TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 72
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....ief facts of the case are that the assessee is a private limited company and running a unit engaged in the manufacturing of Poultry feed in the name and style of 'Raja Fats & Feeds Pvt. Ltd'. The assessee was required to maintain books of account as per the provisions of the Company's Act, 1956 and duly audited by the Chartered Accountant u/s 44AB of the Income Tax Act, 1961 (in short 'the Act'). During the assessment proceedings, the Assessing Officer noticed that the assessee had obtained secured loans form Punjab National Bank against hypothecation of the stock. The Assessing Officer vide letter dated 24.9.2014 requested the Manager of the Punjab National Bank to supply copy of the stock statement furnished by the assessee to the bank on different dates. The Manager of the Bank vide his letter dated 4.2.2014 supplied the copy of the stock statement. The Assessing Officer compared the stock statement supplied by the assessee to the bank with the stock statement as per the books of account and noted that there was a difference of Rs. 1,81,57,649/- in the stock as shown in the books of account or to say that there was shortage of stock to the aforesaid extent in....
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....he Assessing Officer by observing as under:- "4.2 I have perused the assessment order and considered the submissions putforth by the appellant as also the facts on record. The appellant is a private limited company incorporated under the Companies Act 1956. It is mandatorily required to keep complete books of account including quantitative details of stock etc. It is clear from the facts on record that the appellant submitted stock statement to the bank as on 28.03.2012 whereas it has furnished audited balance sheet and profit and loss account for the period ending on 31.03.2012. The assessing officer has compared the stock figures on two different dates and not surprisingly found the difference which became the basis for making addition u/s 69 of the Act. The appellant further explained that it had submitted estimated stock figures to the bank and the difference is on account of wastage which is booked on the last day of the financial year. That the stock statement submitted to the bank contained details of 13 stock items of which 11 are of raw material and the remaining two comprised of bardana and poultry feed. A perusal of the stock summary which is a part of the final accoun....
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....the query whether the stocks were physically verified by the bank as on 28.03.2012 the bank Officer replied "I do not know because I was not posted at that time in this branch Further in response to the query whether the inventory of each stock statement submitted by the borrowers is checked for accuracy, he replied that "there is no such practice. We do not check the item wise calculations'. And finally in response to the query "can you provide some documentary evidence whether the contents of the stock statement were physically verified by the branch officer", the officer replied, " in our record, there is no other such document except stock statement submitted by the borrower' In his examination by the AO the bank officers confirmed that "the facts stated by me in my statement dated 18.11.2014 are correct". A careful perusal of the disposition of the bank Officer brings out the clear fact that even though the bank officials are required to verify the stock statement submitted by the borrower by visiting concerned premises, there is no evidence that it was actually done. Moreover, it was also categorically stated by the officer that item wise calculations are not checked ....
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....as further submitted the following written submissions:- "1. During the course of assessment proceedings it came to notice that the quantitative details of various items SL No. 1 to 12, furnished by the assessee alongwith the quantity of various items weighing 8336.44 quintals and value thereof disclosed is at Rs. 1,43,21,621/-. Whereas the statement of stock submitted to the bank, the quantity of various items was 39620 quintal and value of which was at Rs. 3,30,78,280/- Thus the difference in stock as per books of accounts and as submitted and certified by the Bank was more by Rs. 1,87,56,649/- and in terms of quantity the stock was access 31284 quintal. 2. In this case the assessee has not maintained any stock register as admitted by it and stated that on 31st March every year actual stock taking is done but the assessee failed to furnish any documentary evidence for actual stock taken on 31-03-2012. The assessee attempted to explain the difference in stock and for this purpose also filed mathematical sheets working out the shortage on a percentage of product which has neither any basis nor as per the approved stock accounting system. The stock loss is different from product....
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.... Punjab and Haryana. In that case the statement of stock was furnished before the bank in terms of quantity and value and in this case also the stock statement furnished in the bank is also in terms of quantity and value are supported or admitted by the statement of bank manager. In that case the Hon'ble High Court has held as under:- "The judgment relied upon is distinguishable on the facts. There is no doubt about the proposition that the burden of proving taxability of income is on the Revenue, as held in Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SCj, referred to in the above judgment. For discharging the said burden, it is not necessary that some positive evidence must be led by the Revenue. In a given case, even by drawing inference from the material available, if explanation of the assessee is found to be unreliable, the claim of the assesee can be rejected. In such situation, the burden on the Revenue can be held to have been discharged. In the present case, the assessee had given stock statement to the bank which was at variance with entries in books of account. No doubt, it was a statement to a third party, but neither the said statement was denied by the a....
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....rial consumed of 295169.71 Qtl. c. The Id. assessing officer has made addition on account of difference in closing stock (as declared in bank statement as on 28.03.2012 and As per books as on 31.03.2012). whereas difference in opening stock(as declared in bank statement as on 28.03.2011 and As per books as on 31.03.2012) was not considered. d. The addition on account of closing stock was made by reconciling closing stock on different dates i.e to bank on 28.03.2012 and in books on 31.03.2013. e. There is no dispute on wastage claimed by the assessee and yield shown by it and books results were accepted in to-to. "That the assessing officer made the aforesaid addition by relying on the Stock Statement dated 28.03.2012 furnished by the assessee to the lending Bank (PB Page 10, at the top of the page), however, by comparing the figure of stock as on 28.03.2012 (as given to Bank) with the stock as on 31.03.2012 (reported to the department), without considering the most important fact that as per the regular accounting policy followed by the assessee, the assessee books the shortage at the end of the year on 31 st March of every year, wherein the yield chart for the five years i....
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....s Rs. 501970940 Less : Purchase return (1) Rs. 4621256 Less : Purchase return (1) Rs. 5168415 Net Purchase (2) Rs. 412865108 Net Purchase (2) Rs. 496802525 Total Quantity Purchased (3) 291844 Qds Total Quantity Purchased (3) 313354.97 Qtls Per Unit Cost (4) (2)/(3) Rs. 1414.67 per Qd Per Unit Cost (4) (2)/(3) Rs. 1585.43 per Qtl Material Consumed (5) 295169.71 Qd Material Consumed (5) 308686.43 Qtl Shortage (6) ((5) x 3.61%) 10655.62 Qd Shortage (6) ((5) x 3.61%) 11143.58 Qtl Total Shortage (7) (6) x (4)) Rs. 15074273 Total Shortage (7) (6) x (4)) Rs. 17667371 Now, therefore its crystal clear that the Ld. A.O. during the course of assessment proceedings when failed to made any addition, called for the Stock Statement from the Bank, and without even looking into the items of stock made the impugned High Pitched assessment on presumptions conjectures and surmises. It is important to mention here that the difference calculated by the Ld. A.O. was with respect to the Closing Stock, whereas forgot to appreciate that there is a difference in the Opening Stock also, considering the same there becomes negligible difference, the....