TaxTMI 
TaxTMI 
2026 (3) TMI 713
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....d had availed the credit facility from State Bank of India against hypothecation of stock in the form of raw material and finished goods apart from mortgage of immovable property comprising factory, land along with building, machinery etc. On 25.09.2000, the appellant filed the statement of stock-raw material and finished goods on estimated basis to avail cash credit facility, and inflated stock was shown as the appellant was sure that no verification of the stock and its valuation shall be made by the bank, as the factory building, land and machinery were furnished as collateral security. The bank accepted the statement of stock at its face value. 2. It is stated that the Assessing Officer during assessment proceedings checked the books....
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....ication or physical checking of the stocks reflected in the hypothecation statement dated 25.09.2000 had been undertaken. However, despite the absence of any discrepancy in the quantity or valuation of stock as recorded in the books of account, respondent No. 1 held that the appellant had failed to furnish true and correct particulars of its income to the Department. Consequently, an addition of Rs.7,77,218/- was made vide order dated 31.03.2004. 5. Aggrieved by the order dated 31.03.2004, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals), Jammu, who, vide order dated 08.09.2004, modified the addition of Rs.7,77,218/- to Rs.7,00,000/-. The reduction was effected by allowing a margin of 10% on account of ro....
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.... Income Tax, passed in (1974) 95 ITR 375, High Court of Punjab and Haryana in case titled Shakuntla Thukral Vs. Commissioner of Income Tax, passed in ITA No. 302 of 2013 dated 06.02.2014 and High Court of Madhya Pradesh, Gwalior Bench in case titled Suraj Bhan Oil (P) Ltd. Vs. Deputy Commissioner of Income Tax, passed in IT Appeal No. 121 of 2021 dated 18.02.2022. 10. Heard learned counsel appearing for the parties and perused the record. 11. Vide order dated 09.03.2016, the following substantial questions of law were framed:- (i) Whether any notional addition to the returned income can be sustained in law when the Income Tax Officer has neither rejected the books of accounts, nor the (respondent No. 1) has held that stocks s....
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....e order passed by the Assessing Authority. 13. In the present case, however, the factual position is materially different. Not only the quantity but also the value of the raw material was specifically mentioned in the statement submitted to the State Bank of India, Purani Mandi, Jammu. At the foot of the statement, the appellant had certified that the quantities of raw material, goods-in-process and finished goods shown therein represented the true and accurate stock position as on the date of the statement and were in conformity with the permanent books of account. Thus, there was a clear admission on the part of the appellant with regard to both the quantity and value of the stock lying with it. In contrast to the case relied upon by l....
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.... bank, and the said statement carried a clear endorsement that the quantities of raw materials, goods-in-process and finished goods shown therein represented the true and accurate stock position as on the date of the statement and were in conformity with the permanent books of account, it cannot be said that the Assessing Authority erred in placing reliance upon such statement furnished to the bank. This court is of the opinion that the practice of declaring inflated quantities of stock to the bank for the purpose of securing higher cash credit, in fact amounts to commercial immorality and such practice cannot be countenanced in law. 17. In view of the foregoing discussion, we hold that the Assessing Authority was justified in making the....