TaxTMI 
TaxTMI 
2015 (6) TMI 766
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.... 4. 200(Asr)/2013 Bhalaria Constructions -do- -do- -do- 5. 571(Asr)/2013 Euro Infrastructure & Power L:td. -do- 27.06.2013 2010-11 6. 457(Asr)/2013 Ram Kumar Bansal -do- 22.03.2013 2009-10 7. CO.No.16(Asr)/14 Ram Kumar Bansal -do- -do- -do- 2. The assessee Sh. Ram Kumar Bansal has also filed cross objection bearing No.16(Asr)/2013. 3. The Revenue in the case of Ishar Infrastructure Developers Pvt. Ltd., in ITA No.198(Asr)/2013 for the assessment year 2009-10, has raised the following grounds of appeal: "1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs. 6,39,30,292/- as its closing stock as at 31.03.2009 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs. 4,66,13,761/- was the correct figures, had squarely shifted on it, which it has failed to discharge. 2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has....
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....the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence." 6. The Revenue in the case of M/s. Bhalaria Constructions, Bathinda, in ITA No.200(Asr)/2013 for the assessment year 2009-10 has raised the following grounds of appeal: "1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs. 1,28,69,000/- as its closing stock as at 31.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs. 19,89,130/- was the correct figures, had squarely shifted on it, which it has failed to discharge. 2. That in th....
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....f : i) Rs. 2,69,86,910/- on account of excessive stock being difference in stock statements submitted to the bank and balance sheet submitted to the department.. ii) Rs. 6,60,000/- on account of non charging of interest on debit balance from debtors. 2. That it is prayed that the order of the ld. CIT(A) be set aside and that of the AO be restored. 9. In C.O. bearing No. 16(Asr)/2013, the assessee has raised the following grounds : 1. That in the facts and circumstances of the case the ld. CIT(A) has erred not adjudicating grounds No. 5 and 11 on the plea that as the main ground of appeal has been decided in favour of the assessee. The 5th and 11th grounds of appeal are as under: Ground No.5: Without prejudice to the above, the ld. AO has erred in law and on facts in recasting the trading account by only taking the inflated figure of closing stock as per bank statement and taking the opening stock as per books of account. If both the figures are taken as per bank account instead of books of accounts, there remain no difference. As such, addition made of Rs. 39155957/- on this account is uncalled for. The same is deleted. Ground No.11:That the Ld. AO has erred in....
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.... assessment proceedings, books of accounts, bills and vouchers were produced which were test checked. The case discussed with him. During the course of scrutiny it was noticed that as per books of account (duly audited by Sh. Sunil Bansal, CA, the closing stock of the firm as on 31.03.2009 stands at Rs. 6,19,75,800/- while as per physical inventory prepared by the assessee and submitted before the bank authorities i.e., Punjab National Bank, Arya Samaj Branch, Bathinda to obtain loan/limit facility from Bank in A/c No.870002192 as on 31.03.2009, the value of closing stock was shown at Rs. 12,59,06,092/-. The bank authorities have submitted certified copy of drawing power register showing stock position of the assessee from July 2007 to 31.01.2010 which is signed by the Officer who physically verified the stock, stock statement and further signed by the incharge incumbent Manger which has been placed on record. The bank authorities also intimated quarterly stock position of the assessee as under:- Date of Stock Statement Amount of Stock (Rs.) 31.03.2008 61,569,440 30.06. 2008 68,507,860 30.09. 2008 72,915,600 31.12.2008 74,605,500 31.03.2009 12....
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....ents receivable by the assessee were held up by the Departments, the assessee was running short of funds. In order to complete the on-going works within stipulated time and to avoid revoking of 'bank guarantees' by the departments, the assessee submitted inflated stock statement to the bank to get loans for running/continuing the ongoing works by making available optimum amount of funds needed for business purposes. Raising of such loans from the bank does not affect the income of the assessee in any manner. However, it is a fact that whatever amount was received from the bank, the same was put to use wholly, exclusively and necessarily for business purposes and by virtue of it, the assessee in a way, made an effort to increase its income/gains. The assessee has been maintaining books of account on regular basis and keeping complete records of receipts and expenses under different heads. It is also submitted that the object of assessment is to tax the real income of the assessee, for which books of account have been maintained on day to day basis. 4. Needless to mention here that this has come up for adjudication in a number of cases before various Hon'ble Courts whe....
