The Commissioner Of Income Tax-Vii v. M/S. M.r.bhansali & Co

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.139 OF 1999 The Commissioner of Income Tax-VII. v. M/s. M.R.Bhansali & Co. ..Appellant. ..Respondent. Mr.A.R.Malhotra with Ms. P.S.Cardozo for the Appellant.Ms.Sneha Phene with Mr. Rajani Divekar with Prita Mehta i/by Little & Co. for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 29TH JANUARY, 2013 PC: Although several questions have been raised by the revenue in this appeal the basic issue which arises for determination is : Whether in the facts and circumstances of the case the Tribunal was justified in holding that the valuation of the polished diamonds done consequent to a search and offered for tax is not assessable under Section 69B of the Income Tax Act, 1961 and is to be considered as profits of the business for the purpose of deduction under section HHC of the Income Tax Act,1961? 2)The case of the revenue is that the assessee had not fully disclosed the valuation of the cut and polished diamonds which were lying in stock with them. The proper value of the cut and polished diamonds was found consequent to a search of the respondent-assesssee. In view of the revaluation, the closing stock was enhanced by Rs.61.12 lacs. However, this amount of Rs.61.12 according to the revenue had to be brought to tax under Section 69B of the Act. While according to the respondent assessee the same is to be brought to tax under the head “Profits and Gains of Business” and deduction under Section 80HHC of the said Act be extended to them.3)In appeal, both CIT(A) as well as the Tribunal have arrived at a finding of fact that there was no dispute with regard to quantity of diamonds constituting closing stock. The difference in valuation was solely on account of different method of valuation adopted by the assessee from that required to be adopted by the revenue. Therefore, upon adopting the method of valuing the closing stock as required by the revenue profits also enhanced by Rs.61.12 lacs and was offered for tax. In these circumstances, it was held that the provisions of Section 69B of the Act would not be applicable as the enhancement is only on account of different method of valuation as explained by the respondent assessee. Thus, the enhanced profit consequent to revaluation of closing stock has to be considered while arriving at profits of business for the purpose of Section 80HHC of the Act. 4)The decision of the CIT(A) and the Tribunal are based on a finding of fact. Therefore, we see no reason to entertain the present appeal. 5)Accordingly, the appeal is dismissed with no order as to costs. (M.S.SANKLECHA, J.) (J.P. DEVADHAR, J.)