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TMI Blog2010 (11) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is void and should be cancelled. 3. It is contended that the Assessing Officer should have reason to believe and not reason to suspect that any income chargeable to tax has escaped assessment. No such evidence is available on record for drawing such inference. Therefore, the reassessment proceedings are void ab initio and deserves to be cancelled. 4. Without prejudice to above ground the CIT (A) has erred in confirming the addition of Rs.11.39 crores on account of alleged difference in reporting of closing stock of sugar in the Central Bank of India, Basti (UP) by the Assessing Officer is only on surmises conjectures and should be deleted. 5. The Ld. CIT (A) as well as the Assessing Officer has failed to appreciate that the closing stock as reflected in the books of accounts of the assessee is duly supported by GRI Form of Excise Records. Further, it was also submitted that the entire production of sugar is duly supported by R.T. 7 of the Central Excise records which shows the entire sugar stock produced by the company during the season. The accounts are duly audited by the statutory auditors certifying the quantitative details. All these positive eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adopted a different method of keeping accounts or valuation. The following reconciliation produced before the Assessing Officer was discarded on the ground that it is an attempt to reconcile the difference:- "- Sugar 398125 bags Rs.5,453.15 lakhs* - Spares and Stores 315.66 lakhs - Gunny bags 32 Bales 3.71 lakhs Rs.5,772.53 lakhs *value of 310934 qtls. (398125 bags) x cost of production Rs.1673.65 Ps (As per Cost Audit Report dated 3.9.2002 copy enclosed) - 5203.95 lakhs). c) Reason for differences: The reasons for differences between both above figures is only Rs.249.20 lakhs (5453.15 lakhs - 5203.95 lakhs) is because of the following two reasons: i) Sales made and cheque deposited on 30th March and 31st March, 1999 worth Rs.115.73 lakhs (because the banker will give credit only when the cheque/DD will be realized after 3 working days), and ii) Estimation of actual cost of production on daily basis (especially on 31.3.99) worth Rs.133.47 lakhs." 3. The Assessing Officer observed that the assessee has supported the closing stock shown in the books of account on the basis of method of accounting and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d along with the return. It was submitted that it was explained to the Assessing Officer that the previous management for whatever reason, has given a wrong statement to bank in order to avail higher drawing facility. It was submitted that the present management should not be penalized for wrong statement made by the previous management. Reference was made to the decision of Hon'ble Madras High Court in the case of CIT vs. APCOM Computers Pvt. Ltd. 292 ITR 630 (Mad) to contend that an addition on account of difference in stock could be made only on adequate materials, but not arbitrarily. Even if there was difference between the value of closing stock declared to the bank and the income-tax authorities, there being no dispute that the assessee was maintaining books of account on day-to-day production and the assessee has taken actual physical stock for the purpose of declaring closing stock to the income-tax authorities. The sales and purchases were supported by vouchers and the Assessing Officer did not point out any suppression of sale or purchase. Referring to those observations, it was submitted that in the case of the assessee, the revenue has not been able to prove that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his argument which, for the sake of convenience, are reproduced below:- "Synopsis of the Company's Contentions and Arguments on merits. 1. The A.O. has relied on the finished stock statement given by the Central Bank of India (Bank) as on 31.03.1999 which states that the company has the Closing Stock of 398,125 Quintals (Qtls.) (which is at page no.119 of the paper book). The Bank has also provided the Finished Stock statement of the company's stock as on 31.03.1998 which automatically becomes the opening stock for the A.Y. 1999-2000 and it shows that the opening stock for the relevant assessment year was 471,488 Qtls. (which is at page No.120 of the paper book). If the finished Stock statement of the bank as on 31.03.1999 is be considered over and above the company's audited accounts then the Finished Stock statement of the Bank as on 31.03.1998 will also has to be considered while making/confirming any addition. The opening stock as per Bank was 471,488 Qtls whereas as per the Company's audited accounts, the opening stock was 384,300 Qtls. Only. Hence, if the company's closing stock is more by 87,211 Qtls. (i.e., 398,125 - closing stock as per company's books 310,934), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r year sugar 89,201 Page No.10 of the paper book 316,348 Less: BISS sugar of previous year 1998-99 2,164 Page No.11 of the paper book 1997-98 3,250 Page No.128 of the paper book 5,414 Total stock as declared in the Balance Sheet 310,934. Hence, the company's entire closing stock is reconciled with the Excise Records which is verified, confirmed and certified by the Excise Officials from time to time. 4. Every year the company is required to prepare its 'Final Manufacturing Reports' under the Excise Rules in Form R.T. - 8(C). Copy of this Form for the A.Y. 1999-2000 is submitted at page No.132 to 135 of the paper book. This yearly summary also states at Serial No.4 'Sugars' that the total sugar bags in quantity is 335,751 Qtls. and the same includes 2540 Qtls. of BISS (Below Indian Standard Sugar also called as Brown Sugar). Hence, the total finished sugar manufactured during the year is 333,211 Qtls (i.e., 335,751 Qtls. Less 2540 Qtls.) and the same tallies with Company's audited financial statements as stated in Point No.C-21 iii) of the 'No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book). (d) The entire stock of sugar of the season 1996-97 was Nil on 23.03.1999 (kindly refer to page No.122 to 126 of the paper book). Hence, it is not possible that the company is having finished stock of sugar of the season 1996-97 to the tune of 84,258 Qtls. as on 31.03.1998 and the same quantity as on 31.03.1999, as stated in the Bank Finished Stock Statement (kindly refer to page no.119 and 120 of the paper book). It is apparent that finished stock of sugar of the season 1996-97 to the tune of 84,258 Qtls. cannot exist as on 31.03.1999 and the Bank statements are wrong as confirmed by the Excise records duly verified, confirmed and certified by the Excise Inspector. Further, the finished stock of sugar for the season 1997-98 is 85,951 Qtls. As also confirmed by the Excise Records and not 88,884 Qtls as mentioned in the Bank Statement. Hence, the difference 2,933 Qtls is the non-existing stock of sugar. Hence, it proves that the total non-existing stock of sugar of 87,191 Qtls. (84,258 + 2,933) as appearing in the Bank statement is wrong and cannot be relied upon for making any addition on the company. Further, this non-existing stock also does not pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther to the Assessing Officer or CIT (A). The sum and substance of the argument of Ld. DR was that it is a case of pledge where the existence of the stock could not be denied by the assessee and the additional evidences sought to be submitted by the assessee are not to be admitted for the reason that despite having ample opportunity, the assessee did not submit the said evidence before the Assessing Officer and CIT (A). Even if it is considered for admission, it has no veracity as the main argument of the assessee is based upon the stock statement submitted to the bank as on 31st March, 1998 which is not even signed by the official of the company. Therefore, Ld. DR submitted that at the first instance, the order of the CIT (A) should be confirmed and in case the documents are considered as argued by Ld. AR, then, the matter should be restored back to CIT (A) with a direction to first examine the veracity of those documents and then to call for remand report, if any, from the Assessing Officer and then to decide the matter as there are no finding recorded by the CIT (A) as no such arguments were raised by the assessee before him. 11. We have carefully considered the rival su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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