2020 (2) TMI 575 - HC - Income Tax

Discrepancy between the stocks as per books of account and as per bank records - addition in view of the statements given by the bank officials that the stocks statement as furnished on 31.3.1988 continued to be reflected in their accounts being upto 28.4.1988? - HELD THAT - The contention is that the stock was from the hypothecated stock of ₹ 20,00,000/- odd. To substantiate the said claim, no evidence was produced before the authorities. The bank was never informed that the hypothecated stock was reduced and out that ₹ 12,00,000/- odd of stock was pledged. The assessee failed to discharge the onus of explaining the discrepancy. The matter can be viewed from another angle, i.e., as and when there was additional stock of ₹ 3,44,000/-, the assessee approached the bank to show that the stock had increased. The said stock was pledged with the bank on 29.4.1988 and thereafter drawing power was enhanced by ₹ 2,33,600/- and accordingly the value of stock was changed by the bank. The value of hypothecated stock as on 31.3.1988 was repeated subsequently on 16.4.1988 and 24.8.1988 as there was no change of value of stock and the same was not informed to the bank. The assessee failed to prove incorrectness of entries of D.P. Register. The evidence was duly considered by the Tribunal and partial relief was granted. No illegality is shown in the order of the Tribunal sustaining addition - Decided against assessee.

Issues:
1. Legality of orders Annexures P-1 and P-3
2. Addition of ?12,89,080/- due to stock discrepancy
3. Bank officials' statements regarding stock reflection
4. Sustainment of addition due to discrepancy in D.P. Register
5. Justification of addition without substantial evidence

Issue 1: Legality of orders Annexures P-1 and P-3
The appellant challenged the legality of orders Annexures P-1 and P-3 under Section 260A of the Income Tax Act, 1961. The Tribunal partly allowed the revenue's appeal, raising questions on the sustainability of the mentioned orders. The appellant contested the validity of these orders, leading to the appeal before the High Court.

Issue 2: Addition of ?12,89,080/- due to stock discrepancy
The primary issue revolved around the addition of ?12,89,080/- on account of a stock discrepancy noticed during assessment proceedings. The Assessing Officer identified a significant variance in the value of closing stock as per the books of account and bank records. The appellant provided explanations for the differences, but the Assessing Officer rejected them, resulting in the addition to the income. The CIT (A) partly allowed the appeal, leading to the current dispute.

Issue 3: Bank officials' statements regarding stock reflection
The Tribunal sustained the addition of ?12,89,080/- based on statements from bank officials indicating the continuity of stock reflection in their accounts. The appellant argued that no stock statement was filed on a specific date, but the Tribunal found no merit in this contention. The Tribunal analyzed the evidence and upheld the addition, emphasizing the lack of evidence supporting the appellant's claims.

Issue 4: Sustainment of addition due to discrepancy in D.P. Register
The Tribunal sustained the addition based on discrepancies in the D.P. Register, highlighting the failure of the appellant to provide substantial evidence to explain the stock differences. The Tribunal considered the bank's records and the appellant's actions regarding stock pledging, ultimately concluding that the appellant failed to discharge the burden of proof regarding the discrepancies.

Issue 5: Justification of addition without substantial evidence
The High Court dismissed the appeal, stating that no substantial question of law arose from the contentions raised. The Court found no error or illegality in the Tribunal's decision to sustain the addition of ?11,88,530/-, emphasizing the factual nature of the arguments presented. The Court concluded that the appellant failed to provide adequate evidence to challenge the addition, leading to the dismissal of the appeal.

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