TMI Blog2015 (6) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the drawing power register, I find tat the drawing power register is not authentic on account of non recording of vital information by the bank officers with regard to date of filing of stock statement and date of physical verification of stock. The AO has also not been able to rebut the contention of the A/R of the appellant that the stock was inflated in the stock statement to avail credit from the bank. Thus, the action of the AO of relying on the statement of the bank manager, the stock statement and the drawing power register for making addition on account of difference in stock, is not justified on facts It is an admitted fact that no stock statement was filed by the assessee on 31.03.2010 and the last stock statement was available on record is dated 20.03.2010, which has been utilized by the AO for making addition on account of difference in stock as per stock dated 20.03.2010 and balance sheet as on 31.03.2010. This fact also goes against the department, as no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010. In view of the above, all the grounds of the Revenue are dismissed - Decided against re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of ₹ 6,39,30,292/- as its closing stock as at 31.03.2009 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at ₹ 4,66,13,761/- was the correct figures, had squarely shifted on it, which it has failed to discharge. 2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence. 4. The Revenue in the case of Ishar Infrastructure Developers Pvt. Ltd., in ITA No.536(Asr)/2013 for the assessment year 2010-11 has raised the following grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nda, in ITA No.200(Asr)/2013 for the assessment year 2009-10 has raised the following grounds of appeal: 1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of ₹ 1,28,69,000/- as its closing stock as at 31.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at ₹ 19,89,130/- was the correct figures, had squarely shifted on it, which it has failed to discharge. 2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence. 7. The Revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain ground of appeal has been decided in favour of the assessee. The 5th and 11th grounds of appeal are as under: Ground No.5: Without prejudice to the above, the ld. AO has erred in law and on facts in recasting the trading account by only taking the inflated figure of closing stock as per bank statement and taking the opening stock as per books of account. If both the figures are taken as per bank account instead of books of accounts, there remain no difference. As such, addition made of ₹ 39155957/- on this account is uncalled for. The same is deleted. Ground No.11:That the Ld. AO has erred in law and on facts in making addition of ₹ 41415652/- in the returned income of the assessee without pointing out any defect in the books of account maintained in the regular course of business as maintained in the past, duly audited by the Chartered Accountant. As such, addition made without rejecting the books of accounts is uncalled for. The same be deleted. 10. The Ld. DR, Mr. Tarsem Lal, at the outset, argued that the issue in all the appeals is identical and was accepted by the ld. counsel for the assesses appearing in all the appeals, Sh. P.N.Arora, Advocate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock was shown at ₹ 12,59,06,092/-. The bank authorities have submitted certified copy of drawing power register showing stock position of the assessee from July 2007 to 31.01.2010 which is signed by the Officer who physically verified the stock, stock statement and further signed by the incharge incumbent Manger which has been placed on record. The bank authorities also intimated quarterly stock position of the assessee as under:- Date of Stock Statement Amount of Stock (Rs.) 31.03.2008 61,569,440 30.06. 2008 68,507,860 30.09. 2008 72,915,600 31.12.2008 74,605,500 31.03.2009 125,906,092 It reveals the difference of ₹ 6,39,30,292/- (Rs.12,59,06,092/- minus ₹ 6,19,75,800/-) on account of stock as shown in balance sheet submitted to I.T. Department. An opportunity of being heard was afforded to the assessee vide this office letter dated 04.11.2010 to state as to why an addition of ₹ 6,39,30,292/- be not made on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making available optimum amount of funds needed for business purposes. Raising of such loans from the bank does not affect the income of the assessee in any manner. However, it is a fact that whatever amount was received from the bank, the same was put to use wholly, exclusively and necessarily for business purposes and by virtue of it, the assessee in a way, made an effort to increase its income/gains. The assessee has been maintaining books of account on regular basis and keeping complete records of receipts and expenses under different heads. It is also submitted that the object of assessment is to tax the real income of the assessee, for which books of account have been maintained on day to day basis. 