TMI Blog1985 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. He found that on March 7, 1969, the assessee had hypothecated 200 bales of cotton valued at Rs. 1,45,000 and 34,000 kilograms of unginned cotton valued at Rs. 68,000. He further found that on March 25, 1969, the assessee had hypothecated 1,20,000 kilograms of cotton seeds valued at Rs. 9,000. On scrutiny of the assessee's stock register, the Income-tax Officer found that on March 7, 1969, the assessee did not possess 200 bales of cotton and 34,000 kilograms of unginned cotton. He further found that the assessee had stock of cotton seeds of only 2,457 kilograms as against 1,20,000 kilograms hypothecated as shown in its statement to the bank on March 25, 1969. The Income-tax Officer, therefore, called upon the assessee to explain the above discrepancy. The assessee's explanation was that 200 bales of cotton and 34,000 kilograms of unginned cotton said to have been pledged on March 7, 1969, belonged to one M/s. Prabhudas Narandas Bros. of Porbandar and, since the said party was in need of money and to finance it, the assessee had made use of the overdraft facility which it had with the bank. The said M/s. Prabhudas Narandas Bros. had overdraft facilities up to Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also. In that view of matter, he deleted all the three additions made by the Income-tax Officer. The Revenue, therefore, carried the matter in appeal before the Appellate Tribunal which by its order dated July 26, 1975, found the explanation of the assessee satisfactory so far as the apparent discrepancy of 200 bales of cotton and 34,000 kilograms of unginned cotton was concerned. The Tribunal, therefore, agreed with the Appellate Assistant Commissioner in so far as he deleted the additions of the two amounts, namely, Rs. 1,45,000 and Rs. 68,000. However, in respect of the hypothecation of 1,20,000 kilograms of cotton seeds, the Tribunal found it difficult to accept the explanation of the assessee. The Tribunal found, as a matter of fact, that the assessee had hypothecated 1,20,000 kilograms of cotton seeds on March 25, 1969, as shown in the statement to the bank. The Tribunal also found that the assessee's stock revealed the stock of cotton seeds of only 2,457 kilograms as on March 25, 1969 as against 1,20,000 kilograms shown in its statement to the bank. The Tribunal noted that admittedly the assessee had taken advances on cotton bales, unginned cotton and cotton seeds. The u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in rejecting the explanation of the assessee ? 4. Whether the Tribunal was justified in holding that there was no satisfactory evidence on record to substantiate the explanation of the assessee ? The crucial problem with which we are concerned is, as to whether the Tribunal was right in upholding the addition of Rs. 94,000 being the value of 1,17,543 kilograms of cotton seeds as unaccounted purchases. In other words, whether the Tribunal could have reached the conclusion that the Income-tax Officer was right in adding the amount of Rs. 94,000 being the value of unaccounted purchases. The bone of contention between the assessee and the Revenue is that there is no evidence worth its name to draw an inference that the stock of cotton seeds weighing 1, 17,543 kilograms as hypothecated with the bank on March 25, 1969, was unaccounted for. We should, therefore, reiterate the facts which have been found by the Tribunal. 1. On March 25, 1969, the assessee had hypothecated 1,20,000 kilograms of cotton seeds with the Bank of Baroda. 2. As on that date, that is, March, 25, 1969, the assessee's stock register revealed that it had a stock of cotton seeds of only 2,457 ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be pressed into service so as to warrant the inference drawn by the Tribunal. Two circumstances of negative character have been emphasised by the Tribunal. Firstly, there were advances on hypothecation of the unginned cotton and, secondly, that there was no evidence to indicate that the advance on unginned cotton was not available to the assessee. We fail to understand as to how from these two circumstances, if at all these can be said to be circumstances and apart from the evidence which has been produced by the assessee to show otherwise, an inference can reasonably be drawn that this quantity of 1,17,543 kilograms of cotton seeds were unaccounted for. As a matter of fact, the assessee has produced evidence to show that its (overdraft) limit was exhausted and, therefore, till the assessee secured to the bank by hypothecating further quantity of goods, no additional advances were possible. The assessee had produced a certificate from the Agent of Porbandar Branch of the Bank of Baroda to show that the limit granted for advances in cash credit account of the assessee was exhausted. The certificate is dated August 27, 1973, and it reads as under: "This is to certify that M/s. U ..... X X X X Extracts X X X X X X X X Extracts X X X X
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