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....sed for favour of kind perusal and consideration. iii) In the case of Commissioner of Income-tax vs. Khan & Sirohi Steel Rolling Mills reported at (2006) 200 CTR (All.) 595, the Hon'ble Court has concluded as under: "Tribunal was justified in accepting the explanation of the assessee that in view of the prevailing practice, the value of stock hypothecated to bank was inflated to avail of more overdraft facilities and deleting the addition on account of difference between stock shown to bank and the stock shown in the books of the assessee." A copy of this judgment is also enclosed herewith. iv) In the case of Commissioner of Income Tax vs. N Swamy reported at (2000)241 ITR 363 (Mad.), the Hon'ble High Court has held as under:- "The assessee's income is to be assessed by the ITO on the basis of the material which is required to be considered for the purpose of assessment and ordinarily not on the basis of the statement which the assessee may have given to a third party unless there is material to corroborate that statement of the assessee give to a third party, even if it be a bank. The mere fact that the assessee had made such a statement by itself cannot....
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....has been shown at Rs. 12,59,06,092/-. The bank authorities have forwarded stock statements for the period ending on 31.03.2009. The amount of stock mentioned in the drawing power register is on the basis of quantified details of stock of the assessee as provided by them which has been verified by the Bank Manager and again signed by Incharge Incumbent Manger of the branch of the bank. Certified copy of the page No.36 of the register showing periodical position of stock of the assessee as available with the bank for this period is submitted to the department. The value of quantified stock mentioned in drawing power register as obtained from the bank is reproduced as under:- Sr. No. Date Value of stock as submitted by the assessee Value of drawing power calculated by the bank 1 31.03.2008/ 01.04.2008 61,569,440 350 lacs 2 20.04.2008 64,064,710 350 lacs 3 31.05.2008 67,629,580 350lacs 4 30.06.2008 6 8,507,866 420 lacs 5 31.07.2008 68,507,860 420 lacs 6 31.08.2008 72,915,600 420 lacs 7 31,10.2008 60,857,320 450 lacs 8 04.12.2008 70,992,150 450 lacs 9 31.12.2008 74,605....
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....suppressed the particulars of the closing stock both in terms of its quantity and valuation as on March 31st, 1977 and, therefore, income chargeable to tax amounting to Rs. 3,18,108/- had escaped assessment at the time of original assessment." 4. "In my opinion, the case set up by the assessee at the time of initiation of assessment that the value of the stocks was inflated for availing of higher overdraft facility and there was deficiency in quantify of the stocks lying with it and disclosed in the return on the one hand and that furnished to the bank is prime facie proved to be false by the contents of the letter annexure R 2/2. Therefore, respondent No.2 had sufficient reason to believe that the petitioner had not made full, complete and truthful disclosure of the material facts and its income had escaped assessment." This being the judgment of Jurisdictional High Court, the contents are all the more valuable, directional and binding. The basic intent of Courts behind their adjudication is that where the figures of quantitative valuations arrived at by applying rates, may these be inflated rates, to secure higher overdraft, are available, the need to be relied upon for ....
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....not make any difference whether the physical possession remains with this Bank or the assessee. The certification of valuation of an asset by A) Assessee B) Valuation Officer of Bank who physically verified the stock and C) Bank Manager being Incharge Simultaneously, speak of authentication of figures. Is it a mandatory circumstances that only figures or valuations of stock are to be accepted which are in possession of bank and no cognizance should be taken of such valuation where the physical possession is not with bank? Millions of assessee all over the country file statements of stock in their returns and their valuations are accepted by Income Tax Department. The department accepts the valuation of stock on the basis of the papers filed without taking possession of stock. Are all of them erroneous? No, they are fully reliable. Only duplicate sets of figures are questioned and penalized. Therefore, there is no force in the argument of the assessee that the stock which is not in possession of a Government agency, like bank, has no authenticity value wise. The assessee took the plea that stock statements are filed on estimated basis with the bank but such an estimate c....
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....d what terms to impose. I am quite sure that different Banks must be using different terminology to secure the loan i.e., some banks might be using pledge for a particular item whereas at the same time the other banks may be using the term "hypothecated". Therefore, it is simply a tactic of assessee to divert attention from the core issue i.e. Difference in figures of stock in the Bank Books and in the assessee's books. It is the assessee to prove that discrepancy in his Books of A/c, on the basis of which the Return of Income for A.Y.09-10 was prepared, verified, signed and submitted before the Income Tax Dett, was not existing. It is worth to mention here that the statement of Sh. Tejinder Sharda, Sr. Bank Manager, Punjab National Bank, Arya Samaj Chowk Branch, Bathinda was recorded on oath on 22.11.2011 in connection with assessment proceedings of one M/s Munis Kumar Bansal Contractor for assessment year 2009-10 where a similar issue was discussed to know the modus operandi of maintaining of record by the banks with regard to bank limits/loans facilities granted to the parties (assessees). During the recording of statement, Sh. Tejinder Sharda, Sr. Bank Manager categorica....
