Closing stock discrepancy not proved where bank stock statement related to an earlier date and hypothecation account was involved.

An addition for alleged closing stock difference could not be sustained where the stock statement filed to the bank related to an earlier date and the overdraft account was secured by hypothecation, not pledge. The first appellate authority accepted the assessee's explanation that no separate stock statement was filed for the intervening days, and the bank statement therefore did not prove any unexplained discrepancy in the books. The absence of minute details of sales during that period did not displace the core factual finding that the stock position shown to the bank had remained unchanged for the relevant comparison. The deletion of the addition was upheld.

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Issues: Whether the addition made on account of alleged difference in closing stock as on the assessee's year-end could be sustained when the stock statement furnished to the bank related to an earlier date and the overdraft account was by hypothecation.

Analysis: The stock position furnished to the bank on 28 March 1974 was treated as continuing to 31 March 1974, and there was no controversy that the account was one of hypothecation and not pledge. The factual explanation accepted by the first appellate authority showed that no separate stock statement was filed for 29 to 31 March 1974, and the bank statement could not be used to infer an unexplained discrepancy in the assessee's books. The absence of minute details of goods sold during the intervening period did not undermine the core factual finding that the stock position disclosed to the bank had remained the same for the relevant comparison.

Conclusion: The deletion of the addition was upheld and the revenue's challenge failed.

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