2005 (7) TMI 100 - HC - Income Tax

Difference between the stock value shown in account and value disclosed to the bank - Assessee submission that inflated figure in the balance-sheet & P/L A/c was in order to get the bank credit facility, is acceptable - Tribunal rightly uphold the order of CIT that the difference between the stock value shown in the books of account of the assessee and value disclosed to the bank was not assessable to tax as deemed income - Tribunal was correct in granting renewal of registration to the firm

Summary

Issues:
1. Assessment of difference between stock value in books and disclosed to bank as deemed income for tax.
2. Granting renewal of registration to the firm.

Analysis:

Issue 1:
The case involved the assessment of the difference between the stock value shown in the books of the assessee and the value disclosed to the bank as deemed income for tax purposes for the assessment years 1981-82 and 1982-83. The Assessing Officer found discrepancies in the stock values, with the assessee showing inflated figures to the bank to avail of higher credit facilities. The Appellate Commissioner deleted the additions, emphasizing that without physical verification and certification of stock, the version of the assessee could not be disregarded. The Tribunal upheld this decision, noting that the bank did not physically verify the stock and no credit facility was allowed based on the balance-sheet. The Tribunal found the addition unfounded and without evidence, citing relevant case law to support its decision. The High Court concurred with the Tribunal's findings, stating that the decision was based on factual evidence and not perverse.

Issue 2:
Regarding the renewal of registration to the firm, the Tribunal's decision was upheld by the High Court. The Tribunal and the authorities found no error in granting renewal, and the High Court agreed with their assessment. The Court noted that no error was pointed out by the Revenue in the Tribunal's decision to grant renewal of registration to the firm. Therefore, the questions referred were answered in favor of the assessee and against the Revenue, with no order as to costs.

In conclusion, the High Court upheld the decisions of the Appellate Commissioner and the Tribunal regarding the assessment of deemed income from stock value differences and the renewal of registration to the firm. The Court found no errors in the Tribunal's decisions and ruled in favor of the assessee on both issues.