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....and not on account of completion of work. Actually, the assessee had submitted stock statements to the bank on last working day of the financial year i.e. on 31.03.2009. At the time, work in progress was also treated as value of closing stock but after receipt of payment or confirmation of work, it was converted into work done instead of work in progress or closing stock. This amount was duly reflected in contract receipts for FY 2008-09. The reply of the assessee is reproduced as under:- "Respectfully it is submitted that during the course of assessment proceedings, inter alia, the assessee was required to explain the reasons and circumstances for difference in the value of stocks available as per books of account and the value of stocks submitted to the bank at the close of the year. 2. The reply as per legal aspect to the above query has already been submitted keeping in view of the judgments pronounced by various Hon'ble Courts on this issue. The present reply explains the factual position in this regard which is as under:- In order to maintain DP the stock statement was submitted to the bank as on 31.3.2009. Before giving any further details, clarifications and ju....
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....s of accounts. This amount of Rs. 5,42,81,001/- was taken into account as "Contract Receipts" on 31/3/09 by the assessee as tax on these amounts had also been deducted at source. It may be further clarified again that in order to maintain the DP, the assessee has to submit the stock statement to the bank on last working day of every month. In this case the stock statement was submitted to the bank on 31/3/09 and also deducted tax at source as on 31/3/2009 and consequently issued Form-16A afterwards. As the aforesaid developments of deducting tax at source by various departments on total amount bill of Rs. 5,42,81,001/- took place on the last day of the accounting year i.e.30-3-2009 and 31-3-2009, and that too without the knowledge of the assessee, the same could not be taken into account in the stock statement already submitted to the bank on 31/3/2009 is given below for your ready reference and kind consideration:- S. No. Name of Department Bill Date Gross Amount Tax Amount Tax Deposited Date 1 MPRRDA JHABUA 30/03/2009 1,941,997 44,006 13/04/2009 1A MPRRDA JHABUA 30/03/2009 1,937,511 19,884 13/04/2009 1B MPRRDA JHABUA ....
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.... the stock statement of January, 2009 and cannot be reduced from the closing stock amounts as shown by the bank as on 31.03.09. However, a benefit of Rs. 1,79,24,544/- (Rs.86,00,963/- +Rs.93,23,581/-) as claimed by the assessee and discussed above is allowed in respect of contract receipts received from P B&R Fatehabad out of the sum total of Rs. 2,55,31,784/- as claimed and shown in the statement above. Therefore, a total amount of stock which stands explained as per the reply of the assessee is Rs. 4,66,13,761/- (Rs.5,42,81,001/- minus Rs. 76,07,240/-) and the remaining difference of stock between bank and assessee of Rs. 1,73,16,531/- (Rs.6,39,30,292/- minus Rs. 4,66,761/-) is reflected in the recasted trading and profit & loss account. Now the important question is--- when did and where from the assessee made purchases of this stock over the year? The sum total of purchase vouchers submitted before the department is different from the quantity of material shown to the bank. It means the Purchase account of the assessee shown to me is unreliable and misleading and can in no way influence my mind to deduce the profitability of the assessee in the justified way, though the othe....
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....ten submissions dated 02.02.2015 as to what has been argued by him and the said written submissions have been placed on record. In the written submissions submitted by the Ld. DR at pages 1 & 2, he has stated about the findings of the AO and thereafter has stated that the ld. CIT(A) has allowed the relief by making perverse appreciation of facts of the case, which were discussed in the said written submissions. 15. The parawise findings by the ld. CIT(A), in the case of the assessee, M/s. Ishar Infrastructure Developers Pvt. Ltd. for the assessment year 2009-10 have been discussed in the written submissions by the Ld. DR, as under: "Para 5(i) This conclusion is perverse on the face of it only. The imputation that the bank authorities are not concerned with the availability of adequate stock as their interests are covered by the collateral security provided by the assessee to bank, is self assumed and if the bank authorities feel that their interests are secured by collateral securities then why they should in the first place ask for hypothecation of the stock and enter into hypothecation agreements. Further, Drawing Power is determined on the basis of the stock and not on the....
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.... the bank manager who had signed the Drawing Power register and determined the limit had stated that he had not made physical verification. Unless either the said bank manager denies or he is provided false, the ld. CIT(A) had no jurisdiction to draw the conclusion that no inspection/physical verification of the stock was carried out. Thus, his findings are patently perverse and deserve to be dislodged. His findings that the stock was scattered at different places and it was not possible to count/weigh the stock is of little significance given the fact that the Sr. Branch Manager has deposed that signature on the DP Register is an assertion of the fact that the stock has been physically verified. The ld. CIT(A)'s findings have got no footing whereas the AO's findings have the support of the authenticated DP Register and further corroborated by the statement of the Sr. Branch Manager. In view of above, it is clear that the ld. CIT(A) has erred in deleting the addition. It is, therefore, prayed that the order of the ld. CIT(A) be vacated and that of the AO be restored. Without prejudice to the above, it is prayed that it is clear that if the ld. CIT(A) was of the opinio....
