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TMI Blog2013 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... st expenses - CIT (A) deleted the addition - Held that:- CIT (A) gave a finding that Shri Jayantibhai Maniar was the son of another partner and was also an employee of the firm. The A.O. has made an addition as the assessee had advanced interest free loan out of the interest bearing funds. The advance given by the firm was for the business expediency. In favour of assessee. - ITA No 2319/Ahd/2009 - - - Dated:- 15-2-2013 - Shri G. C. Gupta And Shri Anil Chaturvedi, A.M.,JJ. Mr. Rahul kumar, Sr.D.R. Mr. S. N. Soparkar,Sr.Adv. ORDER This appeal is filed by the Revenue against the order of Ld. CIT (A)- XX, Ahmedabad dated 9-6-2009 for the assessment year 2006-07. 2. The assessee is a firm engaged in the business of diesel engines, gear box, spare parts of diesel engines and steel on wholesale/retail basis particularly with the manufacturer of three wheelers. The assessee filed its return of income on 26-12-2006 declaring total loss of Rs. 17,609/-.The case was selected for scrutiny and vide order dated 23-12-2008 assessment was framed u/s. 143(3) of the Act and total income was determined at Rs.30,97,670/- by making various additions/disallowances. Aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On verification of the stock statement that was submitted by the assessee to Bank A.O. noticed that physical verification of stock was carried out by Bank on 22-3-2006 and the value of stock of godown as admitted by the partner of the assessee firm on the date of verification was Rs.34,03,218/-. A.O. further observed that in the statement of stock of hypothecated goods as on 31-3-2006, the assessee has shown the value of stock at Rs.39,97,454/- but the value of closing stock shown in the assessee's balance sheet as on 31-3-2006 was only Rs.9,04,838/-. The assessee's explanation with respect to the difference in stock between the books and as shown to the Bank was that on account of the weak financial position of the firm and in order to obtain bank finance, excess stock was shown and declared to the Bank. The submissions of the assessee were not found acceptable to the A.O. He thus, determined the difference in the value of stock of Rs.30,92,616/- (Rs.39,97,754 less Rs. 9,04,838) which according to the A.O. was unaccounted stock as on 31-3- 2006. He accordingly concluded that the assessee was in possession of undisclosed stock of Rs.30,92,616/- as on 31-3-2006 which was shown to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2. Thus considering the fact that the appellant has been maintaining books of account according to recognized accounting principle in the ordinary course of its business. Thus, entries so made carry with them presumption of truth unless proved otherwise. If it came to the notice of A.O. that excess stock has been shown to the bank even in terms of quantity, then ipso facto addition should not be the result. It is also fact that the appellant's stock was hypothecated and not pledged. In the case of pledge, stock remains under the lock and key of the bank authorities; whereas in the case of hypothecation, such goods remain in the custody of the assessee. The Hon'ble ITAT Ahmedabad Bench in the case of ITO vs. Mapin Publishing (P) Ltd. 96 TTJ (Ahd) 990 supports the above finding. Therefore, this make shift arrangement is nothing but a business exigency and cannot be termed as an offence, particularly when the benefit of such an arrangement is quite known and very limited. Hence, in the absence of any evidence revealing appellant's involvement in making unexplained purchases in investment, the addition made merely on the basis of a bank statement cannot be upheld. As such, the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the bank cannot be compared with the stock as on the balance sheet date for the reason that in the stock statement submitted to the bank, assessee has disclosed the stock in Kilograms whereas in the closing stock statement which was part of tax audit report and copy of which was placed at page 17 of paper book, the quantity was in numbers. He further placed reliance on the decision of Gujarat High Court in the case of CIT vs. Arrow Exim (P) Ltd., (2010) 230 CTR 293 (Guj.),CIT vs. N. Swamy (2000) 241 ITR 363 (Mad.) and the decision of Rajasthan High Court in the case of CIT vs. Relaxo Footwear 259 ITR 744 (Raj.). He thus, supported the order of CIT (A). 13. We have heard the rival submissions and perused the material on record. It is an undisputed fact that physical verification of stock was carried out by the Bank on 22-3-2006 and further as admitted by the partner of the firm the value of the stock on the date of verification was Rs.34,03,218/-. As per the statement of hypothecated stock as on 31-3-2006 that was submitted to bank, the value of stock was stated to be Rs. 39,97,454/- but the value of stock as per balance sheet was stated to be Rs.9,04,838/-. Before us the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A), as same is against the settled position of law. The assessee is required to explain its stock position, however, there may be difference in valuation but here the contention of the assessee is that before bank valuation of stock was based on the weight is incorrect. No material has been brought on record before us to substantiate that the limit granted by bank to assessee were fully exhausted. Further the observation of the CIT (A) that the declaration of higher stock to bank is out of business expediency and not an offence is not supported by any material on record. In view of these facts, in the present case, we therefore, feel that to meet the ends of justice the matter should once again be examined by the A.O. and he should bring on record the correct factual position that whether the sales made by assessee is on the basis of weight or numbers, whether the stock submitted to the Bank was in Kgs. or in numbers and whether the assessee has been submitting higher stock figures as compared to its book stock to bank in the past and for earlier months in the year under appeal. We therefore, remit the issue to the file of A.O. with a direction to him to decide the matter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A), Revenue is now in appeal before us. 17. Before us the Ld. D.R. relied on the order of the A.O. and also placed reliance on the decision of Delhi High Court in the case of Punjab Stainless Steel Industries vs. CIT 324 ITR 396, the Ld. A.R. on the other hand submitted that the funds were give for the purpose of business as Shri Jayantibhai Maniar was also an employee of the firm and functioning as a Manager. He thus supported the order of CIT (A). 18. We have heard the rival submissions and perused the material on record. We find that CIT (A) while deleting the addition has given finding that Shri Jayantibhai Maniar was the son of another partner and was also an employee of the firm. The A.O. has made an addition as the assessee had advanced interest free loan out of the interest bearing funds. The advance given by the firm was for the business expediency. These facts could not be controverted by the Revenue by bringing any material on record. In the case of Punjab Stainless Steel Industries (supra) the facts were "that the assessee did not claim before the A.O., that the advances were actuated by way of commercial expediency. The plea of commercial expediency was not set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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