TMI Blog2013 (1) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... from house property, business and other sources. For the impugned assessment year the assessee filed its return of income declaring income of ₹ 1,07,470/-. 4. In course of the scrutiny assessment proceeding the Assessing Officer while examining assessee s bank accounts noticed that the assessee has availed a loan of ₹ 15 lakhs from SBI out of his cash credit account on hypothecation of stocks. The Assessing Officer further notified that in the details furnished along with the return of income the assessee has disclosed opening stock of ₹ 9,05,160/- and closing stock of ₹ 9,67,257. The Assessing Officer entertaining a doubt as to how the bank could grant loan of ₹ 15 lakhs against hypothecation of stock of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and treated the amount of ₹ 9,73,516/- as the excess stock found on 18-10-2005 as unexplained investment of the assessee and added it u/s 69 o of the Act. 6. The assessee preferred an appeal before the CIT (A). It was contended by the assessee before the CIT (A) in course of the appeal hearing that he has maintained regular books of accounts where all the purchases, sales and other transactions are recorded, however no stock account or stock register was maintained. It was contended that though the Assessing Officer rejected the books of accounts in absence of stock account no defect or deficiency were found in the books of accounts nor the profit declared on the basis of the book results were rejected. The assessee contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement to bank. The CIT (A) further observed that though the assessee has claimed that no physical inventory of stock was made by the assessee but the Assessing Officer has recorded in the assessment order that the Chief Manage of SBI has confirmed physical verification. On the aforesaid analysis, and relying upon the decisions of Hon ble Gauhati High Court and Madras High Court, the CIT (A) dismissed the appeal of the assessee. 8. The learned AR reiterating the submissions made before the CIT (A) submitted that the loan availed from the bank was a mortgage loan for investing in shares. The learned AR submitted that the assessee mortgaged his immovable property for availing loan. The learned AR further submitted that the assessee never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess and finished goods, whereas the assessee only deals with finished materials. Another important aspect is though the Assessing Officer has rejected the books of accounts he has accepted the profit declared by the assessee on the basis of books of accounts. Before making addition on account of excess stock, the Assessing Officer has to bring material on record to establish the fact that the assessee was actually having physical stock as per the statement given to the bank. Merely relying upon the stock statement, it cannot be presumed that the assessee has made unexplained investment when there is no denying of the fact that a common practice of inflating the stock is followed in the business circle for availing loan from bank. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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