4. Needless to mention here that this has come up for adjudication in a number of cases before various Hon'ble Courts wherein they have given their verdict that no adverse view in such circumstances need be taken against the assessee. For favour of your kind consideration, the following judgments are relied upon: i) The Hon'ble Punjab Haryana High Court in a recent case of Commissioner of Income tax, Ludhiana v. M/s Santosh Box Factory (P) Ltd. reported at (2011) 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pothecated to bank was inflated to avail of more overdraft facilities and deleting the addition on account of difference between stock shown to bank and the stock shown in the books of the assessee. A copy of this judgment is also enclosed herewith. iv) In the case of Commissioner of Income Tax vs. N Swamy reported at (2000)241 ITR 363 (Mad.), the Hon'ble High Court has held as under:- The assessee's income is to be assessed by the ITO on the basis of the material which is required to be considered for the purpose of assessment and ordinarily not on the basis of the statement which the assessee may have given to a third party unless there is material to corroborate that statement of the assessee give to a third party, even if it be a bank. The mere fact that the assessee had made such a statement by itself cannot be treated as having resulted in an irrefutable presumption against the assessee. The burden of showing that the assessee had undisclosed income is on the Revenue. That burden cannot be said to be discharged by merely referring to the statement given by the assessee to a third party in connection with a transaction which was not directly related to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bent Manger of the branch of the bank. Certified copy of the page No.36 of the register showing periodical position of stock of the assessee as available with the bank for this period is submitted to the department. The value of quantified stock mentioned in drawing power register as obtained from the bank is reproduced as under:- Sr. No. Date Value of stock as submitted by the assessee Value of drawing power calculated by the bank 1 31.03.2008/ 01.04.2008 61,569,440 350 lacs 2 20.04.2008 64,064,710 350 lacs 3 31.05.2008 67,629,580 350lacs 4 30.06.2008 6 8,507,866 420 lacs 5 31.07.2008 68,507,860 420 lacs 6 31.08.2008 72,915,600 420 lacs 7 31,10.2008 60,857,320 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under no circumstances dispute now and if the valuation of the stock hypothecated with the bank is made at the same rate the total valuation of stock available with the assessee as on March 31st 1977 would work out to ₹ 9,06,000/-. 3. From the information now collected by the Department, it is evident that during the course of regular assessment proceedings, the assessee had suppressed the particulars of the closing stock both in terms of its quantity and valuation as on March 31st, 1977 and, therefore, income chargeable to tax amounting to ₹ 3,18,108/- had escaped assessment at the time of original assessment. 4. In my opinion, the case set up by the assessee at the time of initiation of assessment that the value of the stocks was inflated for availing of higher overdraft facility and there was deficiency in quantify of the stocks lying with it and disclosed in the return on the one hand and that furnished to the bank is prime facie proved to be false by the contents of the letter annexure R 2/2. Therefore, respondent No.2 had sufficient reason to believe that the petitioner had not made full, complete and truthful disclosure of the material facts and its in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has categorically pronounced that where the quantitative details of stock are available and the valuation of stock has been made the basis of the rate and quantity available, the assessee cannot deny his possession of such stock, more so when such a valuation is made every month and both assessee and the bank are an authenticating it. In this connection, it is emphasized that it does not make any difference whether the physical possession remains with this Bank or the assessee. The certification of valuation of an asset by A) Assessee B) Valuation Officer of Bank who physically verified the stock and C) Bank Manager being Incharge Simultaneously, speak of authentication of figures. Is it a mandatory circumstances that only figures or valuations of stock are to be accepted which are in possession of bank and no cognizance should be taken of such valuation where the physical possession is not with bank? Millions of assessee all over the country file statements of stock in their returns and their valuations are accepted by Income Tax Department. The department accepts the valuation of stock on the basis of the papers filed without taking possession of stock. Are all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets like space crafts, satellites, aeroplanes, ships, multiwheel tankers, trucks, buses etc. are loosely under control of the Bank which finance them so hugely, sometimes into trillion of dollars/rupees. In other words does only ledge has the strength of recovery of loan dues and not the Hypothecatedd asset? This argument has no force. It is for the Bank to decide how to secure its loan and what terms to impose. I am quite sure that different Banks must be using different terminology to secure the loan i.e., some banks might be using pledge for a particular item whereas at the same time the other banks may be using the term hypothecated . Therefore, it is simply a tactic of assessee to divert attention from the core issue i.e. Difference in figures of stock in the Bank Books and in the assessee's books. It is the assessee to prove that discrepancy in his Books of A/c, on the basis of which the Return of Income for A.Y.09-10 was prepared, verified, signed and submitted before the