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TMI Blog1981 (10) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... the draft order u/s. (1) of s. 144B to the assessee and ending with the date on which the ITO received the directions from the IAC u/sub-s. (4) of that section being more than 180 days and it being implicit in cl. (iv) of explanation I to s. 153 that the IAC will not take more than 180 days for issuing instructions to the ITO u/s. 144B(4), the assessment order is bad in law." However, he elected to address us on merits of the case and after hearing the arguments of the revenue did not press the additional grounds, though this happened towards the closing stage, we are changing the sequence and reject the additional grounds as not pressed. 3. The Assessee is a registered firm consisting of nine partners carrying on the business of gin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of kapas made by the assessee during the accounting period. In this way, he made an addition of Rs. 81,842. On the basis of the bank certificate alone, he also concluded that 271 qtls. of kapas had been purchased by the assessee from funds outside the books of A/C. 4. The assessee filed appeal against the above said addition. Before the CIT (A), as the first appellate authority, the assessee as also the department represented. The CIT (A) has reproduced the relevant portion of the assessment in his own order. At the appeal hearing the assessee produced another certificate from the Punjab National Bank which reads as under: "Punjab National Bank Ref.: Stock/78 To whom it may concern We hereby certify that M/s Jindal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced by the use of the word 'Pledge' appearing in the day-to-day stock reports prepared by the godown keeper of the assessee firm. For this reason the CIT(A) upheld the addition of Rs. 81,842. 5. We heared the parties at length and whereas for the assessee Sh. D.S. Gupta very effectively pointed out that the ITO and the CIT(A) did not appreciate the facts, Sh. R.S. Khichi very persistently read out the ITO's and the CIT(A)'s orders. 6. We have carefully gone through the two certified, particularly the statement of Sh. Bhatnagar, Officiating Manager of the Punjab National Bank. It is evident that neither the CIT(A) nor the manager of the bank correctly appreciated the meaning of Hypothecation. According to Whartons Law Laxican, hypoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually weigh the goods himself when he reports the quantities to the godownkeeper of the bank?" Ans. Sometimes, chowkidar's report is based on actual weighment some time chowkidar report is based on the quantity of material coming going on the basis of gate passes. Q. 4 When the good lying in 'Daras' are actually weighted? Ans. They are not actually weighed when they are lying in daras. In face of the above, one does not have to do vigorous exercise of mental faculties to know and understand the actual state of affairs. In the present case, the limit sanctioned by the bank was against stocks lying in the compound of the factory which in commercial parlance is known as open factory limit. It is not a case where the stocks had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ola obtained therefrom, went out of the factory on sale, That apart, the Bank Manager categorically stated that the goods lying in 'Daras' were not actually weighted. That being the position, the assessee could have no record to bifurcate the quantity of desi kapas when a part of it was ginned into desi kapas, binola and cotton. Necessarily, he took into account all of them together for the purpose of aggregate against the desi kapas itself. The ITO's rejection of the assessee's explanation was, therefore, clearly founded on suspicion and was wrong. As we have not found any discrepancy in the stock pledged with the Bank and the stock at close as per the assessee's books the ITO's observation that 271 qtls. of kapas were purchased by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on sub-standard morality to obtain more funds from its bank by showing stocks much in excess of the stocks which its books depicted. Here, the position is the other way round. The assessee had much more stock in its books both in weight and in value, as compared to those pledged by it with the bank. Therefore, there was absolutely no occasion or circumstance in this case for the assessee to inflate the weight of desi kapas when it could very well show the same weight of desi kapas as in its books on 31st March, 1975 alongwith the other admittedly available stocks without effecting its drawing limit. 10. Vacating the addition of Rs. 81,142, we allow the appeal. 11. On the view which we have taken in this case, it is not considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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