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....een physically verified when OD facility is allowed to such assessee's in these circumstance, the statement of the manager who is incharge of the branch represents the true affairs and business practice of the concerned bank and therefore, it carries high evidentiary value. (b) Further more the Branch Manager has given the statement in the capacity of responsible head of the branch and it certainly covers the point of view of his juniors who must have physically verified the stock and reported to him in this regard. (c) Without prejudice to the above, the ld. CIT(A) should have raised the issue before taking any decision in this matter. He has not doubted the authenticity and evidentiary value of the statement of the concerned bank manager. On the contrary, the ld. CIT(A) has merely applied the case law in favour of the assessee without appreciating the difference of facts in the present case. It is further submitted that the issue is wholly covered by a recent judgment of the Hon'ble P & H High Court in the case of Smt. Shakuntala Thukral vs. CIT reported in 366 ITR 644. The factual matrix of both the case is almost identical. In the case before the Hon'ble P ....
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....e of MP the stocks were scattered at every work location in a radius of 50 Km. in view of the construction of roads. This categorical statement of the assessee has not been rebutted by the department at any stage. He further submitted that the ld. CIT(A) has never recorded a finding in A.Y. 2009-10 that the AO should have examined the bank officer who had actually verified the stock, the finding is limited to extent as recorded in para 5(ii) that AO has tried to prove in the present case that the stock was physically verified by bank manager by relying on the statement of bank manager in the case of Manish Kumar Bansal Contractor but in the opinion of the ld. CIT(A) unless the AO proved that the stock was physically verified, no addition can be upheld. Since the department failed to prove that any physical verification of the stock was carried out by the bank the addition was deleted by the CIT(A) as finally held in the concluding paragraph on page 13. 16.2. The ld. counsel, Mr. P.N.Arora, Advocate further stated that the stock statement filed by the assessee has been found to be unsigned (page 12 & 13 of the paper book for AY 2009-10 filed on 02.02.2015). As regards the Drawing....
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....hat the drawing power is calculated on the basis of entries of entries in this register, stands rebutted keeping in view the facts as discussed supra. 16.4. As regards the judgment of Punjab & Haryana High Court in the case of Devgan Rice & Gen. Mills relied upon by the AO, the ld. counsel for the assessee submitted that the issue before the Hon'ble High Court was that where the bank provided the details of the stock hypothecated to the bank after the completion of the assessment proceedings by the AO, the reopening of the assessment on account of escapement of income was valid or not. The Hon'ble Court held that the reassessment proceedings initiated were valid. The CIT(A) has given a clear cut finding in para 3.1 on page 16 of the appellate order that the judgments relied upon by the AO are distinguishable on facts. 16.5. He further submitted that the judgments of Hon'ble Punjab & Haryana High Court, relied upon by the ld. CIT(A) in the cases of 'Santosh Box Factory, Sidhu Rice mills and in the case of Devi Dayal Rice Mills are squarely applicable to the facts of the case as the department failed to prove the physical verification of stock and neither the st....
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....ii) page 12 & 13 of the appellate order). iv) The AO concluded in this case that the assessee's books were not accurate (para 2.3.1 page 4). But in the case of the assessee, the AO has accepted the fact that the books of account were produced alongwith bills and vouchers and these were test checked (para 2 page 1 of the assessment order but no finding regarding any defect whatsoever). v) The valuation of closing stock was found defective by the AO (para 2.8 page 6). But no such finding of the AO was there in the case of the assessee in the assessment order. 16.8. The ld. counsel for the assessee further stated that it is relevant to point out that the Hon'ble Punjab & Haryana High Court in the case of Sheena Exports in ITA No.382(Asr)/2011, vide order dated 13.03.2012, reported in 20 Taxman.Com page 644, has once again decided this issue in favour of the assessee. This order is available at page Nos. 70 to 72 of the paper book. The Hon'ble High Court in the said case has held that the addition could be made only if quantity of stock submitted to the bank was higher than the quantity as per books, which were pledged, counted or verified by the bank officia....
