Stock statement admission and peak difference principle govern addition for book-stock discrepancy

A stock statement furnished to a bank can operate as an admission and may prevail over books of account where the assessee does not prove that the statement was wrong. The assessee bears the burden of showing which version reflects the true stock position, especially where the facts lie within its special knowledge. On that basis, an addition for the difference between book stock and bank stock statement was sustainable in principle. However, where the same stock difference recurs across months, the discrepancies should not be aggregated cumulatively; only the peak difference is the proper basis for adjustment.

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Issues: Whether the addition for difference between stock recorded in the books and the stock statement furnished to the bank was justified in principle, and if so, whether the addition had to be restricted to the peak difference instead of aggregating month-wise discrepancies.

Analysis: The assessee's books of account are presumed to be correct unless disproved, but the stock statement given to the bank is an admission and is binding unless the assessee establishes that it is wrong. The relevant facts were within the special knowledge of the assessee, so the burden lay on it to prove which version was correct. In the absence of evidence showing that the bank statement was factually incorrect or that the stock register had been independently verified and accepted by other authorities, the addition was sustainable in principle. However, the month-wise discrepancies could not be added cumulatively where they represented the same stock difference recurring over time. The proper approach was to assess only the peak difference.

Conclusion: The addition was upheld in principle, but it was confined to the peak amount.

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