Stock discrepancy additions fail where verified books outweigh bank hypothecation figures and no undisclosed sales are proved.

Maintained stock records independently verified by civil supplies and sales tax authorities were preferred over hypothecation figures furnished to a bank, because the Department did not establish any actual suppression of stock or undisclosed sales. On those facts, a mere inconsistency between the bank statement and the stock register was insufficient to justify an addition for alleged stock discrepancy. As the foundational stock addition failed, the consequential estimate of profit on assumed off-book sales also could not stand. The article states that the additions based on alleged stock inflation and presumed unrecorded sales were unsustainable on the record.

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Issues: Whether the addition made on account of alleged discrepancy between the stock shown in the assessee's books and the stock declared to the bank, and the consequential addition for presumed profit on alleged off-book sales, was sustainable.

Analysis: The assessee maintained stock registers that were repeatedly checked by other governmental authorities, including civil supplies and sales tax authorities, and no discrepancy was found in those verifications. The statements furnished to the bank were only for hypothecation purposes and were not shown to be more reliable than the stock registers. The finding on the record was that the bank figures could not outweigh the consistent third-party verification of the books, and the Department had not established that the assessee had in fact suppressed stock or made undisclosed sales. Since the premise for the stock addition failed, the further profit addition based on assumed disposal of that stock also failed.

Conclusion: The stock discrepancy addition was not justified and was deleted, and the consequential profit addition also could not survive. The appeal succeeded.

Final Conclusion: The assessed additions based on alleged stock inflation and presumed unrecorded sales were held unsustainable on the facts, with the assessee's books and external verifications preferred over the bank hypothecation figures.

Ratio Decidendi: Where maintained stock records are independently verified by competent authorities and no discrepancy is found, a mere inconsistency between hypothecation statements furnished to a bank and the stock register does not, by itself, justify an addition as undisclosed income or a consequential profit estimate.

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