2019 (8) TMI 292 - AT - Income Tax

Addition u/s 69B on account of difference in stock statement given to the Bank - The AO called for information from Manager PNB u/s 133(6) to furnish details regarding the stock/assets hypothecated for obtaining loans/CC limit - HELD THAT - The assessee submitted that as on the closing of the financial year the closing stock was of ₹ 1,88,17,001/- which is also reported to the bank on the same date which is also certified by the bank (PB-11). It would, therefore, show that the stock statement tally with the stock statement submitted to the bank at the end of the financial year on 31.03.2014. The assessee, therefore, rightly contended that the stock statement submitted on 28.02.2014 prior to close of the financial year was on estimate basis and not on actual basis. The assessee also rightly contended that since assessee deals in controlled items like fertilizer and chemicals, therefore, it is subject to physical verification by Agriculture Department. No enquiries have been done by the AO from the concerned Agriculture Department with regard to discrepancy in the stock. It may also be noted here that in the preceding AY 2013-14 the similar addition was deleted by the Ld. CIT(A) following the judgment of the Hon ble Punjab Haryana High Court in the case of Sidhu Rice General Mills 2004 (7) TMI 12 - PUNJAB AND HARYANA HIGH COURT . Therefore,CIT(A) should not have taken a contrary view in assessment year under appeal. The decisions relied upon by Ld. Counsel for assessee squarely applied to the facts and circumstances of the case. The issue is, therefore, covered by these decisions in favour of the assessee. It is well settled law that Revenue authorities are bound to follow the rule of consistency. Thus the addition is wholly unjustified - Decided in favour of assessee. Addition on account of low household withdrawal - HELD THAT - It is not in dispute that family of the assessee consists of self and his wife only. The assessee resides in his own house and has sufficient ancestral agricultural land. The assessee has agricultural income also. The AO has not brought any evidence on record to justify the estimate of household expenses in a sum of ₹ 20,000/- per month. The AO did not doubt the explanation given by the assessee that household expenses withdrawn by the assessee and agricultural income are sufficient to maintain the family. It may also be noted here that in preceding AY 2013-14 Ld. CIT(A) considered the same issue in the appellate order dated 25.04.2017 and on identical facts deleted the addition on account of enhancing the household expenses. CIT(A) noted in the appellate order that during assessment year under appeal i.e. 2013-14 assessee had withdrawn a sum of ₹ 1,12,010/-. The further addition made by the AO was deleted as against household expenses of AY 2013-14, there is a substantial increase in household expenses withdrawn by assessee in assessment year under appeal. CIT(A), therefore, should not have taken a contrary view in assessment year under appeal. The addition is made merely on estimate basis. Therefore, same is liable to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?25,66,790/- under section 69B of the Income Tax Act due to the difference in stock statements given to the bank.
2. Addition of ?55,000/- on account of low household withdrawals.

Issue-wise Detailed Analysis:

1. Addition of ?25,66,790/- under section 69B of the Income Tax Act:
The assessee challenged the addition of ?25,66,790/- made by the Assessing Officer (AO) under section 69B of the Income Tax Act due to a discrepancy between the stock statement provided to the bank and the stock value as per the balance sheet. The AO noted that the stock declared to the bank on 28.02.2014 was ?2,23,86,350/-, while the balance sheet as on 31.03.2014 showed a stock value of ?1,88,17,001/-. The AO, after considering the Gross Profit (GP) rate, added the difference as unexplained investment in stock.

The assessee argued that the stock statement given to the bank was on an estimated basis to avail higher credit facilities and not based on actual stock. The stock value as per the audited books of accounts matched the stock statement submitted to the bank on 31.03.2014. The assessee's books of accounts were duly audited and accepted by the AO without any specific defects pointed out. The assessee relied on several judicial precedents, including CIT vs. Sidhu Rice & General Mills, CIT vs. Shri Bharat Bhushan Suri (HUF), and CIT vs. N. Swamy, which supported the contention that additions could not be made solely based on stock statements given to banks without corroborative evidence.

The CIT(A) dismissed the assessee's appeal, noting that the bank had verified the stock as per their general practice. However, the tribunal found that the authorities below relied on general banking practices rather than verifying the actual facts of the case. The tribunal observed that the stock statement as on 31.03.2014 matched the audited books of accounts and that the stock statement on 28.02.2014 was indeed on an estimated basis. The tribunal noted that no inquiries were made with the Agriculture Department regarding the stock, and a similar addition for the previous assessment year was deleted by the CIT(A). Following the principle of consistency and the judicial precedents cited, the tribunal deleted the addition of ?25,66,790/-.

2. Addition of ?55,000/- on account of low household withdrawals:
The assessee challenged the addition of ?55,000/- made by the AO on account of low household withdrawals. The AO estimated the household expenses at ?2,40,000/- for the year, while the assessee had withdrawn ?1,85,000/-. The AO added the difference, considering the social status of the assessee.

The assessee argued that the family consisted of himself and his wife, with both sons earning separately and residing elsewhere. The family resided in their own house and had additional income from ancestral agricultural land. The household expenses shown by the assessee, combined with agricultural income, were sufficient for the family size.

The tribunal found that the AO did not provide any evidence to justify the estimated household expenses and did not dispute the assessee's explanation. It was noted that in the previous assessment year, the CIT(A) had deleted a similar addition, and there was a substantial increase in household expenses in the current year compared to the previous year. The tribunal concluded that the addition was made merely on an estimated basis without any basis and deleted the addition of ?55,000/-.

Conclusion:
The tribunal allowed the appeal of the assessee, deleting both the additions of ?25,66,790/- under section 69B for the difference in stock statements and ?55,000/- for low household withdrawals. The tribunal emphasized the importance of consistency, the lack of corroborative evidence for the stock discrepancy, and the sufficiency of household withdrawals considering the family size and additional agricultural income.