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TMI Blog2001 (11) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... come. 2. The learned CIT(A) has grossly erred in allowing the assessee's appeal. He has accorded recognition to a substandard morality on the part of the assessee to say that the higher stock had been shown with a view to obtaining higher credit facility. He has set an unhealthy judicial predecent when he held that no adverse inference can be drawn of his statement duly verified by a person. It may further be submitted that admittedly, there is cleavage in the judicial opinion on the point but preponderance on the judicial opinion is in favour of the Revenue. But the assessee's case is marked by distinction as in its case, the difference in valuation is due to the difference in the quantity of stock as shown to the bank and to the Department and not due to difference in the valuation shown to the bank and to the Department of the same stock. There is no judgment of any High Court in favour of the assessee where the difference had been found in the quantity of stock shown to the bank and to the Department. 3. It is prayed that the order of the learned CIT(A) may be vacated and that of the AO be restored. 4. That the appellant craves leave to add or amend the grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a hypothecation of the stocks with the bank and the stock shown during the year 1989-90 was not physically verified. It was explained that practice of declaring higher stock to the bank was purely for the purpose of getting higher loan and availing higher cash credit limit for the purpose of business. The assessee also submitted before the learned CIT(A) that the explanation and the evidence produced at the time of assessment was not countered and no defect was found in the books of account. The reliance was also placed on the various judgments mentioned in the order of the learned CIT(A). After considering the submissions of the assessee, the learned CIT(A) observed that the stock as disclosed to the bank could not be compared with the actual stock, since the purposes for the disclosure of stock to the bank was to get higher cash credit limit, and the same cannot be made the basis for the rejection of books of account resulting into an addition. It was further observed that the addition could have been made on that ground only if there were defects and discrepancies in the books of account or the G.P. declared by the assessee was considerably low. The learned CIT(A) further obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Departmental Representative strongly supported the order of the AO and also submitted that the assessee verified the stock statements submitted to the bank so it cannot be said that it was not in possession of the higher stock. Therefore, the AO was justified in making the addition and the learned CIT(A) without appreciating the facts was not justified in deleting the addition. 9. We have heard both the parties and carefully gone through the material available on the record. In the instant case, it appears that the AO made the addition only on the basis of the stock statements submitted to the bank. In the instant case, it is noticed that the contention of the assessee that the stock statement furnished to the bank was inflated and that statement also included the stock of the agriculturists lying in the godown of the assessee was not controverted by the AO. It is well settled that there is a real difference between pledging and hypothecation because in the case of the pledging, the goods remain under the lock and key of the bank and, therefore, are liable to be physically checked and examined but in the case of the hypothecation such goods remain in the custody of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Tribunal was a pure finding of fact and the deletion of the amount added by the ITO on account of discrepancy in accounts regarding stock was justified." In the case of CIT vs. Vighyan Chemicals Industries, the Hon'ble Allahabad High Court observed as under: "That the Tribunal had accepted the explanation furnished by the assessee that the part of the stock pledged with the bank was that of the third party. The Tribunal having believed the version of the assessee and the evidence placed before it, in our opinion, it again does not give rise to any question of law." In the case of CIT vs. Gopal Rice, the Hon'ble Allahabad High Court held as under: "The assessee, a registered firm, was engaged in the business of running a rice mill. The stock of paddy was shown as 4,459 quintals in the statement sent to the bank whereas in the levy register only 2,569 quintals were recorded. The amount of Rs. 3,78,270 attributable to this difference was assessed as income from unexplained investment. The appellate authority concluded that the inspection made by the officers of the Regional Food Controller was more thorough and constituted a better evidence than the inspection, if an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts order dt. 26th March, 1998, held that: "Where goods were hypothecated with banks and not pledged and stock statements submitted to the bank were on estimate basis, AO cannot make addition under s. 69 on the basis of higher value shown in those statements than stock declared in books. It is also relevant to point out that one of the Members of this constitution is also the author of the decision reported at (2000) 66 TTJ (Ahd) 199 in the case of ITO vs. Jagdip Kanjibhai. So by respectfully following the aforesaid decision of the Ahmedabad 'C' Bench of Tribunal and also keeping in view the various judgments reproduced hereinabove and also keeping in view the totality of the facts and circumstances of the present case as discussed above, we are of the considered view that no addition was called for and, therefore, we set aside the order of the learned CIT(A) in sustaining the addition of Rs. 50,000. Accordingly, the whole of the addition made by the AO on account of difference in the stock on the basis of stock statements furnished to the bank and as shown in the books of account is deleted. 10. In the result, the appeal of the Department is dismissed and that of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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