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V.M. Star DW 6310, Bharat Diamond Bourse, G-Block, Bandra Kurla Complex, Bandra (E) Mumbai-400051 Vs. ACIT-16(3) Matru Mandir, Tradeo Road. Mumbai -400007
January, 22nd 2016
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      Before Shri Sanjay Garg, Judicial Member, and
        Shri Ashwani Taneja, Accountant Member

               ITA NO.1238/Mum/2014
              Assessment Year: 2011-12

V.M. Star                           ACIT-16(3)
DW 6310, Bharat Diamond       /     Matru Mandir,
Bourse, G-Block, Bandra             Tradeo Road.
Kurla Complex, Bandra (E)           Mumbai -400007
          (Assessee)                      (Revenue)
P.A. No.AAAFV5448H
               ITA NO.2504/Mum/2014
              Assessment Year: 2011-12

ACIT-16(3)                  V.M. Star
Matru Mandir, Tradeo    / DW 6310, Bharat Diamond
Road.                       Bourse, G-Block, Bandra
Mumbai -400007              Kurla Complex, Bandra (E)
       (Revenue)                    (Respondent)
                               P.A. No. AAAFV5448H

[    / Assessee by Shri K. Sivaram (AR)
è    / Revenue by Shri G.M. Doss (DR)

                   /   Date   of      06/01/2016
Hearing :
                                      2            V.M. Star

    /Date of Order:                                20/01/2016

                              / O R D E R

Per Bench:

     These appeals have been filed by the Assessee and
Revenue against the order of Ld. Commissioner of Income Tax
(Appeals)-27, Mumbai {(in short `CIT(A)'}, dated 15.01.2014 for
the assessment year 2011-12, passed against the assessment
order passed by the Assessing Officer (in short `AO') u/s 143(3)
of the Act.

First we take assessee's appeal ITA No.1238/M/2014

2. The assessee has raised following grounds of appeal:
     "1. The learned CIT(A) erred in not taking the value of
     stock as per second v al u a ti o n r e p o r t s u b mi t t e d of
     v al u e r   S h r i S h ar ad   M e h ta   a t Rs.5,41,93,485/-.
     Whereas the learned CIT(A) as taken the value as per
     Shri Dinesh Salvi report at Rs. 8,51,67,748/-.
     2. Without prejudice Id. CIT (A) failed to consider that value
     as per Dinesh Salvi's Report at Rs. 8,51,67,748/- is the
     market value and has to give adhoc allowances for
     differences       in   valuations     since    the   valuation   is
     3. Without prejudice the Id. CIT(A) erred in not giving
     consequential effect as to allowing the business loss of
     Rs.3,09,52,303/- as the value of total stock is taken as
                                       3                  V.M. Star

       per    valuation     report         of     Shri    Dinesh      Salvi    at

3.     During the course of hearing, arguments were made by
Shri K. Sivaram, Authorised Representative (AR) on behalf of
the    Assessee      and    by    Shri          G.M.     Doss,   Departmental
Representative (DR) on behalf of the Revenue.

4. The issue involved in all the grounds is common. The
assessee has challenged the action of lower authorities in
adopting the value of stock found during the search at
Rs.8,51,67,745/- as against a sum of Rs.5,41,93,485/-. The
assessee has also contended that the lower authorities have
erred in not granting the benefit of business loss of
Rs.3,09,52,303/-, incurred by the assessee on account of sale
of the aforesaid stock.

4.1. The brief facts are that the assessee is a partnership firm
engaged in the business of trading exports of diamonds. A
search action had taken place at the premises of the assessee,
wherein inter alia stock of diamonds was found by the search
team. Physical verification of the stock of diamond was taken
and the same was valued by the Government Approved Valuer.
Total stock of the diamonds found was Rs. 16772.32 carats,
but the stock of diamonds as per books as on date of search
i.e.   13th   July   2010    was     only         Rs.3113.60       carets.    The
department      valued      for   an        aggregate       amount      of    Rs.
                               4           V.M. Star

8,51,67,745/-. But the assessee claimed that the value of the
said diamonds was Rs.5,41,93,485/-.

4.2. Being aggrieved, the assessee contested the matter before
the Ld. CIT(A), where part relief was given. But, the assessee
was not satisfied and the appeal was filed before the Tribunal.

