2015 (10) TMI 173 - AT - Income Tax

Addition on account of difference in value of stock submitted to bank in the form of stock statement and the stock as per books of account of the assessee - CIT(A) deleted the addition - Held that - We find that the stock statement as per books of account carried more value than stock statement submitted to bank and difference was to the tune of ₹ 10,74,921/-. Therefore, there is no loss to the revenue as the assessee has taken in the trading account higher figures for the purpose of calculation of profits. Ld. CIT(A) has passed a very reasoned and speaking order on which we do not intend to interfere. - Decided against revenue.

Summary

Issues:
- Addition of Rs. 87,86,604 made by the A.O. on account of difference in value of stock submitted to bank and stock as per books of account.
- Whether the Ld. CIT(A) was justified in deleting the addition.

Analysis:
1. The issue revolved around the addition of Rs. 87,86,604 made by the Assessing Officer (A.O.) due to a variance in the value of stock submitted to the bank and the stock as per the books of account of the assessee. The A.O. observed discrepancies in the stock statements provided, leading to a show cause notice to explain the differences. The assessee claimed that a different stock statement was furnished to the bank to avail extra credit facility, while the stock in the books of accounts was accurate. The A.O. was not convinced and made the aforementioned addition.

2. The Ld. CIT(A) reviewed the submissions and evidence, concluding that the value of closing stock was higher in the books than that submitted to the bank. The Ld. CIT(A) highlighted that the A.O. selectively focused on discrepancies in certain items without considering the overall picture. It was emphasized that the stock was hypothecated, not pledged, to the bank, and the appellant had shown higher stock values in the books. Reference was made to a Supreme Court decision dismissing a similar appeal by the Revenue. Ultimately, the Ld. CIT(A) allowed the appeal, stating that the A.O. was unjustified in making the addition.

3. The Revenue appealed the decision, arguing that the Ld. CIT(A) erred in favoring the assessee and emphasizing discrepancies in the stock statements. The Departmental Representative (D.R.) contended that the excess stock in the books contradicted the claim of furnishing different statements for credit facility. The D.R. relied on the assessment order and case law supporting the A.O.'s position.

4. The Appellate Tribunal analyzed the facts and submissions, noting that the value of stock in the books exceeded that in the bank statement by Rs. 10,74,921. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the higher stock value in the books did not result in revenue loss as it was considered in the trading account for profit calculation. The Tribunal dismissed the Revenue's appeal, affirming the reasoned decision of the Ld. CIT(A) to delete the addition.

In conclusion, the Appellate Tribunal upheld the Ld. CIT(A)'s decision to delete the addition, emphasizing the higher stock value in the books and the absence of revenue loss. The Tribunal found no grounds to interfere with the Ld. CIT(A)'s well-reasoned order, ultimately dismissing the Revenue's appeal.