TaxTMI 
TaxTMI 
2002 (8) TMI 248
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....er: ------------------------------------------------------------------------- Item Stock as Stock as Excess / Less per Audit submitted Report to Bank ------------------------------------------------------------------------- Tin 64.9 kg 250 kg + 185.1 kg Finished goods 87 kg 6180 kg &n....
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....ly observed the formalities of terms and conditions of sanctioned letter. 3. The assessee furnished copy of Fire Insurance Policy of New India Assurance Co. Ltd. which indicated that goods have been insured for Rs. 7,25,000 which is almost equal to stock declared to the bank followed at Rs.7,13,350. The Assessing Officer came to the conclusion that the assessee has shown an excess stock to the bank valued at Rs. 4,35,263 and made the addition accordingly by invoking the provisions of section 69. In support of the impugned addition, the Assessing Officer placed reliance on the following decisions. (1) S. Murugappa Chettiar v. CIT [1988] 174 ITR 245 (Ker.). (2) Swadeshi Cotton Mills Co. Ltd. v. CIT [1989] 180 ITR 651 (All.) (3) CIT v. Ashok Textiles (P.) Ltd. [1983] 141 ITR 785 (Ker.) 4. Aggrieved, the assessee carried the matter in the appeal before the CIT(A). The CIT(A) proceed to delete the impugned addition with the following observations : On behalf of the appellant it has been stated that they directly needed credit facilities from the Bank in this year for their business; and hence they committed this act. I agree with the view taken by the Assessing Officer....
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.... various items of stock as reflected in this statement are higher than the stocks reflected in the stock inventory filed during the assessment proceedings. The discrepancy in the two statements has been worked out by the Assessing Officer at Rs. 4,35,263. The assessee contends that stock hypothecation statement contains inflated quantities and should be disbelieved. However, no evidence whatsoever has been furnished by the assessee before the tax authorities below in support of its contention that quantities of various stocks as reflected in the hypothecation statement are inflated. The preposition of law is unexceptionable that heavy onus lies upon the assessee to prove that the stock hypothecation statement filed before the bank authorities duly signed and authenticated by the partners of the assessee firm is false. The assessee has duly availed of overdraft facilities on the strength of the said statement and the same has been accepted and allowed by the bank authorities. After availing of the benefit of overdraft the assessee cannot be allowed to say that the stock hypothecation statement is a mere falsity. This is particularly so when no evidence whatsoever has been furnished ....
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....inflated for the purpose of getting overdraft facilities from the banks. The learned departmental representative has cited a large number of decisions of various High Courts referred above wherein a similar view has been taken as discussed above. Regarding the decision of Madras High Court in the case of CIT v. Shri Padmavathi Cotton Mills [1999] 236 ITR 340 cited by the learned counsel, their Lordships in this decision have referred to their earlier decisions reported in Rama Krishna Mills (Coimbatore) Ltd.'s case and Coimbatore Spg. & Wvg. Co. Ltd.'s case and took note of the findings of the Tribunal that the assessee has maintained the stock register namely; R.G. register and the stock position reflected in the accounts tallied with the R.G. register. It was in the light of these facts that the Tribunal came to the conclusion that the closing stock declared in the return filed by the assessee based on the R.G. register should be accepted rather than the closing stock as declared to the bank. The facts in the instant case before us are clearly distinguishable inasmuch as no stock register or production register are maintained by the assessee and the stock position as on 31-3-1....
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....ehta, J. A bare reading of the aforesaid extract indicates that the Hon'ble High Court has reversed the order of the Tribunal the deleting the addition in respect of excess stock hypothecated with the Bank. The High Court observed that section 69 could not be invoked and the accounting year for the purposes of addition was the accounting year followed by the assessee. We feel that the Gujarat High Court's decision in fact supports the case of the revenue and does not in any manner supports the case of the assessee. Regarding the invocation of the provisions of section 69, we feel that if excess stocks are found with the assessee, the addition in respect of the excess stock has to be made in accordance with the accounting year of the assessee and not the financial year as held by the Gujarat High Court. 10. For the aforesaid reasons, we would reverse the findings of the CIT(A) and sustain the addition of Rs. 4,35,263 on account of excess stock reflected in the hypothecation statement filed by the assessee. 11. Regarding the second addition of Rs. 2,90,700, the Assessing Officer made the impugned addition on the ground that PVC resin shown in the bank statement is less by 80....