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....ess premises as on 31.03.2005. But in the present case we have all along stated before the AO and before the ld. CIT(A) that the stock was inflated to get the cash credit limit from the bank." 16.10. The ld. counsel for the assessee further submitted that the AO in the case of Shakuntal Thukral after pointing out defects in books of account of the assessee recorded a categorical finding in the assessment order that the books of account were not accurate meaning thereby that the books of account were rejected. But in the present case there are no such finding by the AO and the books of account has not been rejected by the AO rather no defect has been pointed out in the books of account. 16.11. The ld. counsel further stated that the ld. CIT(A) in the case of Shakuntla Thukral has relied on the reports of physical inspection carried out by the bank authorities in respect of the stock of the assessee at quarterly intervals and such findings have neither been rebutted before the CIT(A) or before the ITAT or before the Hon'ble High Court. But in the present case of the assessee, it has been established that no physical inspection of the stock has been carried out, as stated....
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....se of hearing or otherwise and which may have not been provided by the assessee to the undersigned. Therefore, I am giving below a detail of the various documents filed by the assessee on different dates: 1. List of compilation of judgements on 9.4.2014 in the case of C above. 2. List of compilation of judgements on 9.4.2014 in the case of A above. 3. List of compilation of judgements on 9.4.2014 in the case of B above. 4. List of compilation of judgements on 9.4.2014 in the case of E above. 5. Paper Book in the case of C above on 28.04.2014 6. Paper Book in the case of A above on 28.04.2014 7. Paper Book in the case of B above on 28.04.2014 8. Written submission in the case of B above on 1.5.2014 9. Written submission in the case of D above on 1.5.2014 10. Written submission in the case of D above on 19.08.2014 11. Written submission in the case of B above on 25.08.2014 12. Written submission in the case of E above on 25.08.2014 13. Written submission in the case of A above on 25.08.2014 14. List of compilation of judgements on 10.9.2014 in D above 15. List of compilation of judgements on 10.9.2014 in C above. 16. List of compilation....
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....l of the Drawing Power Register of PNB wholly disapproves the asseseee's claim that it had submitted inflated stock statement to the bank. It reveals that the assessee had been regularly submitting stock statement of values much higher than 75%. (A copy of DP Register is enclosed for ready reference as Annexure 1). It reveals that the assessee had submitted no inflated stock statement when it had sought higher credit on 31.10.2008 when it had been sanctioned higher limit of Rs. 4.5 crore against stock statement of Rs. 6,08,57,320/-as against limit of Rs. 4.2 crore the value of stock submitted was Rs. 7,29,15,600/- on 30.09.2008 and Rs. 9,05,18,375/- on 31.01.2009 when higher limit of just Rs. 4.5 cr had already been sanctioned to it on 31.10.2008. Now when the assesee submitted stock statement of Rs. 9,05,18,375/-, it cannot claim that it had submitted inflated stock statement to avail higher credit limit as the same credit limit of Rs. 4.5 crore had already been allowed to it. It may further be noted that the assessee had credit limit of Rs. 8 crore on 31.05.2010 as against limit of Rs. 6 crore at the almost same value of stock which was at Rs. 11,85,81,990/- when limit sancti....
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....i Kamlesh Gupta. Shri Gupta has categorically affirmed in his reply question No.4 of the statement that:- Thus, it is clear that Sh. Kamlesh Gupta had emphatically confirmed the physical verification of the stock as per record of the bank. He had further confirmed this fact in his cross-examination in an answer to the assessee's counsel's question about physical verification of stock. He had answered: The stock is physically verified by the Bank Officer and stock audit is also conducted by an independent Auditor. I am submitting a photocopy of the said Audit Report dated 4.2.2010. It is further pertinent to note that it has been made clear in the cross examination that the stock audit was done in respect of the stock statement submitted by the assessee to the bank as on 31.01.2010 which was declared at Rs. 10,75,10,500/- whereas the stock declared to the bank on 20.3.2010 was Rs. 10,82,22,030/-. Thus, It is clear that when the assessee was clearly caught on a wrong foot viz a viz stock audit taken by the auditorst on 4.2.2010 of the quantum Rs. 10,75,10,500/-, it chose to not to raise any question on the auditors' stock audit on 4.2.2010 and had kept studied si....
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....signed. In this regard, it may be pointed out that the assessee has only claimed that the statement was unsigned. It has not disputed that the stock statement submitted on 31.3.2009 was not of the value of Rs. 12,59,06,092/-. It is highly pertinent to take note of the fact that perusal of Annexure-1 (DP Register) clearly shows that the bank manager had made inspection of the stock on 03.04.2009 i.e. just after three days of the submission of the statement as his dated signature are appearing on DP Register. The dated signature takes whole of the wind from the sails of the assessee that the stock was never physically checked by the bank. It only remains an allegation without corroboration and cannot be taken any cognizance of. Third Issue: The third issue which the assessee has contested in this case is using the information as given by Shri Tejinder Sharda, Sr.Branch Manager in the case of M/s.Munish Kumar Bansal, Contractors. In this regard, it may be mentioned that the assessee has relied upon the Tribunal's order in the case of M/s.Munish Kumar Bansal which is distinguishable decision as would be shown hereinafter but the statement of the Sr.Branch Manager touching the pr....