Income Tax Dett, was not existing. It is worth to mention here that the statement of Sh. Tejinder Sharda, Sr. Bank Manager, Punjab National Bank, Arya Samaj Chowk Branch, Bathinda was recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted through the written submission on 23.12.2011 in which has stated that some of the payments amounting to ₹ 5.42,81,001/- were received on 30th and 31st March, 2009 i.e., on the last two days of the financial year. They were received in lieu of raising of the bills towards the contracts executed during the F.Y.2008-09. Such payments were received on account of actual work in progress and not on account of completion of work. Actually, the assessee had submitted stock statements to the bank on last working day of the financial year i.e. on 31.03.2009. At the time, work in progress was also treated as value of closing stock but after receipt of payment or confirmation of work, it was converted into work done instead of work in progress or closing stock. This amount was duly reflected in contract receipts for FY 2008-09. The reply of the assessee is reproduced as under:- Respectfully it is submitted that during the course of assessment proceedings, inter alia, the assessee was required to explain the reasons and circumstances for difference in the value of stocks available as per books of account and the value of stocks submitted to the bank at the close of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the notice of the assessee after submission of stock statement to the bank, at the time of reconciliation of accounts, contract receipts and the tax deductions at source at later stage. On passing of these entries in books of account regarding finalization of bills amounting to Rs,5,42,81,001/- on 30-3- 2009 31/3/2009. the stock given in bank statement on 31/3/09 got reduced by ₹ 5,42,81,001/- in books of accounts. This amount of ₹ 5,42,81,001/- was taken into account as Contract Receipts on 31/3/09 by the assessee as tax on these amounts had also been deducted at source. It may be further clarified again that in order to maintain the DP, the assessee has to submit the stock statement to the bank on last working day of every month. In this case the stock statement was submitted to the bank on 31/3/09 and also deducted tax at source as on 31/3/2009 and consequently issued Form-16A afterwards. As the aforesaid developments of deducting tax at source by various departments on total amount bill of ₹ 5,42,81,001/- took place on the last day of the accounting year i.e.30-3-2009 and 31-3-2009, and that too without the knowledge of the assessee, the same could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above mentioned entries have already been got verified by your good office from the records books produced by the assessee. Hence, the difference in stock submitted to the bank as on 31/3/09 taken into books of accounts as on 31/3/2009 may kindly be considered as justified. In the circumstances of the case, it is requested that no adverse view in this regard may kindly be drawn. At this stage it is further submitted that the remaining difference is stocks as per books Vs. Stock statement furnished to the bank is on account of estimation of stock lying at various sites in open, without measurement and taking actual physical stocks verifications etc. This difference is with in margin of tolerance and even various Hon'ble Courts have held that no adverse view in this regard/difference may be taken. Copies of such judgments has already submitted for your kind perusal. The reply of the assessee has been considered. On a careful scrutiny of the reply of the assessee in which he has submitted the details of receipts on 30th /31st March,2009, it has been observed that contention of the assessee is partly correct for the reason that out of the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous Income J Rs.10,88,156/- 3 Increase In Stock K Rs.3,88,06,532/- (Rs.2,14,90,000/- +Rs.6,39,30,293/-minus ₹ 4,66,13,761/-) 4 Profit on Sale of Assets Rs.1,53,898/- Total Rs.31,96,84,629/- ₹ 30,23,68,097/- +Rs.1,73,16,532/-) EXPENDITURE 1 Material Consumed L Rs.10,88,41,059/- 2 Works Expenses M Rs.14,74,18,714/- 3 Administration Expenses N Rs.47,12,197/- 4 Financial Expenses O Rs.1,86,73,072/- Loss on Sale Assets 0 Total Rs.27,96,45,043/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate stock as their interests are covered by the collateral security provided by the assessee to bank, is self assumed and if the bank authorities feel that their interests are secured by collateral securities then why they should in the first place ask for hypothecation of the stock and enter into hypothecation agreements. Further, Drawing Power is determined on the basis of the stock and not on the basis of collateral securities and the limit sanctioned is subject to variation depending upon the availability of stock with the assessee. Therefore, this finding is patently perverse and needs not to be given any cognizance. Para 5(ii) The ld. CIT(A) has ignored the statement of the Sr. Branch Manager of the same very branch from which the assessee had raised limit who had deposed that the authentication of DP register by the bank manager carries in its sweep the fact that the stock has been physically verified by the officer/manager who has authenticated the DP Register. The ld. CIT(A) has no where doubted the correctness of the statement of the Sr. Branch Manager Sh. Tejinder Sharda and the same could not be trashed by the