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Issues involved:
Addition of Rs. 1,83,044 on account of difference in stock between the books of account and the statement furnished to the bank. Analysis: The main issue in this case was the addition of Rs. 1,83,044 due to a difference in stock as per the books of account and the statement provided to the bank. The assessee explained that the discrepancy was to meet the bank's margin requirements for a loan. However, the Assessing Officer (A.O.) rejected this explanation, stating that the bank verifies the actual stock. The CIT(A) upheld the addition, leading to the appeal before the Tribunal. The counsel for the assessee argued that the stock statements to the bank varied intentionally to secure higher overdraft facilities and that the stock register matched the bank statement on opening and closing days. The assessee relied on various legal precedents to support the argument that no addition should be made without defects in the accounts. The Senior Departmental Representative (Sr. D.R.) supported the CIT(A)'s decision, emphasizing that the auditors never verified the stock and that the figures provided by the assessee were specific. The Tribunal considered the principles of the Evidence Act, stating that entries in the books of account are presumed correct unless proven otherwise. The statement given to the bank is binding on the assessee unless disproved. The burden of proof lies on the assessee to establish the correctness of the bank statement. Referring to a decision by the Madras High Court, the Tribunal held that the statement of stock given to the bank is binding unless proven otherwise. Regarding case law references, the Tribunal distinguished various High Court decisions cited by both parties. The Tribunal found that the earlier decision of the Madras High Court regarding stock statements still applied. The Tribunal also rejected the assessee's plea that higher stock was shown to the bank for overdraft purposes, aligning with the Madras High Court's view on the matter. The Tribunal partially allowed the appeal, modifying the addition to Rs. 64,960, the peak amount of discrepancy. The decision highlighted the importance of proving stock statements' accuracy and the burden of proof on the assessee in such cases. In conclusion, the Tribunal upheld the addition but restricted it to the peak amount, emphasizing the necessity of accurate stock reporting and the burden of proof on the assessee in verifying discrepancies.
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