9911796707
TMI Blog1995 (8) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... otal sales of Rs. 27,25,401 for the immediately preceding assessment year. The assessee did not maintain any stock register or production/consumption register. The Assessing Officer called for the bank statements and found that on various dates, namely, 31st July, 1987, 31st March, 1987, 30th Sept., 1987, 31st Oct., 1987 and 30th Nov., 1987, there was a wide variation between the stock as per bank statements and the stock as per the books. It was noticed that the highest difference appeared on 31st Oct., 1987 when the stock as per bank statements was of Rs. 3,00,270 and stock as per the books of account was of a sum of Rs. 27,752 thereby resulting in a difference of Rs. 2,72,518. After considering the explanation of the assessee, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no discrepancy had been found in the cash book and that the stock hypothecated to the bank as on the closing date of the accounting period i.e. 31st March, 1988 was shown at Rs. 1,57,200 which tallied with the figure of closing stock shown as per books. Relying on the Punjab Haryana High Court judgment in the case of CIT vs. Bhalla Bros. (1981) 10 TLR 45, the learned counsel for the assessee submitted that even that even when negative stock was found on a particular date, the Hon'ble jurisdictional High Court held that no addition was called for because if any purchases had been made outside the books of account and any addition had to be made on that account, then a debit of the same amount would have to be made to the trading account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty to the bank and because of other reasons, no addition was sustainable. 6. The learned counsel for the assessee vehemently argued that the books of account having not been rejected and the gross profit rate or increased turnover having been found to be in order, no addition could be made merely because the assessee had filed certain statements before the bank in respect of the goods hypothecated. It was submitted that because of the immovable property kept as a collateral security with the bank, neither the bank's interest was jeopardised nor did the assessee show any sub-standard morality in getting a higher overdraft facility. 7. The learned Departmental Representative, on the other hand, contended that there was vast variation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental Representative also relied on the decision of the Chandigarh Bench of the Tribunal in the case of Loomba Manufacturing Syndicate in ITA No. 1062/Chd/1988 dt. 4th Nov., 1993. 9. In reply, the learned counsel for the assessee submitted that all the cases relied on by the learned Departmental Representative were of pledging and not of hypothecation. The learned counsel for the assessee explained that in the case of pledging, the stocks remain under the lock and key of the bank authorities for physical check up and in the case of hypothecation, the stock physically remain with the borrower i.e. the assessee and they were never subjected to physical verification. It was also submitted that physical verification in the assessee's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses relied on by the Revenue are those of pledging and not of hypothecation. As rightly pointed out by the learned counsel for the assessees, there is a real difference between pledging and hypothecation because in the case of pledging, the goods remain under the lock and key of the bank authorities and are, therefore, liable to be physically checked and examined. But in the case of hypothecation, such goods remain in the custody of the assessee. The bank authorities have in the present case certified that a collateral security was obtained. The physical verification of the goods hypothecated to the bank is normally not done. The learned counsel for the assessee has further explained that even otherwise, it would have been impossible and im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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