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....,531/- could not be reconciled. IT IS HIGHLY PERTINENT TO POINT OUT THAT WHEN THE ASSESSEE CLAIMED THAT ITS STOCK WORTH Rs. 5,42,81,001/- was to be reduced from the total stock statement submitted to the bank as the stock of this value had been consumed and payments received and which the AO accepted to the extent of Rs. 4,66,13,761/-, then it becomes eminently clear that the assessee owns up the total stock at Rs. 11,62,56,801/- Stock shown to the department as per audited accounts. = Rs.6,19,75,800 Stock claimed by the assessee as having been consumed on 30.3.3009 and 31.3.2009 Rs.5,42,81,001 Rs.11,62,56,801/- This figure of Rs. 11,62,56,801/- is the figure which the assessee himself admits as against the actual stock statement furnished to the bank at Rs. 12,59,06,092/- and thus according to the assessee it had inflated the stock by only a sum of Rs. 86,49,191/- (12,59,06,092/- minus Rs. 11,62,56,801/- to avail higher credit limit on 31.3.2009 for which he only needed to show stock at Rs. 12 crore only and not excess by Rs. 59,06,092/- or at Rs. 13,46,44,500 for June, 2009 and Rs. 13,26,44,125 for July, 2009. Thus, it becomes that the stock ....
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....ssessee had submitted after getting its accounts audited. It may further be mentioned that the bank authorities after having inspected the stock physically had little interest as to what amount of stock the assessee discloses to the department. The bank authorities would have immediately launched prosecution proceedings against the assessee on its submission of balance sheet with lesser stock if the bank authorities had not physically checked the correctness of the stock declared in the bank statement. In such a situation, the assessee would have taken the stand that its stock had been physically checked by the bank authorities and found the same as correct and then how can the bank launch prosecution proceedings when it had itself physically checked the record. Sixth Issue: The assessee has claimed that its stock was hypothecated and remained under its control. This claim is of no consequence as the stock under hypothecation though remains in the possession of the assessee but the bank carries the right to inspect the same. If on an inspection, it is discovered by the bank that the stock is not in the possession of the assessee or stock is short then the bank can immediately wi....
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.... i.e. Chartered Accountants and in the case of the M/s.Euro Infrastructure, Shri Kamlesh Gupta had admitted that report of such checks are available which are dated 09.04.2009 and 24.11.2010 and thus it is clear that the assessee cannot submit inflated stock statements which are monthly checked by the bank manager and annually by the external agencies. (Refer last question of cross examination in Euro Infrastructure which is enclosed as Appexure).. In view of these facts, the factum of physical inspection of the stock gets well established. M/s.Euro Infrastructure and Powers Limited. Assessment year 2010- 11 In this case also, the factual matrix is almost the same as in the above case. Here also, the assessee had contended before the AO that inflated stock statement was submitted to the bank. The veracity of this statement when examined brings to the fore the same results as have come out in the aforementioned case. Here in this case, the AO has reproduced the copy of the bank statement at page 2 of the assessment order where stock Rs. 4,68,82,440/-has been reported. A copy of the Drawing Power Register has also been reproduced by the AO in his assessment order at page 7. A p....
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....at required. It represented the actual stock lying with the assessee and the asssessee cannot claim that this higher value stock statement was submitted for securing higher credit limit. The detail of various stock statements submitted to the bank by the assessee have been incorporated in his order by the AO at page 3 of his order. Thus, in this case also, the assessee's story that it had submitted higher stock statement to the bank to secure higher limit is found to be false. Tthe AO had reproduced copy of DP register in his order at page 2. M/s.Ram Kumar Bansal Contrator, Bathinda Assessment year 2009-10 Similar story is emanating in this case also. The AO has reproduced copies of stock statements submitted by the assessee to the bank in the body of his assessment order. The study of these statements can be made from the following tabulation: S.No. Date of submission of stock statement Value in Rs Limit sanctioned 1 30.08.2008 2,95,76,208 Rs.2 crore 2 31.05.2008 2,93,00,000 Rs.2.2 crore 3 30.06.2008 2,97,50,000 Rs.2.2 crore 4 31.07.2008 3,09,00,000 Rs.2.2 crore 5 31.10.2008 3,27,00,000 Rs.2 crore....