4.3. During the course of hearing before us, Ld. Counsel has
contested the action of lower authorities in not accepting the
value of stock as claimed by the assessee. It has further been
submitted that, without prejudice to Ground nos. 1 & 2, the
assessee challenged in ground No.3, the action of lower
authorities in not granting a benefit of business loss incurred
by the assessee on account of sale of aforesaid stock
amounting to Rs.3,09,52,303/-. It has been further submitted
by the assessee that submissions in this regard were made
before the AO as well as Ld. CIT(A), but the this contention has
not been met by Ld. CIT(A), and no discussion has been made
in the appellate order passed by the Ld. CIT(A) in regard to
business loss of Rs.3,09,52,303/-. It has been further
submitted that complete documentary evidences have been
submitted evidencing sale of 100% stock by the assessee.
During the year itself, nothing has been brought on record by
the lower authorities to negate the claim of the assessee and
thus, sale has been found to be genuine. On the other hand
Ld. DR has not controverted factual submissions made by the
                                5           V.M. Star

4.4. We have gone through the orders of lower authorities and
carefully considered the submissions made by both the sides.
Without going much deeper into the whole controversy raised
before us, it is noted by us, at the very outset, that facts with
respect to sale of 100% of the aforesaid stock and incurring of
business loss of Rs.3,09,52,303/- was raised by the assessee
before Ld. CIT(A) also. The relevant part from the written
submissions of the assessee filed before the Ld. CIT(A) as has
been reproduced in its order by the Ld. CIT(A) is reproduced

     "4.1.10. Without prejudice to above grounds, the Learned
     Assessing Officer has failed to allow the business loss of
     Rs.3,09,52,303/-, if the value of total shock is taken as
     per valuation report of Dinesh Salvi at Rs.8,51,67,745/-.
     4.1.12. The appellant has disposed off all the 100% stock
     (accounted as well as unaccounted) till the end of the
     relevant financial year i.e. 2010-11. Hence, the redrafted
     profit and loss account of the appellant which is worked
     out by substituting the cost of the book stock at market
     price of the book stock as taken in the valuation report by
     Dinesh Salvi is to be accepted and the business loss of
     Rs.3,09,52,303/- arising after taking the value of books
     stock as per Dinesh Salvi report is to be set off against the
     business income added in the assessment order under
     section 72 of the Income Tax Act, 1961."
                                6           V.M. Star

4.5. We have noted from the perusal of the order passed by
the Ld. CIT(A) that these contentions have not been dealt with
by either of the authorities, and no discussion at all has been
made by AO or by Ld. CIT(A) in their orders on this issue.
Thus, as requested by both the parties jointly, we find it
appropriate to send this issue back to the file of the AO. The
assessee shall furnish complete documentary evidences before
the AO evidencing sale of the aforesaid stock and incurring by
of the consequent loss there-upon, for which the AO shall give
adequate opportunity of hearing to the assessee. The assessee
shall extend requisite cooperation to the AO for ascertaining
correct facts, by furnishing information and documents as
may be required by the AO, as per law. Thus, with these
directions, this issue is sent back to the file of the AO for
verification of these facts and if these facts are found to be
correct, then the aforesaid claim of loss should be allowed to
the assessee. As per the law and facts, the AO shall decide the
whole issue afresh without being influenced by the earlier
orders passed by him or by Ld. CIT(A) and after taking into
account all the facts and circumstances and all the legal and
factual issues as may be raised by the assessee before the AO.
Thus, with these directions, this ground is sent back to the file
of the AO and is treated as partly allowed for statistical
                                7          V.M. Star

Now, we take ITA No.2504/Mum/2015 Revenue's Appeal

5. In the grounds raised by the Revenue before us, it has been
contended that the Ld. CIT(A) has erred in sustaining the
addition only to the extent of Rs.1.19 crores out of addition of
Rs.3.60 crores made by the AO in respect of value of
unaccounted stock found during the course of search. It has
been contended by the Ld. Counsel that a bill dated
08.06.2010 found during the course of search was not entered
in the books of accounts. The AO denied the claim of the
assessee. But Ld. CIT(A) After verification of facts allowed the
claim. On the other hand, Ld. DR, submitted that complete
facts have not been submitted by the assessee and this issue
also require re-examination on the same pattern as the issues
raised by the assessee in its appeal.

5.1 We have gone through the orders of the lower authorities
in this regard. It is noted by us that issues raised by the
assessee in its appeal have been sent back to the file of the AO
for re-adjudication, therefore, in pursuance to the request and
as per agreement conveyed by both the parties during the
course of hearing, issues raised by Revenue in its appeal are
also sent back to the file of the AO. The AO shall re-adjudicate
this issue and after examining the claim of the assessee shall
decide the same afresh in respect of our directions as have
been given in the appeal filed by the assessee.
                                     8           V.M. Star

  6. In the result, appeal of the assessee as well as revenue is
  partly allowed for statistical purposes.

       Order pronounced in the open court on   20th    January, 2016.

              Sd/-                                   Sd/-
          (Sanjay Garg )                          (Ashwani Taneja)

    Mumbai;  Dated : 20/01/2016
  ctàxÄ? P.S/...
      /Copy of the Order forwarded to :
  1.    / The Appellant
  2.   × / The Respondent.
  3.     () / The CIT, Mumbai.
  4.      / CIT(A)-
        È                     , Mumbai
  5.    ,   ,             / DR,
       ITAT, Mumbai
  6.   [  / Guard file.
                                                        / BY ORDER,
              ×  //True Copy//
                                 /  (Dy./Asstt. Registrar)
                                  ,   / ITAT, Mumbai
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