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TMI Blog1984 (8) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... n) and collateral securities of properties belonging to the firm and its partners. This loan was discharged five months later. The first declaration in pursuance of the arrangement was made on 27-12-1978 well prior to the season. Since the total value of stock available as per books was only Rs. 13,124, the ITO proposed the addition representing the difference. At the very first instance, Shri M. Nageswara Rao, partner stated that the statement to the bank, though certified, was not real and that it was meant for the bank records so as to enable the assessee to avail the cash credit limit of Rs. 1 lakh (at 50 per cent margin). It was claimed that the assessee's account with the bank was 12 years old that the arrangement which was temporary was a normal one especially when considered in the light of collateral securities offered and the standing of the firm. The bank statement, according to the assessee was to satisfy the bank records requirement. Thereupon, the ITO examined one Shri D.V. Seethapathi Rao, the then bank's branch manager who certified that the loan limit was sanctioned on the strength of the stock statement and that bank has godown-keepers and field officers who physi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He questioned all attempts to characterise the statement as casual and not serious. It is precisely this kind of light-hearted approach that has been frowned upon, he pointed out, by the High Court, in Coimbatore Spg. Wvg. Mills' case. He contended that the assessee cannot be allowed to go back on its statement to suit its convenience. 5. We have carefully considered the records as well as the arguments. We cannot possibly dismiss the bank statement as having been 'casually' or 'not seriously' made as canvassed by the assessee. The stock list as given by the assessee to the bank hits five quantities of various materials and the statement has been certified. It has been acted upon by the bank apparently on the bona fide belief that such stock actually existed. This is clear from the statement of the bank manager. The Madras High Court as pointed out, by the ITO, observed as under: "The learned counsel for the assessee, however, submits that the Tribunal should have taken judicial notice of the practice followed by the business houses of declaring larger stocks to the banks purely for the purpose of getting higher loans or overdraft facilities. We are not convinced that any suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to the Textile Commissioner during the relevant year were found to be quite in accord with the entries made in the books of account. It was also found that the discrepancy in the stocks was due to the fact that the statement of stocks given to the banks was only on an estimated basis and not based on actuals. This Court, agreed with the view of the Tribunal taking note of the fact that the declarations made to the banks were on an estimated basis and not on actuals and that the contemporaneous documents such as the returns sent to the Textile Commissioner showed that the book entries were correct." The decision mentioned in the above passage is the one in Ramakrishna Mills Ltd.'s case. In one case, the Tribunal accepted the book stock while on the other it relied upon the bank stock. In both cases, the Tribunal's decisions were confirmed. But, there is absolutely no conflict of principles involved as explained by the High Court itself. In the case of Ramakrishna Mills Ltd., the bank statement, though false, was the only material as against all other factors leading to acceptance of books and it was for this reason that the Tribunal accepted the claim of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------- Stock as per Average consumption bank for year with reference statement to consumption of four years (tonnes) (tonnes) ------------------------------------------------------------------------------------------ Sulphur 20 14 Gunnies 10,000 (No.) 7,000 (No.) Firewood 450 330 Coal 60 55 Limestone 250 100 Castor seeds 40 5 Husk 75 lorry loads 15 lorry loads ------------------------------------------------------------------------------------------ Hence, the stock declared exceeds the total consumption for any year. The stock admitted again is well before the season itself. 4. There is no allegation of any physical verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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