock of the stones consistently following the same system and method of valuation as accepted by the revenue in earlier years at cost or market price whichever is less. The value of the stone being subjective satisfaction of the buyer is dependent on their liking or disliking or suitability in this line of trade. The saleable stock of superior quality are purchased first by the customers, after assortment of find items as per buyer's choice; and at the end of the year, only the inferior quality of the stones remained in stock having minimal value even less than the cost price. Accordingly, the appellant valued its stock at the end of the year as per their ability, experience and commercial expediency, deducting the cost of the sold stock from the total stock of the particular stone. In order to ascertain the cost price of the sold stock, the gross profit is deducted from the sale value of the sold stock; thereafter, the cost price so ascertained of the sold stock is deducted from the total cost of the stock at the end of the year of particular stone; resulting into the cost of the stock of inferior quality at the end of the year is valued.