TaxTMI 
TaxTMI 
2015 (3) TMI 934
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....gainst the deletion of addition in respect of undisclosed stock of Rs. 32,42,815/-. At the time of hearing, no one has appeared on behalf of the assessee despite service of notice of hearing. Therefore, the appeal was taken up for hearing in the absence of assessee. 3. Briefly stated facts are that the case of the assessee was reopened for assessment for AY 2005-06 and the assessment u/s.143(3) read with section 147 of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 07/12/2010. While framing the assessment, the Assessing Officer (AO in short) made addition on account of the difference in value of closing stock as submitted before the Revenue and before Nutan Nagarik Sahakari Bank Ltd. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee, partly allowed the appeal. 4. The ld.Sr.DR supported the order of the AO. 5. We have heard the ld.Sr.DR, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has considered the written submissions of the assessee in para-4.2 of his order as under:....
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....ck statement of the company as he was of the opinion that the said stock like in previous years is also that of the assessee company. He accordingly under such bonafide belief submitted a stock statement of Rs. 61,98,448/- to the bank. However, while doing so, as stated hereinabove, he mistakenly overlooked the fact that "Auto Agency" having came into existence during the year itself was now a separate entity. (vii) It is submitted that the value of closing stock of Auto Agency as on 31/03/2005 is at Rs. 77,93,370/-. Therefore if the value of closing stock of both the entity is taken together the same comes to Rs. 1,07,49,003/- which is far in excess of value of closing stock submitted to the Bankers. It is further submitted that Auto Agency is not enjoying any credit facilities from the bankers. Refer copy Balance Sheet of Auto Agency Refer Exhibit-8. Page No. 135 to 143 of the Paper Book furnished. Considering the aforesaid facts, no adverse inference is warranted on the basis of statement of closing stock furnished to bankers as the same was furnished without verification of the records and under the bonafide belief and/or mistake on the part of the accountant as stated herein ....
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.... prevailing in the business community and as also ratified by various courts of law that such inflated value of stock furnished to the bank is only with an intention to obtain higher loans. 6. It is contended that the stock position given to the bank was only for limited purpose of meeting with the terms of the bank and to avoid penal interest in case of shortfall in stock position. Accordingly, the stock position was given on approximate and adhoc basis every month since it is impossible and impracticable to physically check and verify the stock in the middle of the year. 7. It is further contended that the stock was merely hypothecated to the bank, the possession of which remained with the assessee and since there is usually no physical verification of the stock by the bank, no credence can be given to the stock declared to the banks. The submission of stock statement is normally a mere formality and the common business practice of reporting higher figures of stock on hand or on estimation basis than what is actually available is only in order to show that the bank is safe and secure and its interest is not in jeopardy. Such practice is also normally known to the banks and so f....
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....ken due cognizance of:- CIT v. Arrow Exim (P.) Ltd. (2010) 230 CTR 293 (Guj.) Where addition was made on account of excess stock as there was discrepancy between stock as per books of account and that shown in the statement given in bank allegedly to obtain higher credit facilities but the Tribunal deleted the addition: Held that, the Tribunal had accepted the explanation given by the assessee and in that context had stated that when the books of account or the accounting system had been found to be genuine supported by vouchers, etc. the addition was not justified. It was required to be mentioned that the stocks were hypothecated and not pledged, which was explained by the assessee and, therefore, in order to avail higher credit facilities the statement was given, but the stock was with the assessee. Thus, the deletion of addition was justified. CIT v. Veerdio Rollers (P.) Ltd. (2010) 323 ITR 341 (Gui.) Addition was made on account of difference in the closing stock furnished before the bank authorities for availing of credit facility as against the same disclosed in the books of account furnished before the income-tax authorities. It was found that the assessee had submitte....
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....he rest of the addition. CIT v. Laxmi Engineering Industries (2009) 308 ITR 279 (Raj.) There can be circumstances where there may be difference in the quantity of stock, as appearing in the balance-sheet, and as appearing in the hypothecation made to the bank, and if there is any explanation coming forward for the discrepancy, then the addition need not be made. Sufficiently or reliability of the explanation, offered by the assessee, is a question of fact, and the findings thereon, as recorded by Tribunal, cannot be interfered with by the High Court, as they do not give rise to any substantial question of law. Where there was difference between the value of stock shown in accounts and the value disclosed to the bank, and the Tribunal's finding was that the Assessing Officer had not been able to point out any discrepancy in the quantity of stock hypothecated to the bank and the quantity of stock as per books of account, on the face of such finding, even if there was some difference in the valuation of the said quantity of the stock in the balance sheet, as against the valuation shown in the bank, it could not be said to be resulting into any income from undisclosed sources c....
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....s RS 2955633. Therefore it is clear that there was no quantity difference on stock found by the assessing officer on comparing the two stock details. Appellant submitted various reasons for such difference. The important reasons are- there was split in the business of the appellant company during the year and a new entity was created which had substantial stock and accountant submitted the stock statement ignoring the separate entity. Another argument of the appellant was that stock statement was given to the bank just on the basis of estimate without referring the quantitative stock records maintained by it. Appellant also argued that in the earlier year and in subsequent year, stock statement submitted to the bank reported less stock as compared to stock disclosed in books of accounts. Therefore stock figures reported to bank are just estimated and not prepared on the basis of quantity records of stock. Considering the various arguments of the appellant, it is clear that the stock value reported to the bank by the appellant are only estimated value and not based on quantity details of stock. Since the quantity was not disclosed in the statement given to the bank, there is no disc....
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.... 15 lakhs. The AO has verified the stock statement which was submitted along with the return. Moreover, the AO has also worked out the closing stock of emery power and machinery spares as per the return and the value comes to Rs. 14,07,156. We find that the AO has verified the value of stock which was given to the bank, wherein the assessee has inflated the value of stock and shown the value at Rs. 21,23,680 which can be verified from p. 1 of the assessment order. The assessee has submitted the bank statement with inflated price of the stock. There is no difference in quantity of the stock. The difference is only of inflated price of the stock which was given to the bank. We find that the AO in support of his finding has relied on the decision of the hon'ble Madras High Court in the case of Coimbatore Spinning & Weaving Co. Ltd. vs. CIT (1974) 95 ITR 375 (Mad), the decision of the Hon'ble Supreme Court in the case of Dhansiram Agarwalla vs. CIT (1993) 111 CTR (Gau) 39 : (1993) 201 ITR 192 (Gau) and concluded that the assessee was unable to discharge the onus to prove that books of account alone give the correct picture and the statement given to the bank was motivated. In t....