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TMI Blog2020 (5) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and that the minor difference in this respect was required to be ignored. - Decided against revenue. - ITA No. 840/CHD/ 2017 - - - Dated:- 27-2-2020 - SHRI SANJAY GARG AND MS . ANNAPURNA GUPTA For the Appellant : Shri Deepak Aggarwal Shri Sanjay Goyal, CA For the Respondent : Shri P.K. Sharma, Addl. CIT ORDER SANJAY GARG, J. The present appeal has been preferred by the Revenue against the order dated 24.4.2017 of the Commissioner of Income Tax (Appeals), Patiala [hereinafter refer red to as CIT (A) ]. 2. The Revenue in this appeal has taken following grounds of appeal : - 1. In the facts and circumstances of the case, whether the Ld. CIT(A) was correct in deleting the addition made by the Assessing Officer on account of difference in Stock as per stock statement filed before Bank and as per books, even when the assessee never denied the authenticity of stock statement filed before the Bank authorities. 2. It is prayed that the order of Ld. CIT(A) be sent aside and that of the AO be restored. 3. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed off. 3. The brief fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inished product of 297550.00 Qtl. (after shortage). In quantity terms the shortage was 11136 quintals i.e. 3.61%. The difference in quantity in stock as per Balance Sheet and as per stock statement is also 10753 quintal which is almost similar to the quantity lost in production. However, the Assessing Officer did not get satisfied with the above reply of the assessee. He further called upon the Manager of the bank and recorded his statement u/ s 131 of the Income Tax Act, 1961. After considering the statement of the bank Manager, the Assessing Officer noted that the stock statement given to the bank being duly signed and verified by the assessee carried the presumption of truth and the assessee was bound with the same. He further observed that since there was a difference of ₹ 1,81,57,649/- between the stock statement given to the bank and the stock statement recorded in the books of account, he, therefore, made the addition of the aforesaid amount by invoking the provisions of section 69 of the Act. 4. Being aggrieved by the above order of the Assessing Officer, the assessee preferred appeal before the Ld. CIT (A). However, the Ld. CIT (A) deleted the additions so ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance sheet. Similarly the value of closing stock as submitted to the bank was at ₹ 332.70 Lacs and as declared in the balance sheet at ₹ 183.70 . Thus, there was a difference of ₹ 149.0 Lacs in the valuation of closing stock as well. It bears no reiteration that the method of accounting followed for valuation of closing stocks should be applied in respect J of the valuation of the opening stock also. The appellant company furnished estimated figures of stock to the bank to avail higher drawing power and it has no relevance with the actual stockholding of the company. In his deposition before the A O, the bank officer stated that the stock is to be physically verified as per bank guidelines and that the authorities can inspect the stock and surprise visit. He also confirmed the authenticity of stock statement and list of sundry debtors submitted by the appellant company as per bank record. However, at the time of his cross- examination by the counsel of the appellant, the same officer stated that there was no fixed time schedule for vising the visiting the premises to get the physical verification of stock and that the physical verification is done at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT versus Sanspareils Greenlands Private Limited (2013) 85 CCH 0113 (All.), the Hon'ble Allahabad High Court has held that the stock position reflected in the properly maintained books of account should be taken as correct and not the one reflected in the statement submitted to the bank for availing higher drawing power. In the present case the AO has not adversely commented on the maintenance of books. These have, in fact, been accepted by him. He did not give any adverse finding regarding purchases and sales. In the absence of any finding with regard to any unrecorded transaction in respect of purchases and sales, the action of the AO in holding that the stock statement furnished to the bank for availing higher limit reflects the true stock position cannot be upheld. Consequently the addition of ₹ 1,81,57,649/- on that count is not sustainable. Accordingly, the same is ordered to be deleted. Hence, this ground of appeal is allowed. 5. Being aggrieved by the aforesaid order of the Assessing Officer the Revenue has come in appeal before us. 6. We have heard the rival contentions of the Ld. Authorized Representatives of both the parties. 7. The L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-2015 during the cross examination it was admitted that yes I had truly stated that after receipt of stock statement from the party. The stock is to be physically verified and the stock statement furnish by the party was treated as true and correct. Thus the actual availability of stock with the assessee in terms of quantity and amount was supported by statements submitted to the Bank by the assessee and admitted by the Bank Manager in his statement. The assessee is as an afterthought making an unsuccessful attempt to cover up the discrepancy in the quantity of stock as brought out by the AO in the assessment order. 4. The assessee relied on case law ITO Vs Devi Dayal Rice Mills (2002) 75 TTJ 0024 dated 12th November, 2001. It is submitted that there is little difference between hypothecation and pledge as both involves creation of charge on the stock. Which in pledge the possession of the stock is with the bank, whereas in hypothecation the possession remains with the client. In both cases the stock statement has to be true and correct and the onus of the assessee is not relaxed because the stock is hypothecated. 5. The facts of the case are also similar to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books the shortage at the end of the financial year i.e. 31 st March of every year. The Ld. Counsel in this respect has relied upon the table of yield chart for five years. The Ld. Counsel has further submitted that after claiming the shortage occurred in the manufacturing process, there would remain no / negligible difference in the stock statement. The Ld. Counsel has further submitted that even there was difference in the opening stock as given in the bank statement as compared with the balance sheet. The Assessing Officer though has taken the difference between the closing stock, however, ignored the difference between the opening stock. After the credit of opening stock is given to the assessee, the resultant difference will be negligible. The relevant part of the submissions made by the assessee in this respect is reproduced as under:- The grounds of challenge on behalf of the assessee can be summarized as under: a. The addition was made without rejection of books of accounts and the addition was made which will ultimate affected on manufacturing account and gross profit earned. b. The Ld AO failed to consider the wastage of 3.61 % booked on material consumed duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egligible, the said fact is further fortified by the Ld. CIT(A) who has recorded a categorical finding, at Page 10 Para Top, on this aspect which reads as under: In the case of the appellant if its explanation that the difference in quantity of stock was due to wastage shown at 3.61 % in bank statement is considered, than only negligible difference remains. Further, the value of stock (as per stock statement given to the lending bank) after allowing shortage as per yield chart (TABLE A), showing that the difference remains negligible, is as under: TABLE B PARTICULARS (AY 2012-13) AMOUNT Rs. In Lakhs Stock as per Stock Statement dated 28.03.2011 given to the lending Bank 313.81 Less: Shortage to be booked on 31.03.2011 as per regularly accepted accounting policy) (3.61 % of Material Consumed (yield)) calculated in Table C 150.74 Resultant Figure of stock on 31.03.2011 (after reducing shortage from the Stock as on 28.03.2011) 163.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the course of assessment proceedings when failed to made any addition, called for the Stock Statement from the Bank, and without even looking into the items of stock made the impugned High Pitched assessment on presumptions conjectures and surmises. It is important to mention here that the difference calculated by the Ld. A.O. was with respect to the Closing Stock, whereas forgot to appreciate that there is a difference in the Opening Stock also, considering the same there becomes negligible difference, the Table showing difference in opening stock and closing stock is as under: TABLE D PARTICULARS (AY 2012-13) AMOUNT Rs. In Lakhs OPENING STOCK AS PER BANK STATEMENT 313.81 OPENING STOCK AS PER BALANCE SHEET 169.49 DIFF. IN OPENING STOCK 144.32 CLOSING STOCK AS PER BANK STATEMENT 332.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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