TaxTMI 
TaxTMI 
2017 (7) TMI 728
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....enue in this appeal is against the order of the Ld. CIT (A) wherein he has deleted the addition of Rs. 11, 39, 05, 000/- on account of excess stock. The brief history of the above disallowance/ addition is that assessee is Sugar manufacturing company who filed its return of income on 30/11/2000 declaring nil income. Subsequently during the course of assessment proceedings, the Ld. assessing officer made an addition of Rs. 11.39 crores on account of under valuation of closing stock. According to the Ld. assessing officer as such the stock placed with the bank consisting of 3 98125 bags of sugar of 1 printers each the value of which is Rs. 5 453.16 Lacs is actual stock for purpose of obtaining cash credit limit whereas the Stoke of sugar as per the assessee's record is consisting of 310934 bags amounting to Rs. 4 314.10 Lacs. Therefore, according to him there is a difference in quantity of the bags of sugar of 87191 the value of which is Rs. 1139.05 lakhs . This addition was contested by assessee before the Ld. first appellate authority who confirmed the above disallowance/addition vide order dated the 11/3/ 2008. Subsequently appeal was referred against the order of the Ld. CIT (A) ....
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....He further submitted that reconciliation of excess stock as per the bank stock with the books of accounts is placed at para No. 15 of the order of the learner CIT appeal at page No. 8 where the complete reconciliation has been provided he stated that it shows that there is a non-existent stock of sugar manufactured in the season 1996 - 1997. He further referred to para No. 24 of the Ld. CIT appeal wherein he stated that the assessee has demonstrated that the addition cannot be made in the hands of the assessee by producing reconciliation of current year finish stock as per excise records and bank records, stock statement as per Central bank of India as on 31/03/1999, stock statement as per Central bank of India as on 31 - 03 - 1998, copy of the excise records for 3 seasons, reconciliation of the stock with the excise records and reconciliation of excess top as per the bank stocks statement with the books of accounts. He further referred to the page No. 14 of the order of the Ld. CIT appeal that based on the verification of the same he has deleted the addition. In the and he referred to the page No. 16 of the order of the learner CIT appeal wherein he has mentioned that after opting....
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....r source other then the area allotted to them for procurement of cane which is the basic ingredient for production of sugar. Furthermore purchase of sugar cane and production of sugar is recorded in the supervision of the government authorities on a day-to-day basis in the excise records which remains uncontroverted. The assessee for the purpose of obtaining credit facility from Central bank of India was required to submit hypothecation of stock statement to the bank. Admittedly closing stock as at 31st of March 1999 as per books of accounts was 310934 bags whereas as per the bank statement given to the Central bank of India it was shown to be 398125 bags and therefore there was a difference of 87191 bags in the stock according to the books of the assessee as well as stock statement given to the bankers. At para No. 11 of the order of the learner CIT appeal a chart is reproduced which shows that in the opening stock as per books of accounts there were 384300 bags as per the books of accounts whereas the information given to the banker in the bank stock statement was 471488 bags therefore there was a difference of 87188 bags in the opening stock. From the above chart it is apparent ....
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....th the audited accounts . It has also been argued that purchase of cane and production of sugar is a controlled item and that there is no way that the assessee could have either purchased unaccounted stock of sugar or would have suppressed its production records. Moreover in this context it is noted thai the AO has not rejected the production records or has found any discrepancy in the same. Rather the AO has accepted the book results including the trading results i.e. the production and sales during the year as there is no adverse finding on this issue by the AO. Therefore the appellant submits that there is no ground for making addition to income for the alleged excess stock of sugar in the previous year relevant to this assessment year merely on the basis of the discrepancy of stock noted on a comparison with the stock statement filed with the bank, which is for the purposes of obtaining credit limit. In view of the above primary records maintained by the appellant which are verified by the Central Excise authorities and which have not been found to be untrue or incorrect by the Assessing Officer , there is enough substance in the arguments advanced by the appe....