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TMI Blog2012 (8) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Appellant did not hold the alleged stocks declared to the Bank. 4. The impugned addition of ₹ 35,74,910/- is made u/s 69B disregarding the fact that ₹ 25,20,239.88 borrowed from Canara Bank towards the Overdraft Account as at 31.3.2004 is an available source for the alleged unexplained investment. 5. The impugned addition of ₹ 35,74,910/- is made u/s 69B of the Act without taking in to cognizance of the Stock of ₹ 43,65,075/- as at 31 .3.2003 shown to the Canara Bank. 6. The impugned addition of ₹ 35,74,910/- is made u/s 69B with complete disregard to the facts of the case and to the provisions of the Income Tax Act 7. That the impugned levy of interest of ₹ 5,35,965/- u/s 234B is liable to set aside in so far as the appellant is not liable there for. 8. That the impugned levy of interest of ₹ 777/- u/s 234C is liable to set aside in so far as the appellant is not liable there for. 3. The assessee is an individual who is engaged in the business of trading in coffee under the name style, M/s. Prime Commodities at Somwarpet. For the A.Y. 2004-05, the assessee had filed a return of income declaring an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He held as follows:- 3.5 The assessee failed to substantiate that there is no stock as at 31/03/2004 and 31/03/2005. Further, considering the stock statement given to Canara Bank for the above periods, I hereby recast the trading account for A.Y. 2004-05 is as under: RECASTED TRADING ACCOUNT To Opening Stock 43,65,075 By Sales 8,90,17,500 Purchases 8,71,49,496 Closing Stock 35,74,910 Gross profit 10,77,839 --------------- 9,25,92,410 -------------- 9,25,92,410 3.6 As could be seen from the recasted trading account, the gross profit arrived at ₹ 10,77,839/- whereas, the gross profit declared by the assessee in the return of income is at ₹ 18,68,003/-. Thus there is a difference of 7,90,164/-. The difference arrived at ₹ 7,90,194/- is the excess GP declared in the trading account and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock given to the bank was not true. This is because giving any such affidavit would expose him to action by the bank. Thereafter, the ld. CIT(A) distinguished all the case laws relied upon by the assessee which were to the effect that the addition cannot be made on the basis of stock statement given to the bank. According to the ld. CIT(A), the assessee s books of account were not true and reliable and therefore the veracity of the claim made in the books of accounts cannot be believed. He held that in the decisions cited by the ld. counsel for the assessee, books of account were not found to be incorrect and therefore the addition made on the basis of stock statement given to the bank was deleted. The ld. CIT(A) also relied on the decision of the Pune Bench of the ITAT in the case of Mak Texttchem Products 83 ITD 96 (Pune), wherein the Pune Bench expressed the opinion that the burden of proving that stock statement given to the bank was false was heavy on the assessee. Following the said judicial pronouncement, the ld. CIT(A) was of the view that the assessee had not established that the closing stock shown in the books was correct and that the one given to the bank was not cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,50,000 Ac Nil 9,60,000 RC 24,75,000 6,75,000 RC EPC-80 Nil 6,89,910 Thus, it can be seen from the comparison of the closing stock as on 31.3.2003 and 31.3.2004 that the same stock had not been carried forward. The closing stock of AC is shown to be Nil as on 31.3.2003 whereas the same is shown to be 800 bags worth ₹ 9,60,000 on 31.03.2004. Similarly, 22620 Kgs of RC(Bu) stock worth ₹ 6,89,910 is shown only on 31.3.2004. The same was Nil as on 31.3.2003. This stock can safely be presumed to be out of the purchases made during the previous year. The appellant has argued that these purchases would be out of the unaccounted closing stock shown as on 31.3.2003. Even if this argument is accepted hypothetically, it has to be admitted that the unaccounted closing stock as on 31.3.2003 itself was out of unaccounted purchases of that year. The closing stock given to Canara bank has not been accounted for in any of the asst. years. The unaccounted purchases made in the asst. year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed credit for the unaccounted liability in the form of outstanding balance in the OD account with the Canara bank. The issues is actually not relevant because the outstanding in this account was ₹ 25,73,678 as on 31.3.2003 and ₹ 25,20,239 as on 31.3.2004. The appellant has not produced any proof that there were any new borrowings during the relevant previous year. 10. Aggrieved by the order of ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal. 11. The submission of the learned counsel for the Assessee was identical to the submissions as were made before the CIT(A). The learned DR relied on the order of the CIT(A). 12. We have considered the rival submissions. The law with regard to making addition on the basis of stock statement given to the Bank to the Assessee in connection with credit facilities availed may be summed up as follows. The stock statement given to the Bank is not conclusive and the burden is on the Assessee to show that stock statement given to the bank was not correct and that the stock position as reflected in the books of accounts of the Assessee is true. The legal position with regard to admission viz., Admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of the Assessee. The appropriate section that would apply in our view is Sec.69A of the Act, which is as follows: 69A. Unexplained money, etc.- -Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. The scope of the provisions of Sec.69C and 69A of the Act are different and therefore the appropriate provision that would apply to the present case of the Assessee assumes importance. 14. The first alternative claim of the Assessee before the CIT(A) was that if the closing stock shown to the bank as on 31.3.2004 is treated as genuine, then the closing stock shown to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This stock of the value of ₹ 16,49,910/- is also lying in closing stock and cannot be ignored. Therefore the recasting of the trading account done by the AO cannot be disturbed. The closing stock as on 31.3.2004 has to be ascertained as that will be the opening stock as on 1.4.2004 relevant for AY 05-06. The computation of total income has to be made in accordance with law and the fact that the Assessee has availed of a benefit available to him in law cannot be the reason to disallow a legitimate claim of Assessee for set off. 15. In our view, the proper way to work out the quantum of addition that ought to be made in the given facts and circumstances of the case would be to consider closing stock as on 31.3.2004 of ₹ 19,25,000/- as explained from and out of the opening stock on 31.3.2003. The remaining sum of ₹ 16,49,910 stands unexplained and an addition u/s.69A of the said sum would be just and proper. 16. Another submission of the learned counsel for the Assessee was that in AY 05-06 as per the stock statement given to the bank the closing stock was ₹ 51,70,000 as on 31.3.2005 and in that year also an addition on account of unexplained stock viz., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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