ld. CIT(A) without giving some cogent reasons. His statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port of the authenticated DP Register and further corroborated by the statement of the Sr. Branch Manager. In view of above, it is clear that the ld. CIT(A) has erred in deleting the addition. It is, therefore, prayed that the order of the ld. CIT(A) be vacated and that of the AO be restored. Without prejudice to the above, it is prayed that it is clear that if the ld. CIT(A) was of the opinion that the AO ought not to have relied solely on the statement of the Sr. Branch Manager and ought to have examined on oath the bank manager who had actually authenticated the DP register in token of his having physically verified the stock, he ought to have invoked his co-terminus power to record his statement or else remanded the case back to the AO for this purpose. It is, therefore, prayed that the matter be restored to the file of the AO with the direction to record to the statement of the bank manager who had authenticated the DP Register in token of his having physically verified the stock and decide the issue on the basis of the facts as deposed by the manager before the AO. The ld. CIT(A)'s approach is clearly prejudicial to the interests of the revenue and it is, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely applied the case law in favour of the assessee without appreciating the difference of facts in the present case. It is further submitted that the issue is wholly covered by a recent judgment of the Hon'ble P H High Court in the case of Smt. Shakuntala Thukral vs. CIT reported in 366 ITR 644. The factual matrix of both the case is almost identical. In the case before the Hon'ble P H High Court, the assessee had claimed that she had shown inflated the quantity as well as the value of the stock with a view to availing higher loan facility and in the case of the assessee also,, the assessee had claimed that it had shown inflated value of the stock with the similar objective as discussed in para 3 of the assessment order. Therefore, this judgment of the Hon'ble High Court has dovetailing suitability to the facts of the case and the appeal of the department eminently deserves to be allowed and it is prayed accordingly. 16. The Ld. counsel for the assessee, Mr. P.N.Arora, Advocate, on the other hand, relied upon the submissions made before the AO and the order of the ld. CIT(A). The ld. counsel Mr, P.N. Arora, Advocate further argued that as to the written sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to prove that any physical verification of the stock was carried out by the bank the addition was deleted by the CIT(A) as finally held in the concluding paragraph on page 13. 16.2. The ld. counsel, Mr. P.N.Arora, Advocate further stated that the stock statement filed by the assessee has been found to be unsigned (page 12 13 of the paper book for AY 2009-10 filed on 02.02.2015). As regards the Drawing Power Register on which heavy reliance has been placed by the Ld. DR, the copy of the same has been enclosed alongwith the paper book (filed on 2.2.2015 for AY 2009-10 in which the photocopy is on page 12 and typed copy is on page 15 16 for period from Jan, 2007 to 31.12.2009.). 16.3. He further stated that there are following deficiencies in the register and vital information relating to physical verification of the stock has not been recorded: i) There is no column in this register for keeping the record that on which date stock statement has been received. ii) The column for accountant initials is blank. iii) The column for inspection is mostly blank except initials in some of the columns and date of 19.01.2010 against the stock statement of 31.08.2009, 30.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts relied upon by the AO are distinguishable on facts. 16.5. He further submitted that the judgments of Hon'ble Punjab Haryana High Court, relied upon by the ld. CIT(A) in the cases of 'Santosh Box Factory, Sidhu Rice mills and in the case of Devi Dayal Rice Mills are squarely applicable to the facts of the case as the department failed to prove the physical verification of stock and neither the stock statement nor the drawing power register can be relied upon. 16.6. He further stated that the reliance of the ld. CIT(A) on the dismissal of SLP by the department in the case of Veerdip Roller (P) Ltd., is only one of the cases but the CIT(A) has placed reliance on all the judgments as a whole. 16.7. The Ld. counsel for the assessee has invited our attention to the distinguishable facts of the case, as facts of the case have been discussed in detail by the ld. CIT(A) in the case of Smt. Shakuntla Thukral vs CIT (2014) 366 ITR 644 (P H) vide order dated 24.02.2010, as under: i) The contention of the assessee in the case of Shakuntal Thukral is that the stock as on 31.03.2005 was inflated to make payment of import of machinery by giving higher stock has been reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 13.03.2012, reported in 20 Taxman.Com page 644, has once again decided this issue in favour of the assessee. This order is available at page Nos. 70 to 72 of the paper book. The Hon'ble High Court in the said case has held that the addition could be made only if quantity of stock submitted to the bank was higher than the quantity as per books, which were pledged, counted or verified by the bank official and since the stock statement was not verified by any bank official, the stock statement given to the bank could