Stock discrepancy in survey proceedings did not raise a referable question of law where the explanation was rejected.

A survey revealed a stock discrepancy between the books and the physical stock, and the assessee's explanation that the shortage was lying at a branch office was rejected. On those facts, the authorities inferred that the unexplained difference represented unrecorded sales, and no legal error was shown in that inference. The High Court held that no referable question of law arose under section 256(2) of the Income-tax Act, 1961, and the application was rejected.

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Issues: Whether any referable question of law arose from the Tribunal's affirmation of the addition based on the stock discrepancy noticed during survey proceedings.

Analysis: A survey at the assessee's premises revealed a difference between the stock reflected in the books and the stock physically found. The explanation that the deficit stock was lying at a branch office was not accepted by the assessing authority. On those facts, the authorities drew an inference that the unexplained difference represented sales outside the books. As the inference was based on an unsatisfactory explanation and did not disclose any legal error, no referable question of law was shown to arise under section 256(2) of the Income-tax Act, 1961.

Conclusion: No statable question of law arose, and the application was rejected.

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