2016 (2) TMI 1343 - AT - Income Tax

Addition u/s 69B - difference in value of stock as per bank statement and as per the balance sheet furnished to the Department - Difference in figures of closing stock submitted to the Bank and balance sheet - HELD THAT - We find that the above issue is squarely covered against the Revenue and in favour of the assessee by the consolidated order in the case of Dy. Commr. of Income Tax, Circle-1, Bathinda vs. Ishar Infrastructure Developer (P) Ltd; Bathinda 2015 (6) TMI 766 - ITAT AMRITSAR as held addition on account of difference furnished to the bank as per books of account u/s 69B of the Act can not be sustained. - Decided in favour of assessee.

Summary

Issues:
- Appeal filed by Revenue against CIT(A) order regarding assessment year 2010-11
- Deletion of Rs.84,10,600/- by CIT(A) due to difference in closing stock figures
- Interpretation of law regarding addition on the basis of difference in stock valuation
- AO's failure to prove physical verification of stock by the bank
- Applicability of various court decisions on similar cases

Analysis:
1. The appeal was filed by the Revenue against the CIT(A) order concerning the assessment year 2010-11. The main grievance of the Revenue was the deletion of an amount of Rs.84,10,600/- by the CIT(A) due to a difference in the figures of closing stock submitted to the Bank and the balance sheet submitted to the Department.

2. The counsel for the assessee argued that the issue was already decided in favor of the assessee by a consolidated order of the ITAT, Amritsar Bench. The ITAT had considered whether an addition could be made based on the difference in stock valuation submitted to the Bank and the Department. The ITAT's findings in a lead case were highlighted to support the assessee's position.

3. The DR supported the AO's order but acknowledged that the matter was in favor of the assessee. The Tribunal examined the material on record and noted that the AO had added Rs.84,10,600/- due to the difference in stock value as per the bank statement and the balance sheet. However, the CIT(A) allowed relief to the assessee based on various justifications.

4. The CIT(A) justified the deletion of the addition by emphasizing that the stock was hypothecated, not pledged, and the AO failed to prove physical verification of stock by the bank. The Tribunal found that the AO's action was not justified based on the facts presented, including discrepancies in balance sheets and profit & loss accounts filed with the bank and the department.

5. The Tribunal concluded that the issue was covered in favor of the assessee by a consolidated order of the ITAT, Amritsar Bench, in a bunch of appeals. Various court decisions were cited to support the position that additions based on differences in stock valuation without physical verification were not sustainable. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

6. In light of the discussions and legal precedents cited, the Tribunal found no infirmity in the CIT(A)'s order and upheld the decision. Consequently, the appeal of the Revenue was dismissed, and the order was pronounced in open court on 05/02/2016.