not be relied upon. Further, the details comments of the assessee on the judgment of the Hon'ble Punjab Haryana High Court in the case of Smt. Shakuntla Thukral vs. CIT (2014) 366 ITR 644 relied upon by the AO has been given in the brief synopsis by Ld. DR for AY 2010-11 and this case is not at all applicable to the assessee's case. 16.9. The ld. counsel for the assessee, Mr. P.N. Arora, in furtherance to his arguments submitted the comments on the decision of the Hon'ble Punjab Haryana High Court in the case of Smt. Shakuntla Thukral vs. CIT (supra) that: A bare perusal of the order of the ld. CIT(A) makes it clear that the AO had given ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thukral has relied on the reports of physical inspection carried out by the bank authorities in respect of the stock of the assessee at quarterly intervals and such findings have neither been rebutted before the CIT(A) or before the ITAT or before the Hon'ble High Court. But in the present case of the assessee, it has been established that no physical inspection of the stock has been carried out, as stated by the bank manager. 16.12. The ld. counsel stated that the ld. CIT(A) in the case of Shakuntla Thukral has recorded a categorical finding that assessee has accepted the fact that the stock as per stock statement on 31.03.2005 was lying in the premises of the assessee. But in the present case of the assessee, it has all along stated before the AO and before the ld. CIT(A) that the stock was inflated to get the cash credit limit from bank and the onus is on the department to prove that the assessee owned the stock more than the stock as reflected in the balance sheet as on 31.03.2005. 16.13. The ld. counsel for the assessee further argued that the AO has not rejected the books of account and has not invoked the provisions of section 145(3) of the Act and the AO is not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 10. Written submission in the case of D above on 19.08.2014 11. Written submission in the case of B above on 25.08.2014 12. Written submission in the case of E above on 25.08.2014 13. Written submission in the case of A above on 25.08.2014 14. List of compilation of judgements on 10.9.2014 in D above 15. List of compilation of judgements on 10.9.2014 in C above. 16. List of compilation of judgements on 9.9.2014 in E above. 17. Paper Book in the case of D above on 10.9.2014 18. Compilation of judgements in the case of A above on 10.9.2014 19. Compilation of judgements in the case of B above on 10.9.2014. 20. Compilation of judgements in the case of E above on 10.9.2014. 21. Audit Report in the case of D above on 15.09.2014 22. Paper Book in the case of C above on 15.9.2014 23. Audit Report in the case of A above on 16.09 2014 24. Paper Book in the case of B above on 16.09.2014 25. Paper bok in the case of E above for hearing fixed on 22 09.2014 26. Paper book on 28.04 2014 in the case of A above. 27. Paper book on 28.04 2014 in D above. 28. List of compilation in B above far hearing on 30.12.2014 29. List of compilatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now when the assesee submitted stock statement of ₹ 9,05,18,375/-, it cannot claim that it had submitted inflated stock statement to avail higher credit limit as the same credit limit of ₹ 4.5 crore had already been allowed to it. It may further be noted that the assessee had credit limit of ₹ 8 crore on 31.05.2010 as against limit of ₹ 6 crore at the almost same value of stock which was at ₹ 11,85,81,990/- when limit sanctioned was ₹ 6 crore and at ₹ 11,91,47,712/- when limit sanctioned increased by ₹ 2 crore with increase in stock of mere ₹ 5.6 lacs. It needs to be appreciated that the stock statements furnished by the assessee each month during the accounting period relevant to the assessment year 2009-10 and 2010-11, was much higher than the threshold limit after including 25% margin. Thus, it is proved that the stock reflected in the monthly stock statement was real and not inflated. It also needs to be appreciated that the stock was being inspected by the bank and signature of the bank manager were put on the DP register in token of having physically inspected the stock. It is also pertinent to note that when the manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in respect of the stock statement submitted by the assessee to the bank as on 31.01.2010 which was declared at ₹ 10,75,10,500/- whereas the stock declared to the bank on 20.3.2010 was ₹ 10,82,22,030/-. Thus, It is clear that when the assessee was clearly caught on a wrong foot viz a viz stock audit taken by the auditorst on 4.2.2010 of the quantum ₹ 10,75,10,500/-, it chose to not to raise any question on the auditors' stock audit on 4.2.2010 and had kept studied silence for obvious reason i.e. it knew that the stock statements submitted are real and it was deliberately question the same as regards the inspection by the bank in the futile hope that the bank may not be able to come forward with the hold record. The assessee did not choose to ask for the auditors' stock audit report on 04.02.2010 as it knew that it would be cornered with the said report. It is highly pertinent to note that stock statement submitted to the bank on 20.3.2010 was ₹ 10,82,22,030/- i.e. just more by a meagre sum of ₹ 7,11,530/- and that too when no increase in the credit limit had been sought by the assessee. All these facts clearly prove that the stock was physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and cannot