TMI Blog2009 (9) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... no addition can be made. HELD THAT:- As we find that in the instant case it is not in dispute that the credit facility was extended by the bank to the assessee against hypothecation of stock and the valuation of the stock declared to the bank was higher than actual stock available in the books of accounts and this inflation of the stock was done by the assessee to obtain higher credit limit from the bank. Hence, in our opinion on the basis of the case law the CIT(A) in a well-reasoned order has rightly deleted the impugned addition because in the instant case the AO has not brought on record any evidence to show that the assessee was in fact in possession of higher quantity of stock, therefore, mere comparison of the stock declared to the bank and the one shown in the books of accounts the addition could not be made on the difference between the two. Accordingly, the order of CIT(A) in deleting the impugned addition is upheld and ground of appeal taken by the Revenue is rejected. Appeal filed by the Revenue is dismissed. - Member(s) : D. R. SINGH., A. K. GARODIA. ORDER-D.R. SINGH, J.M.: The Revenue has filed the present appeal against the order of CIT(A), Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or detected from the accounts. 3.3 Closing stock was also valued as per method consistently adopted by the assessee. Contrary to this the AO estimated the manufacturing expense and applied a GP rate at 22.06 per cent. Recasted manufacturing-cum-trading account for the period 22nd March, 2005 to 31st March, 2005 and worked out closing stock of Rs. 40,84,840 as on 31st March, 2005 against closing stock of Rs. 23,38,886 and thus made an addition of Rs. 17,45,954 to the income taking income from other sources. Thus summarizing his arguments the learned Authorised Representative for the assessee submitted that- (i) Sales is no basis to arrive at the amount of manufacturing expenses of a particular period. (ii) There is no such law to determine the income or statement in mid of a period, cannot be accrued and is always on estimate basis. (iii) Difference in method of valuation otherwise consistently applied cannot be applied. (iv) Quantitative stock details, and valuation given to the bank was estimated only to obtain finances from the bank hence it did not have direct relation with the value of closing stock. 4. In support of the contentions the assessee relied upon the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been able to bring on record any evidence or fact to show that there was a difference in the quantity of the stock given to the bank and shown in the books of accounts or the assessee possessed a larger quantity of stock than declared to the IT authorities, therefore, the additions deserve to be deleted on the basis of facts as well as law. 8. In support of the conclusion the CIT(A) relied upon the case laws reproduced and analysed as under: (i) Coimbatore Spinning Weaving Co. Ltd. vs. CIT (1974) 95 ITR 375 (Mad) : In the said case, AO had rejected books of accounts for various reasons and Hon'ble High Court has held that heavy burden lies on the assessee to prove that the books of accounts alone give a correct picture. In the case of the assessee, AO has neither found any patent defect in the books of accounts of the assessee nor rejected the books of accounts, whereas, assessee has claimed that stock declared to the IT authorities is as per the books of accounts, audited by a chartered accountant and accepted by other Government Department. Similarly, the trading account prepared by the AO does not have proper basis, particularly, manufacturing overheads have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhansiram Agarwalla vs. CIT (1993) 111 CTR (Gau) 39 : (1993) 201 ITR 192 (Gau): In the said case, Hon'ble High Court has held that stock as disclosed to the bank is generally inflated to get larger overdraft is untenable because it is merely a statement and assessee did not offer any other explanation as regards discrepancy between value of stock disclosed to bank and as shown in the balance sheet and there was no material to show that bank did not exercise effective control, whereas, the loan was under the category "lock and key loans". Whereas, in the case of the assessee, the stock is only hypothecated and not under the "lock and key" of the bank and bank has admittedly not verified the stock. Therefore, this case law is not applicable to facts of the case of the assessee. (vi) Ramanlal Kacharulal Tejmal vs. CIT (1983) 32 CTR (Bom) 293 : (1984) 146 ITR 368 (Bom): In the said case, Hon'ble High Court has held that addition under s. 69 is justified on account of stock discrepancy in goods pledged with the bank and stock as per books. In the said case, assessee was supplying finance to 3 firms and had taken loan by pledging 268 fully pressed cotton bales with the bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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