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TMI Blog2004 (6) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... e was enjoying cash credit limit of Rs. 4,00,000 from the bank. For the year ending 31st March, 1997, which is the year under appeal, the stock of raw material was shown at Rs. 3,12,000 in the books of account. There was no stock of finished goods. However, in the stock statement sent to the bank, the assessee declared stock of Rs. 5,39,175 which consisted of raw material of Rs. 1,12,050 and finished goods of Rs. 4,27,125. While completing the assessment, the Assessing Officer took note of the above and considered the amount of Rs. 4,27,125 as the assessee's income. The assessee took a position before the Assessing Officer that the stock figures given to the bank were inflated with the view to obtain maximum credit facilities and that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is guilty of concealment of income. Accordingly, he levied a penalty of Rs. 3,31,560 at 200 per cent of the tax sought to be evaded. 3. On appeal, the CIT(A) examined the matter in detail and held that it was highly probable that the assessee did furnish inflated stock figure to the bank since she enjoys a cash credit limit of Rs. 4,00,000, whereas the actual stock was only Rs. 3,12,000. He also noticed that in several judgments, including the judgment of the Hon'ble Bombay High Court in the case of CIT v. M. Bhuta & Co. [1976] 103 ITR 183, the explanation of the assessee that the normal trade practice is to inflate the figures of stock submitted to the bank has been accepted both for assessment and for penalty purposes. He also took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is that in these circumstances, the Assessing Officer rightly imposed the penalty. 5. On the other hand, the learned counsel for the assessee submitted that the assessee did not receive any order for school bags after August, 1996, and that there was no sale after January, 1997. The normal trade practice is to inflate the stock figure given to the bank with a view to obtain the higher credit facilities. It was pointed out that in the present case though in the books stock of raw materials was Rs. 3,12,000, the assessee had shown raw materials of only Rs. 1,12,050 to the bank and it was only in the case of finished goods that she had shown Rs. 4,27,125 to the bank as against nil stock in the books. It was submitted that the finding of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the explanation was not made bona fide and that the assessee did not place all the facts material to the computation of the income before the Assessing Officer. On the basis of these submissions, the learned counsel for the assessee pleaded that the order of the CIT(A) should be confirmed. 6. On a careful consideration of the matter. I am of the view that the decision taken by the CIT(A) does not require any interference. The Assessing Officer did not say that the assessee cannot furnish any details regarding stock in the course of the penalty proceedings. He has stated that the details are false and fabricated. These are very serious charges and merely because these details were not produced before the Assessing Officer in the cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade practice generally adopted by businessmen, as has been referred to in the several authorities cited at p. 2 of the compilation of judgments filed before him. The assessee's explanation cannot be said to be mala fide because there is no evidence to show that the bank staff had checked the stock figure furnished by the assessee at Rs. 5,39,175 and found the same to be false or incorrect. In fact, the assessment order itself records the fact that the stock statement as on 31st March, 1997, was given to the bank only in October, 1997, and this means that the bank staff could not have got it verified in the month of March itself. In my view, all the three conditions required for invoking Explanation 1(B) below to section 271(1)(c) should be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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