be taken any cognizance of. Third Issue: The third issue which the assessee has contested in this case is using the information as given by Shri Tejinder Sharda, Sr.Branch Manager in the case of M/s.Munish Kumar Bansal, Contractors. In this regard, it may be mentioned that the assessee has relied upon the Tribunal's order in the case of M/s.Munish Kumar Bansal which is distinguishable decision as would be shown hereinafter but the statement of the Sr.Branch Manager touching the procedure adopted in the bank and also his statement that in all such cases where signatures are put by the Inspecting Manager, the said signature are in token of having inspected the stock. So such a statement cannot be trivialized as is being attempted by the assessee. Nonetheless, the only point which the assessee is contesting so studiously has been found to be false that it had furnished inflated stock statement to the bank with a view to securing higher credit limit. This claim of the assessee has been demolished with a sledge hammer and the sledge hammer is the DP Register which clearly shows that the assessee had been showing stock in the statements to the bank as was actually i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,81,001 Rs.11,62,56,801/- This figure of ₹ 11,62,56,801/- is the figure which the assessee himself admits as against the actual stock statement furnished to the bank at ₹ 12,59,06,092/- and thus according to the assessee it had inflated the stock by only a sum of ₹ 86,49,191/- (12,59,06,092/- minus ₹ 11,62,56,801/- to avail higher credit limit on 31.3.2009 for which he only needed to show stock at ₹ 12 crore only and not excess by ₹ 59,06,092/- or at ₹ 13,46,44,500 for June, 2009 and ₹ 13,26,44,125 for July, 2009. Thus, it becomes that the stock statements submitted to the bank were real. The assessee is blowing hot and cold in the same breath. On the one hand, it is claiming that it had inflated the stock for availing higher credit limit and on the other hand it is claimed that it had consumed the stock as on 30.03.2009 and 31.3.2009. The falsity in the assessee's contention is too obvious to be missed out. Nonetheless, in this regard, it may be mentioned that a perusal of the DP register clearly reveals that the branch manager had put his signature on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee would have taken the stand that its stock had been physically checked by the bank authorities and found the same as correct and then how can the bank launch prosecution proceedings when it had itself physically checked the record. Sixth Issue: The assessee has claimed that its stock was hypothecated and remained under its control. This claim is of no consequence as the stock under hypothecation though remains in the possession of the assessee but the bank carries the right to inspect the same. If on an inspection, it is discovered by the bank that the stock is not in the possession of the assessee or stock is short then the bank can immediately withdraw the limit and serve a notice for the recovery of the amount already withdrawn from the CC limit account. All that the assessee seems to suggest by pointing out the fact that the stock remained under its control is that the banking authorities have nothing to do with the stock which is never the case. No bank sanctions limit in any case where stock is hypothecated without the actual existence of the stock which the assessee seems to suggest. Assessmnt year 2010-11: In this assessment year, the only point which the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stock gets well established. M/s.Euro Infrastructure and Powers Limited. Assessment year 2010- 11 In this case also, the factual matrix is almost the same as in the above case. Here also, the assessee had contended before the AO that inflated stock statement was submitted to the bank. The veracity of this statement when examined brings to the fore the same results as have come out in the aforementioned case. Here in this case, the AO has reproduced the copy of the bank statement at page 2 of the assessment order where stock ₹ 4,68,82,440/-has been reported. A copy of the Drawing Power Register has also been reproduced by the AO in his assessment order at page 7. A perusal of this DP register reveals that when the assessee availed credit limit of ₹ 3 crore, it had submitted stock statement of the value of ₹ 6,29,18,775/- on 30.4.2010 and submitted stock statement of the value of ₹ 6,21,80,415/- when limit sanctioned was ₹ 5 crore which is of lesser value. This clearly shows that when statement of stock at ₹ 6,29,18,775/- was submitted there was no occasion for seeking raise in the credit limit yet still stock statement was submitted of hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is found to be false. Tthe AO had reproduced copy of DP register in his order at page 2. M/s.Ram Kumar Bansal Contrator, Bathinda Assessment year 2009-10 Similar story is emanating in this case also. The AO has reproduced copies of stock statements submitted by the assessee to the bank in the body of his assessment order. The study of these statements can be made from the following tabulation: S.No. Date of submission of stock statement Value in Rs Limit sanctioned 1 30.08.2008 2,95,76,208 Rs.2 crore 2 31.05.2008 2,93,00,000 Rs.2.2 crore 3 30.06.2008 2,97,50,000 Rs.2.2 crore 4 31.07.2008 3,09,00,000 Rs.2.2 crore 5 31.10.2008 3,27,00,000 Rs.2 crore 6 31.03.2008 2,81,00,000 Rs.2 crore It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, thus, deserves