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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 ..... disregarding the fact 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 ..... d 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 same has been considered while computing the total income. 4.1 Consequent on adopting the closing stock in the trading account, the value of closing stock should have been reflected in the balance sheet under the head "CURRENT ASSET". Accordingly, excess of asset over liability is worked out as under: Closing stock not reflected in the Balance Sheet : Rs.35, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 correct. 9. With regard to the recasted books of accounts filed by the assessee, the ld. CIT(Appeals) was of the view that the recasted balance sheet could not be believed. Thereafter, the ld. CIT(A) held as follows:- "17. The appellant's alternative argument is that if the closing stock shown to the bank as on 31.3.2004 is treated as genuine, then the closing stock shown to the same bank as on 31.3.2003 should also be treated as genuine and actual. It may be mentioned here that the appellant had shown the closing stock at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted 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 2003-04 which ultimately got reflected in the closing stock as on 31.3.2003 would be taxable in the appellant's hands as unexplained expenditure/investment u/s 69(3) of the Act. This type of unexplained expenditure cannot be allowed as a deduction as per the explanation to section 60C. Therefore, even if we assume that the unaccounted closing stock amounting to ₹ 16,49,910 added during the current asst. year was out of the unexplained purchases and closing stock of the earlier year, the same cannot be allowed as an expenditure. 20. On the facts of the case also, I find that the appellant's claim of set off for the unaccounted opening stock as on 31.3.2003 is totally unwarranted. The cash deposits in OD account have been explained by the appellant to be out of the sale proceeds of earlier unaccounted stock. No separate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties 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., Admissions are not conclusive and that it is open to the person who made an admission to show that it was not true or that it was made under a mistake. On the above aspect, we are in agreement with the findings of the CIT(A) that the closing stock declared to the Bank by the Assessee cannot be disregarded as not true. We are also in agreement with the findings of the CIT(A) that the Assessee failed to show facts or circumstances which would go to show that the closing stock declared to the Bank by the Assessee was false. Therefore we proceed to examine the alternative claim made by the Assessee before CIT(A). 13. Before we examine the alternative claim of the Assessee, we feel that it would be appropriate to narrow down the provision of law that would be applicable to the facts and circumstances of the case. In our view the provisions of Sec.69-C of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 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 the same bank as on 31.3.2003 should also be treated as genuine and actual. The Assessee had shown the closing stock at ₹ 43,65,075 as on 31.3.2003 to the bank and the closing stock shown to the Bank as on 31.3.2004 was ₹ 35,74,910/-. In such circumstances, as per the Assessee, there will be no net addition because the debit on account of excess opening stock shown to the bank will be higher than the credit on account of the excess closing stock. In other words, as per the assessee if there is any unexplained investment in closing stock, the same actually pertains to the previous financial year relevant to the asst. year 2003-04. On this claim of the Assessee, the CIT(A), agreed with the Assessee in para-17 and 18 of his order. In para- 19 of his order, the CIT(A) did not give such credit for the reason that closing stock of the value of ₹ 16,49,910/- ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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., the difference between the opening stock as on 31.3.2004 and 31.3.2005 was made. A further addition of ₹ 30,27,389 being the difference between the value of stock as on 31.3.2005 as indicated in the stock statement filed by the Assessee with the bank and balance of amount due to the said bank as on that date was also made. This was deleted by the CIT(A) because addition on account of closing stock has already been confirmed and therefore sustaining the addition of ₹ 30,27,389/- would amount to making double addition. The learned counsel for the Assessee on the basis of the said finding of CIT(A) has argued before us that the impugned addition in this appeal should also be deleted. We are unable to agree with the submissions of the learned counsel for the Assessee. As we have already observed, as far as this Assessment year is concerned the only addition is with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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