2016 (7) TMI 681 - HC - Income Tax

Court upholds ITAT order in favor of assessee over discrepancies in stock statements for credit facilities

The court upheld the ITAT order, ruling in favor of the assessee in a challenge to the addition made for discrepancies in stock statements for availing ... Addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility - Held that:- As in the case of Riddhi Steel and Tubes (2013 (10) TMI 291 - GUJARAT HIGH COURT) it is held by this Court that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. Accordingly, the question is answered in the affirmative i.e. against the appellant revenue and in favour of the assessee. We hold that the Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility. - Decided in favour of the assessee Issues:Challenge to ITAT order for block period 01/04/1994 to 08/08/2000 - Addition made on account of difference in stock statement for availing higher credit facility.Analysis:The appellant Department challenged the ITAT order dated 31/03/2006 for the block period 01/04/1994 to 08/08/2000, questioning the deletion of an addition made due to a difference in stock statement for obtaining increased credit facility. The main issue raised was whether the ITAT was correct in law in deleting the said addition. The counsel for the assessee argued that a similar issue had been decided in a previous case by the court, emphasizing that discrepancies between stock shown in books of account and statements to banking authorities for credit facilities do not warrant additions if adequately explained. The court referred to previous judgments where it was held that inflated statements to banks do not justify additions if the explanation provided is satisfactory, even after considering audits and financial ratios. Another case cited highlighted that informing banks about common stock positions among group concerns can justify deletion of additions. The revenue's advocate could not contest these arguments or provide contradictory decisions. After considering the arguments, the court held in favor of the assessee, citing previous decisions that supported the deletion of additions based on differences in stock statements for credit facilities. The court dismissed the appeal, stating that since the issue had been previously settled, no further elaborate reasons were needed, and the decision favored the assessee against the Department.