to be rejected being without any merit whatsoever and also being misleading. In all the above appeals, the issue at stake is the addition made on account of difference in the value of stock shown to the bank by the assesses in their stock statements issued to the bank and as declared to the income tax department in their returns of income. It is submitted that this issue stands resolved by the recent decision of the Hon'ble Punjab Haryana high Court in the case of Smt. Shakuntla Thukral Vs CIT reported at 366 ITR 644. The assessee has filed detailed submissions and only sought to suggest that the said decision may not be followed. It has been suggested by quoting various decisions including of Hon'ble Punjab Haryana High Court which had gone in favour of the assessee. In this regard, it is submitted that the judgement of the Hon'ble Hon'ble Punjab High Court in the case of Smt. Shakuntla Thukral (supra) is the latest judgment and while rendering this judgment, the Hon'ble Court deems to have taken into consideration the whole gamut of the issues involved and has rightly observed that no illegality or perversity in the findings recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case is wholly covered by the judgement of the Hon'ble Punjab Haryana High Court in the case of Smt Shakuntla Thukral (supra) wherein the Hon'ble High Court held that when the stock had been inspected, no credence to the assessee's assertion that the inflated stock statement was submitted should be given though in the case of the assessee it has been proved beyond an iota of doubt that the assessee had been submitting real stock statements as stock statements of higher value were submitted even when no increase in credit limit had been sought. 5. The learned CIT(A) has grossly erred in not appreciating the whole factual matrix of the cose which he ought to be done in his coterminous jurisdiction with AO and had he done so he would have found that there was no truth in the contention of the assessees that they had furnished inflated stock statements which lie stands fully exposed from the stock statements submitted invariably at much higher figure than the threshold limit of at/ailing the credit i.e. Amount of limit sanctioned by the bank plus 25% margin The learned CIT(A) has also not taken into consideration the statement of Shri Kamiesh Gupta in its totality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Drawing Power is determined on the basis of the stock and not on the basis of collateral securities. The ld. CIT(A) ignored the statement of Senior Branch Manager of the same very Branch and the ld. CIT(A) has not doubted the correctness of the statement of Senior Branch Manager, which cannot be trashed without giving any cogent reasons. However, the ld. DR relied upon the statement of Sh.Tejinder Sharda and DP Register which was ignored by the ld. CIT(A). The ld. Counsel for the assessee has already given his submissions to the said arguments made by the ld. DR which has been considered by us and which has been reproduced hereinabove. 20. Our findings are based on the said arguments made by the ld. DR and the ld. Counsel for the assessee with regard to the said collateral securities and DP Register and the statement of Senior Branch Manager Sh.Tejinder Sharda and the stock statement filed by the assessee for the A.Y. 2009-10 on 02.02.2015 available at PB 12 13 which are unsigned . The ld. Counsel for the assessee has pointed out certain deficiencies in the DP register on which the ld. DR has placed heavy reliance but has not been rebutted by the ld. DR in his counter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of material available. Had it been verified physically, the same should have been there. The Ld. DR totally relied upon the DP register, a copy of which is part of the assessment order but the same is not backed by any documentary evidence which can prove that the physical verification has been done by any of the Bank Authorities at any point of time during the impugned year in any of the case mentioned hereinabove. 22. Much reliance has been placed on the statement of Bank Manager, Sh. Tejinder Sharda in the case of Munish Kumar Bansal Contractor but the AO has failed to prove that any physical verification has been made of the stock. However, a statement recorded of the Branch Manager in the case of Sh. Munish Kumar Bansal contractor, who has been assessed by the AO, the same cannot affect the assessment of the present appeal and cannot be blindly applied in the present appeal automatically. However, the matter in the case of Sh. Munish Kumar Banal Contractor, travelled upto the ITAT, Amritsar Bench and the ITAT, Amritsar Bench in its decision in ITA No.391(Asr)/2012 dated 12.09.2013 deleted the addition though the facts in that case were different. 