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....k statements. The assessees' assertion, thus, deserves to be rejected being without any merit whatsoever and also being misleading. In all the above appeals, the issue at stake is the addition made on account of difference in the value of stock shown to the bank by the assesses in their stock statements issued to the bank and as declared to the income tax department in their returns of income. It is submitted that this issue stands resolved by the recent decision of the Hon'ble Punjab & Haryana high Court in the case of Smt. Shakuntla Thukral Vs CIT reported at 366 ITR 644. The assessee has filed detailed submissions and only sought to suggest that the said decision may not be followed. It has been suggested by quoting various decisions including of Hon'ble Punjab & Haryana High Court which had gone in favour of the assessee. In this regard, it is submitted that the judgement of the Hon'ble Hon'ble Punjab & High Court in the case of Smt. Shakuntla Thukral (supra) is the latest judgment and while rendering this judgment, the Hon'ble Court deems to have taken into consideration the whole gamut of the issues involved and has rightly observed that no illegali....
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....ere real and not inflated. 4. That the case is wholly covered by the judgement of the Hon'ble Punjab & Haryana High Court in the case of Smt Shakuntla Thukral (supra) wherein the Hon'ble High Court held that when the stock had been inspected, no credence to the assessee's assertion that the inflated stock statement was submitted should be given though in the case of the assessee it has been proved beyond an iota of doubt that the assessee had been submitting real stock statements as stock statements of higher value were submitted even when no increase in credit limit had been sought. 5. The learned CIT(A) has grossly erred in not appreciating the whole factual matrix of the cose which he ought to be done in his coterminous jurisdiction with AO and had he done so he would have found that there was no truth in the contention of the assessees that they had furnished inflated stock statements which lie stands fully exposed from the stock statements submitted invariably at much higher figure than the threshold limit of at/ailing the credit i.e. Amount of limit sanctioned by the bank plus 25% margin The learned CIT(A) has also not taken into consideration the statement ....
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....of the stock is made by the bank whereas the Drawing Power is determined on the basis of the stock and not on the basis of collateral securities. The ld. CIT(A) ignored the statement of Senior Branch Manager of the same very Branch and the ld. CIT(A) has not doubted the correctness of the statement of Senior Branch Manager, which cannot be trashed without giving any cogent reasons. However, the ld. DR relied upon the statement of Sh.Tejinder Sharda and DP Register which was ignored by the ld. CIT(A). The ld. Counsel for the assessee has already given his submissions to the said arguments made by the ld. DR which has been considered by us and which has been reproduced hereinabove. 20. Our findings are based on the said arguments made by the ld. DR and the ld. Counsel for the assessee with regard to the said collateral securities and DP Register and the statement of Senior Branch Manager Sh.Tejinder Sharda and the stock statement filed by the assessee for the A.Y. 2009-10 on 02.02.2015 available at PB 12 & 13 which are unsigned . The ld. Counsel for the assessee has pointed out certain deficiencies in the DP register on which the ld. DR has placed heavy reliance but has not been r....
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....pecifications and weighment and/or numbers of material available. Had it been verified physically, the same should have been there. The Ld. DR totally relied upon the DP register, a copy of which is part of the assessment order but the same is not backed by any documentary evidence which can prove that the physical verification has been done by any of the Bank Authorities at any point of time during the impugned year in any of the case mentioned hereinabove. 22. Much reliance has been placed on the statement of Bank Manager, Sh. Tejinder Sharda in the case of Munish Kumar Bansal Contractor but the AO has failed to prove that any physical verification has been made of the stock. However, a statement recorded of the Branch Manager in the case of Sh. Munish Kumar Bansal contractor, who has been assessed by the AO, the same cannot affect the assessment of the present appeal and cannot be blindly applied in the present appeal automatically. However, the matter in the case of Sh. Munish Kumar Banal Contractor, travelled upto the ITAT, Amritsar Bench and the ITAT, Amritsar Bench in its decision in ITA No.391(Asr)/2012 dated 12.09.2013 deleted the addition though the facts in that case ....
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.... dated 31.01.2010 allegedly made on 4.2.2010 but not to the stock statement dated 20.03.2010 on the basis of which addition has been made. Hence, no reliance can be placed on the independent stock verification. v) On page 6 of the counter comments, the ld. DR has stated that the value of the stock has been mentioned at stock statement dated 31.03.2009 at Rs. 12,62,06092/- but the assessee never stated that the stock statement was inflated and it has only stated by the assessee that it is unsigned. But in this regard, the assessee has all along stated that the stock as per stock statement has been inflated to avail CC limit from the Bank. The physical verification of the stock has never been proved by the department. Hence, this counter comment of the Ld. DR is also factually wrong. vi) The Ld. DR has again relied on the DP register for the AY 2009-10 and according to him the Branch Manager signed the D.P.register in token of having physically verified the stock and the same is further counter signed by the Chief Manager at that time. But the assessee in his counter comments has brought out the vital defects in the DP Register, which has been discussed (supra). Hence, this DP ....
