TaxTMI 
TaxTMI 
2013 (11) TMI 1617
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.... bank authorities had inspected stock every quarter and had furnished a report thereon which clearly demonstrate that the stock was closely monitored by the bank and was literally inexistent. 2.3 The Ld. CIT(A) as further failed to appreciate that the loan obtained by the assessee did commensurate with the stock secured by the bank by hypothecation which had been recorded, inspected and approved by the bank authorities. 2.4 The Ld. CIT(A) has further failed to appreciate that the evidences such as verification, insurance and sanction of loan commensurate-with the stock clearly proves that the assessee had deliberately furnished a lessor stock for the purpose of Income Tax Asst. which the Assessing Officer is entitled to make good by restoring to addition of the difference. 2.5 The Ld. CIT(A) failed to note that the contention of the assessee of inflated reporting of stock to the bank cannot be accepted, since the closing stock admitted in the Return is based on an inventory and not supported by maintenance of day to day stock register. 2.6 The Ld. CIT(A) failed to observe that the decision of the Madras High Court in V.Rajan .Vs CIT reported in 96 ITR 64 and the decision of the....
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....ication from the bank manager whether the impugned stock had been completely verified for assessment year 2002-03, to obtain sales tax assessment order, to check inspection report obtained by the bank and also to consider any independent evidence. He also observed in his order that in case there is no other evidence supporting the department, assessee's book stock be accepted as correct. 6. In furtherance to the aforesaid directions, the Assessing Officer sought information from Bank of India, whose manager replied on 14.11.2011 that the stock had been verified as on 3.9.2001 but inspection reports thereof were not available. Thereafter, on 20.12.2011, he informed that the stock had been only randomly verified. In addition to this, the Assessing Officer could not find any other evidence to come to the conclusion that the actual stock of assessee was more than the book value. A perusal of the assessment order dated 9.12.2011 reveals that the Assessing Officer found that in the sales tax assessment of the impugned assessment year, the stock submitted to the concerned authorities stood at Rs. 2.42 crores which duly tallied with the assessee's book value. Still, he discarded the same ....
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....vailed a huge bank loan of Rs. 7,23,98,153/-. Every banker is under an obligation to verify and satisfy himself that the bank loan is adequately covered by security. For a cash credit loan the security is the stock and property. For a term loan the security is the immovable property. The term loan had been only Rs. 92,60,211/-. The cash credit loan alone had been Rs. 6,55,16,993/-. It is hard to believe two contradictory statements of the assessee one to the bank and other to the bank. The assessee has stated in the course of hearing that the bank did not depend upon the stock statement alone to test the credit worthiness of the assessee. The assessee has stated that the value of stock given to the bank should not be taken for IT purposes." 7.2 From the above it is seen that the AO could not get any independent evidence to show that the stock statements furnished to the bank represent the actual closing stock held by the appellant at the relevant point of time. Therefore, the AO is not correct in adopting the value of the closing stock furnished to the bank as the actual closing stock of the appellant. And also in this regard on the same issue for the Asst.Year 2001-02 and for the....
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....ar 2001-02 as well, the Assessing Officer had made addition in assessee's case solely on the ground that the declaration of stock made by the assessee to the bank authorities at the time of availing loan facility read much higher than that maintained in the books. However, the very basis was stuck down by the co- ordinate bench of the 'tribunal' in I.T.A.No. 2013/Mds/2005 decided on 27.7.2007 by observing as follows: "6. We have heard the rival contentions and perused the relevant records. Before us the assessee's submissions are as under: 1. The Department itself having verified the real physical stock which is near the Book .stock figure, for the purpose of assessment is not justified in relying upon the inflated stock figure furnished to the Bank. Such stock statement furnished to the Bank cannot be considered as an authentic piece of evidence for making the addition and especially so when the physical control over the stock was not with the Bank and it remained with the assessee. 2. The Department presumes that the alleged deficit is sold. Such presumption is not supported by any evidence. The Sales Tax Department has accepted the Books and the Turnover. The Income Tax Depar....
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....ejected nor any defect pointed out except for the absence of stock book. This, in the auditor's report has been explained that, since the number of items dealt with is innumerable, it is practically impossible to maintain day-to-day stock of goods. Physical stock is taken at the end of each Financial Year. 8. As regards the Assessing Officer's reference to bad morality on the part of assessee, we find that the Hon'ble Apex Court in the case of T.A. Qureshi Vs. CIT 287 ITR 547 had held that, cases are to be decided by Court on legal principles and not on one's own moral views. We further find that in the case of Pandit Bros. Vs. CIT 26 ITR 159 the Hon'ble Punjab High Court had held that, the fact that profit appeared too low or that no stock register was maintained would not be sufficient material to reject the books of accounts. These would only be material for provoking further enquiry. The Income Tax Officer must discover other material and evidence to come to such conclusion. 9. We find that the facts in the present case are identical to the one dealt by this Tribunal in IT.A. No.774/Mds/06 for assessment year 2002-03*in the case of Shri Mitesh Dugar Vs. In....