23. The Ld. DR has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2010 but not to the stock statement dated 20.03.2010 on the basis of which addition has been made. Hence, no reliance can be placed on the independent stock verification. v) On page 6 of the counter comments, the ld. DR has stated that the value of the stock has been mentioned at stock statement dated 31.03.2009 at ₹ 12,62,06092/- but the assessee never stated that the stock statement was inflated and it has only stated by the assessee that it is unsigned. But in this regard, the assessee has all along stated that the stock as per stock statement has been inflated to avail CC limit from the Bank. The physical verification of the stock has never been proved by the department. Hence, this counter comment of the Ld. DR is also factually wrong. vi) The Ld. DR has again relied on the DP register for the AY 2009-10 and according to him the Branch Manager signed the D.P.register in token of having physically verified the stock and the same is further counter signed by the Chief Manager at that time. But the assessee in his counter comments has brought out the vital defects in the DP Register, which has been discussed (supra). Hence, this DP Register has no authentic value an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions are made on conjectures and surmises. 26. Time and again before both the authorities below, the ld. Counsel for the assessee has submitted the explanation that the statement has been submitted before the Bank Authorities only on estimated basis to avail of the bank loan and there is no other purpose. This contention of the assessee has not been rebutted at any point of time by the AO or by the ld. DR. It is a fact that the AO as not pointed out any defects in the books of account and in fact, the AO has not invoked the provisions of section 145(3) of the Act. As argued by the Ld. DR that cash credit limit is calculated on the basis of DP register, which in turn is maintained on physical verification of the stock and no documentary evidence has been brought on record that the stock mentioned in the .DP register by third party i.e. Bank Authorities, has been maintained on physical verification of the stock, maintained by the assessee at different cities in different States. 27. The AO has much relied on the decision in the case of Devgan Rice General Mills (supra). The issue before the Hon'ble Punjab Haryana High Court, in the case of Devgan Rice General Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tla Thukral (supra), it has been stated by the ld. CIT(A) that the assessee has not disputed the stock of the value which was submitted to the bank was actually lying in business premises as on 31.03.2005. But in the present appeal the assessee all along before the AO and the ld. CIT(A) and before us stating that the stock was inflated to get the cash credit limit from bank. Thus, in the case of Smt. Shakuntal Thukral (supra), the AO after pointing out defects in the books of account of the assessee a categorical finding has been given that the books of account are not accurate and meaning thereby that the books of account were rejected. But in the present appeal, there is no such finding by the AO and no books of account have been rejected and provisions of section 145(3) have not been invoked. In the case of Smt. Shakuntla Thukral (supra), the ld. CIT(A) has relied upon the physical inspection carried out by the bank authorities in respect of assessee's stock at quarterly intervals, as mentioned hereinabove and such findings have neither been rebutted before the ld. CIT(A) or ITAT or Hon'ble High Court. But in the present case, the assessee has established that no physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) CIT vs. Sidhu Rice General Mills reported in 281 ITR 428 (P H) ii) CIT vs. Santosh Box Factory (P) Ltd.., 44 IT Reps. 472 (P H) iii) CIT vs. N. Swamy reportede in 241 ITR 363 (Madras) iv) ITO vs. Devi Dayal Rice Mills reported in 75 TTJ 24 (ITAT, Amritsar Bench. v) CIT vs. Sirohi Steel Rolling Mills, reported in 200 CTR 595 (All.) vi) Ashok Kumar vs. ITO, reported in 201 CTR 178 ( J K) vii) CIT vs. Das Industries, reported in 303 ITR 199 (All.) viii) CIT vs. Sri Padmavathi Cotton Mills, reported in 236 ITR 340 (Mad.) ix) Jai Sharda Rice Mills. Vs ITO reported in 36 ITD 254 (ITAT, Asr.) x) CIT vs. Riddhi Steel and Tubes (P) Ltd. reported in 220 Taxman 148 (Guj.) xi) CIT vs. Apcom Computers P. Ltd. reported in (2007) 292 ITR 630 (Mad.) 35. In the facts and circumstances, the arguments made by the ld. DR in his written submissions and counter submissions cannot help the Revenue and accordingly, we find no infirmity in the order of the ld. CIT(A) in the case of M/s. Ishar Infrastructure Developers (P Ltd. in ITA No.198(Asr)/2013 in the impugned year. 36. During the assessment year 2010-11, the AO rejected the purchase account only without rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20.03.2010, which has been utilized by the AO for making addition on account of difference in stock as per stock dated 20.03.2010 and balance sheet as on 31.03.2010. This fact also goes against the department, as no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010. 39. In view of the above, all the grounds of the Revenue are dismissed and our decision hereinabove is identically applicable in all other appeals mentioned hereinabove i.e. in ITA No.536(Asr)/2013 for the AY 2010-11 in the case of Ishar Infrastructure Developers (P) Ltd., in ITA No. 199(Asr)/2013 in the case of Royaldeep Construction Co., in ITA No.200(Asr)/2013 in the case of M/s. Bhalaria Constructions, in ITA No.571(Asr)/2013 in the case of M/s. Euro Infrastructure Power Ltd. and in ITA No.457(Asr)/2013 in the case of 'Ram Kumar Bansal'. 36. Now, we deal with cross objection bearing No.16(Asr)/2014 for the assessment year 2009-10 in the case of 'Ram Kumar Bansal', where it has been argued that the AO is not justified in recasting the trading account by taking the inflated figure of closing stock as per bank statement a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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