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TMI Blog2015 (8) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... ter hearing both parties we find that during assessment proceedings the Assessing Officer noticed that the assessee has taken a limit from the bank, therefore, he obtained information under section 133(6) from Allahabad Bank, Ludhiana regarding the stock which was supplied by the bank. In the said stock statement the value of the stock as on September 30, 2007 was shown at Rs. 76,60,229. It seems the Assessing Officer had asked the assessee to prepare chart showing monthly purchases and sales and position of stock at the end of every month. From that chart it was seen that the assessee had shown stock of Rs. 63,53,283 on September 30, 2007 and, therefore, there was a variation of Rs. 13,06,946. In response to query, no reply was filed and it was only conceded that this was done for obtaining higher loans. The Assessing Officer did not find any force in these contentions and observed that the assessee had made investment in unexplained stock. He further observed that this observation was supported by the view of the hon'ble Punjab and Haryana High Court in the case of B. T. Steels Ltd. v. CIT in I. T. A. No. 186 of 2004 dated October 6, 2010. 4. On appeal, it was mainly submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord. The two documents on the basis of which the difference of Rs. 13,06,946 was worked out by the Assessing Officer were also perused by me. These documents are : (i) Copy of the stock statement given to the bank as on September 30, 2007. (ii) Copy of the stock as per the books of account filed by the appellant before the Assessing Officer. Copies of both these documents are enclosed with this order as annexures A-1 and A-2. 3.4 It is seen from both these documents that both the aforesaid statement were prepared on an estimated basis and none of the two documents reflected the actual physical inventory of stock drawn on September 30, 2007. 3.5 It is seen from the stock statement submitted to the bank which has been enclosed as annexure A-1 to this order that the stock at Doraha lying with the appellant was valued at the uniform rate of Rs. 11,500 per cubic meter and the stock at Gandhi Dham was valued at a uniform rate of Rs. 11,980 per cubic meter. The appellant is trading in timber and the value of stock of timber at any point of time cannot be uniform for all the stock items. The stock normally comprises number of items and the stock of each of the items would depen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of the appellant was not correct. This is by itself, however, could not be the basis for making the addition under section 69 of the Income-tax Act. From the two documents referred to above it is evident that no difference in the quantitative tally of the stock lying with the appellant as on September 30, 2007 can be established. 3.9 Whether difference in stock statement given to the bank and the stock as per the books of account can be added as total income of the assessee under section 69 of the Income-tax Act would depend upon the facts of each case. There are a number of judicial pronouncement on this issue. The appellant has referred to a number of decisions where it has been held that the addition to the total income on account of difference in stock statement given to the bank and the stock as per the books of account was not justified. The Assessing Officer has referred to the decision of the hon'ble Punjab and Haryana High Court in the case of B. T. Steels Ltd. v. CIT [2010] 328 ITR 471 (P&H) where it has been held that the addition to the total income on account of difference in stock statement given to the bank and the stock as per the books of account was just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for. As observed earlier the assessee has merely given statement of monthly stock on the basis of a rough estimate by incorporating monthly purchases and sales and, therefore, that statement cannot be made the basis of addition. If there was a difference in stock, the differences should have been ascertained as at the end of the year then possibly the Assessing Officer could have made addition which has not been done. Therefore, we find nothing wrong with the order of the Commissioner of Income-tax (Appeals) and we confirm the same. 12. Ground No. 2 : After hearing both parties we find that during the assessment proceedings the Assessing Officer noticed that the assessee has shown a debtor in the balance-sheet in the name of Vihor Sood and Bros. amounting to Rs. 8,58,380. It was further noticed that during the year there was no movement in the account. When this issued was raised by the Assessing Officer, it was submitted that this account pertain to a firm where one Smt. Kiran Sood is also a partner who had given unsecured loans to the assessee-firm and that is why no interest has been charged. However, the Assessing Officer did not agree with these submissions because the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,58,380 from the proprietary concern of Smt. Kiran Sood on which no interest had been charged by the appellant and the appellant had to pay Rs. 10 lakhs to Smt. Kiran Sood on which no interest had been paid by the appellant. 5.3 Keeping in view the aforesaid facts, there being commercial expediency in the transaction of debit balance and there being interest-free advance received from Smt. Kiran Sood of an amount higher than amount outstanding, there was no justification in disallowing the proportionate expenditure out of interest expenditure claimed by the appellant. The addition made by the Assessing Officer is accord ingly deleted. This ground of appeal is allowed." 17. In our opinion the learned Commissioner of Income-tax (Appeals) has correctly noted the fact that once it is a case of sale then even if the amount has not been received it cannot be construed as a case of diversion of funds. In any case one of the partner of M/s. Vibhor Sood and Bros., i.e., Smt. Kiran Sood has also given a loan of Rs. 10 lakhs to the assessee-firm. Therefore, we find nothing wrong with the order of the learned Commissioner of Income-tax (Appeals) and we confirm the same. 18. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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