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....in the present cases all the additions are made on conjectures and surmises. 26. Time and again before both the authorities below, the ld. Counsel for the assessee has submitted the explanation that the statement has been submitted before the Bank Authorities only on estimated basis to avail of the bank loan and there is no other purpose. This contention of the assessee has not been rebutted at any point of time by the AO or by the ld. DR. It is a fact that the AO as not pointed out any defects in the books of account and in fact, the AO has not invoked the provisions of section 145(3) of the Act. As argued by the Ld. DR that cash credit limit is calculated on the basis of DP register, which in turn is maintained on physical verification of the stock and no documentary evidence has been brought on record that the stock mentioned in the .DP register by third party i.e. Bank Authorities, has been maintained on physical verification of the stock, maintained by the assessee at different cities in different States. 27. The AO has much relied on the decision in the case of Devgan Rice & General Mills (supra). The issue before the Hon'ble Punjab & Haryana High Court, in the case....
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....der in the case of Smt. Shakuntla Thukral (supra), it has been stated by the ld. CIT(A) that the assessee has not disputed the stock of the value which was submitted to the bank was actually lying in business premises as on 31.03.2005. But in the present appeal the assessee all along before the AO and the ld. CIT(A) and before us stating that the stock was inflated to get the cash credit limit from bank. Thus, in the case of Smt. Shakuntal Thukral (supra), the AO after pointing out defects in the books of account of the assessee a categorical finding has been given that the books of account are not accurate and meaning thereby that the books of account were rejected. But in the present appeal, there is no such finding by the AO and no books of account have been rejected and provisions of section 145(3) have not been invoked. In the case of Smt. Shakuntla Thukral (supra), the ld. CIT(A) has relied upon the physical inspection carried out by the bank authorities in respect of assessee's stock at quarterly intervals, as mentioned hereinabove and such findings have neither been rebutted before the ld. CIT(A) or ITAT or Hon'ble High Court. But in the present case, the assessee h....
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.... referred to hereinabove: i) CIT vs. Sidhu Rice & General Mills reported in 281 ITR 428 (P&H) ii) CIT vs. Santosh Box Factory (P) Ltd.., 44 IT Reps. 472 (P&H) iii) CIT vs. N. Swamy reportede in 241 ITR 363 (Madras) iv) ITO vs. Devi Dayal Rice Mills reported in 75 TTJ 24 (ITAT, Amritsar Bench. v) CIT vs. Sirohi Steel Rolling Mills, reported in 200 CTR 595 (All.) vi) Ashok Kumar vs. ITO, reported in 201 CTR 178 ( J & K) vii) CIT vs. Das Industries, reported in 303 ITR 199 (All.) viii) CIT vs. Sri Padmavathi Cotton Mills, reported in 236 ITR 340 (Mad.) ix) Jai Sharda Rice Mills. Vs ITO reported in 36 ITD 254 (ITAT, Asr.) x) CIT vs. Riddhi Steel and Tubes (P) Ltd. reported in 220 Taxman 148 (Guj.) xi) CIT vs. Apcom Computers P. Ltd. reported in (2007) 292 ITR 630 (Mad.) 35. In the facts and circumstances, the arguments made by the ld. DR in his written submissions and counter submissions cannot help the Revenue and accordingly, we find no infirmity in the order of the ld. CIT(A) in the case of M/s. Ishar Infrastructure Developers (P Ltd. in ITA No.198(Asr)/2013 in the impugned year. 36. During the assessment year 2010-11, the AO rejected the purch....
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....as available on record is dated 20.03.2010, which has been utilized by the AO for making addition on account of difference in stock as per stock dated 20.03.2010 and balance sheet as on 31.03.2010. This fact also goes against the department, as no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010. 39. In view of the above, all the grounds of the Revenue are dismissed and our decision hereinabove is identically applicable in all other appeals mentioned hereinabove i.e. in ITA No.536(Asr)/2013 for the AY 2010-11 in the case of Ishar Infrastructure Developers (P) Ltd., in ITA No. 199(Asr)/2013 in the case of Royaldeep Construction Co., in ITA No.200(Asr)/2013 in the case of M/s. Bhalaria Constructions, in ITA No.571(Asr)/2013 in the case of M/s. Euro Infrastructure & Power Ltd. and in ITA No.457(Asr)/2013 in the case of 'Ram Kumar Bansal'. 36. Now, we deal with cross objection bearing No.16(Asr)/2014 for the assessment year 2009-10 in the case of 'Ram Kumar Bansal', where it has been argued that the AO is not justified in recasting the trading account by taking the inflated figure of closing sto....