TaxTMI 
TaxTMI 
1981 (9) TMI 28
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.... of the undisclosed stock lay with Vijayakumar Cotton Press and not with the assessee-company is based on mere conjectures or surmises and is unreasonable, arbitrary and perverse ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal had any material before it to come to the finding that the declaration made by the assessee-company to the bank was only a mere formality and that no weight can be attached to the document given by the assessee-company while pledging the stock and taking the loan of Rs. 5,99.865 for its business ? 4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in deleting the addition of Rs. 537,810 assessed as income of the assessee from undisclosed sources for the assessment year 1959-60, and Rs. 54,375 and Rs. 68,950 assessed as income of the assessee for the assessment year 1960-61 ? " The assessee is a private limited company engaged in the manufacture and Sale of yarn at Alwaye in the Kerala State. In the accounting years ending on December 31, 1958, and December 31, 1959, as well as the years prior to them one Mr. G. Krishnan of Coimbatore, his wif....
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....ok Textiles Ltd. were offered as security and these have been subsequently invoiced to the company ". The ITO estimated the value of 1,379 bales of cotton and included it in the taxable income for the assessment year 1959-60. Similarly for the assessment year 1960-61, he included the value of 125 bales of cotton. Besides, he estimated the profit on the sales of the quantity of 1,379 bales adopting a uniform rate of Rs. 100 per candy and included that also in the income. This resulted in the taxable income of the assessee being determined as Rs. 1,10,284 for the assessment year 1959-60 and Rs. 98,999 for the assessment year 1960-61. The assessee took up the matter in appeal to the AAC. He did not accept the case of the assessee. The AAC found that the assessee had failed to establish that the quantity of Cambodia cotton pledged with the Indian Overseas Bank Ltd. and outside the books of account were not shown to belong to Vijayakumar Cotton Press or that the same was purchased in later years. The additions were confirmed. Thereupon the assessee filed appeals to the Tribunal. The Tribunal allowed the appeals finding that the fact that this quantity of cotton is not seen accounted ....
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....f to show that it is otherwise is upon the assessee. It is only because the goods were declared to be that of the assessee that the bank advanced the loan on the strength of such declaration. The interesting fact is that even in the notice issued, copy of which is annex. A, there is a categorical mention that the assessee's representative was not able to explain how the assessee happened to pledge outside the stock in the books of account. Annexure B is the explanation submitted by the assessee. That makes very interesting reading. We will extract the relevant portion of annex. B reply dated March 25, 1967 " It was not unlikely that as and when the limited company required finances, the stocks of Vijayakumar Cotton Press to be sold to Ashok Textiles Ltd. were offered as security and these have been subsequently invoiced to the company. We have filed a statement of closing stock with you from which it will be seen that the stocks lying in Coimbatore has been shown at 456 bales together with lot numbers. Subsequently, Vijayakumar Cotton Press have supplied following bales of Cambodia cotton as per invoices drawn on 31-8-1959: Under inv....
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....circumstances mentioned by the Income-tax Appellate Tribunal in its order appear to be relevant or pertinent to the question that was before it. In para. 8 of its order it mentions the fact that the cotton is not seen accounted for in the accounts of Vijayakumar Cotton Press. This is not material at all. The assessee himself had no case that the cotton belonged to Vijayakumar Cotton Press. Even if he had such a case it cannot be said that if stock of such cotton is not accounted for in the accounts of Vijayakumar Cotton Press it helps the assessee's case. In the face of the explanation to which we have already adverted, there is no question of examining any person concerned with Vijayakumar Cotton Press. If at all, there was to be an examination, it was for the assessee to ask for opportunity for such examination or opportunity to adduce evidence. Evidently there is no complaint by the assessee that no opportunity was afforded. The fact that Mr. G. Krishnan was one of those in control of the assessee-company and was also the manager of Vijayakumar Cotton Press is, by itself, of no consequence at all. In fact the explanation sets up no case based on it. It is a case which has not be....