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2017 (1) TMI 1199 - AT - Income TaxAdditions towards difference in stock u/s 69B - Additions towards difference in closing stock based on the stock statement submitted to the bank - Held that:- A.O. made additions solely on the basis of stock statement, ignoring the deposition given by the bank manager in the cross examination proceedings. The bank manager clearly explained that he was satisfied with the utilization of the funds based on the scrap available at the factories purchased from the official liquidator by the sister concern and that he considered the said stock for the purpose of sanctioning the loan. The bank manager in the cross examination proceedings clearly retracted from his earlier statement that before the A.O., he had explained the general procedure followed for sanctioning open cash credit loan and further follow up action for verification of stock hypothecated to the bank without referring to the case of the assessee. In the cross examination proceedings, he has categorically admitted that the loan sanctioned to the assessee is a mortgage loan based on the security given by the partners and obtaining stock statement is only a procedural formality. Therefore, we are of the view that the A.O. was completely erred in relying upon the stock statement without pointing out any defects in the books of accounts. Though the A.O. has relied upon plethora of judgements to come to the conclusion that additions can be made towards difference in stock based on the books of accounts and stock statement submitted to the bank, the case laws relied upon by the A.O. are not applicable to the facts of the case. Thus we are of the view that the A.O. was erred in making additions towards difference in closing stock based on the stock statement submitted to the bank. The CIT(A) after considering the relevant details has rightly deleted additions made by the A.O. - Decided against revenue Addition towards gross profit on sales disclosed in the stock statement submitted to the bank - Held that:- we find force in the arguments of the assessee for the reason that the assessee has maintained regular books of accounts which were audited u/s 44AB of the Act. The auditor has not made any comments in respect of books of accounts and also valuation of closing stock. Therefore, we are of the view that there is no reason for the A.O. to reject books of accounts and estimate gross profit without referring to any discrepancies in the books of accounts in respect of sales as well as purchases. In so far as additions towards gross profit on the basis of stock statement, in the preceding paragraph, we hold that stock statement submitted to the banks cannot be considered as true and correct. Therefore, we are of the view that the A.O. was erred in estimating gross profit on the basis of sales disclosed in the stock statement. - Decided against revenue
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