TaxTMI 
TaxTMI 
2019 (9) TMI 1264
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....s balances declared to the bank and accounted in the books of accounts. During the course of assessment proceedings, the AO had collected the information from the Axis Bank, Gajuwaka Branch, Visakhapatnam with regard to the securities pledged and stocks hypothecated etc., for availing the Over Draft{(OD) (Cash Credit)} facilities from the bank. As per the information furnished by the bank, the AO found that the closing stock was declared at Rs. 1,80,34,903/- as on 31.03.2014 and whereas it was accounted in the books of accounts at Rs. 89,68,749/- resulting in difference of Rs. 90,66,154/-. Similarly, in respect of sundry debtors, the assessee declared to the bank as on 31.03.2014 at Rs. 69,35,805/- against the book balance of Rs. 42,83,258/-, thus, there was a difference of Rs. 26,52,547/-. The closing stock and the book debts were over stated to be bank to the extent of Rs. 1,17,18,701/- which was brought to tax u/s 69B of the Income Tax Act, 1961 (in short 'Act') by the AO. 3. Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) followed the order of Hon'ble High Court of Calcutta in the case of Binod Kumar Agarwala Vs. CIT in ITTA No.22....
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.... unit rate was adopted @Rs. 88/- per kg to bank against which the correct value worked out to Rs. 43.55 per kg. The assessee furnished the date wise purchase bills for closing stock of 1,78,429 kgs iron and the value of the same work out to Rs. 77,71,185/-. In case of cement also the correct value worked out to Rs. 7,58,481/- for 3970 bags @ Rs. 191.05 per bag, whereas it was declared to the bank at Rs. 15,00,660/- @378/- per bag. The Ld.AR furnished the date wise purchase bills for the closing stock of each item as per which the value of closing stock, item wise works out as under : (i) AC Sheets - Quantity : 2673 (closing stock) and Valuation : Bill Date Quantity (in mtrs) Bill Amount (Rs.) 30.03.2014 1460 2,30,831 26.02.2014 892 1,26,536 16.01.2014 321 49,471 Total 2673 4,06,838 Valuee per mtr = Value/Quantity = Rs. 4,06,838/2673 = Rs. 152.20 Total value of closing stock = 2673*Rs. 152.20 = Rs. 4,06,838/- (ii) Iron - Quantity : 178429 (Closing Stock) Valuation : Bill Date Quantity (in Kgs) Bill Amount (Rs.) 29.03.2014 23960 10,30,280 27.03.2014 2880 1,25,....
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....abad Industries Ltd. 2,00,000 Total 69,35,805 4.4. The Ld.AR referring to page No.56 of the paper book submitted that the actual trade debtors representing the trade transactions was only Rs. 42,83,258/- as accounted in the books of accounts. Referring to page No.70 of the paper book, the Ld.AR submitted that other loans and advances were also included in the sundry debtors statement provided to the bank to show inflated balances. The Ld.AR invited our attention to Sl.No.10 of the list in page No.8 of the paper book and submitted that M/s Bhavya Cements was financial debt with an outstanding amount of Rs. 17.60 lakhs, was included in sundry debtors balances to the bank for loan purposes, whereas the same was excluded from sundry debtors and reported in other debtors in the Balance Sheet. Thus, the Ld.AR argued that while grouping the balances in the balance sheet genuine trade debts were taken under the head sundry debtors, whereas to the bank non trade debtors were also clubbed to avail the higher limits. The Ld.AR submitted that except including some non trade debts/financial debts the assessee did not submit any false information and the....
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....n to the trade debts, the assessee had included the financial debtors also in the debtors statement for the purpose of taking advance. While admitting the correct position in the books of accounts, the assessee has made incorrect report to the bank. From the assessment order, we find that the assessee had produced the books of accounts and furnished relevant information and documents etc., as called for during the course of scrutiny proceedings and the AO had verified the same and no defects were noticed or no deficiencies were brought on record by the AO in respect of the value of the closing stock or the sundry debtors. Therefore, except the differences in stock statement and the debtors statement submitted to the bank, there is no other evidence available to the department to take adverse view of the closing stock and sundry debtors declared in the books of accounts. Though declaring excess stock to the bank is unethical, but cannot be the sole evidence or sole reason for making the addition to the returned income when all the evidences are available with the AO. The Ld.CIT(A) relied on the decision of Binod Kumar Agarwala cited supra, where the issue was with regard to decla....
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....fference in stock declared to the bank and presented for assessment. For the sake of clarity and convenience, we extract para No.14 and 15 of the order of this Tribunal which reads as under : "14. We have carefully considered the rival submission and perused the record. We have also carefully gone through the case law relied upon by the A.O. as well as the Ld. Counsel for the assessee. It is no doubt true that the initial burden is upon the assessee to prove the correct value of the stock held by the assessee and he has to prove that the value reflected in the books of accounts is correct but the fact remains that the courts have time and again accepted the fact that in open loan system, the parties tend to inflate figures of quantity as well as rate merely to enjoy higher cash credit limits. In the instant case, the assessee filed monthly VAT returns based on the same books of accounts and the same was accepted without making any additions. Neither the bank authorities nor the A.O. made any effort to verify the actual stock to prove that there is existence of unaccounted stock under these circumstances and consistent with the view taken by the ITAT and various High Courts....