Stock discrepancy addition fails where audited books are intact and no material shows unaccounted stock or suppressed sales.

An addition for stock discrepancy under the Income-tax Act cannot be sustained merely because a higher stock figure was furnished to a bank for hypothecation, where the assessee maintained day-to-day books, purchases and sales were vouched, the accounts were audited, and no defect or suppression was found. In the absence of material showing actual unaccounted stock, the books of account remained relevant evidence of regular business records, so the stock-difference addition was deleted and the departmental challenge failed.

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Issues: Whether the addition made under section 69 of the Income-tax Act, 1961 on account of difference between stock declared to the bank and stock shown in the books of account was sustainable.

Analysis: The stock discrepancy was explained on the basis that the assessee maintained day-to-day books of account, purchases and sales were duly vouched, the books were audited, and no defect in the books or suppression of purchases or sales was found. The difference arose from stock figures furnished to the bank for hypothecation purposes, and the books of account were treated as relevant evidence of regularly kept business records. In the absence of any material showing an actual unaccounted stock position, the addition could not be based merely on the bank statement.

Conclusion: The deletion of the addition was upheld and the issue was decided in favour of the assessee.

Final Conclusion: The Department's appeals were dismissed because the stock-difference additions were not justified on the facts found by the Tribunal.

Ratio Decidendi: An addition for stock discrepancy cannot be sustained merely on the basis of a higher stock figure shown to a bank unless the books of account are found defective or there is material to show suppression of stock, purchases, or sales.

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