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2009 (9) TMI 83 - AT - Income TaxAddition u/s. 69 - Addition on difference in the value of closing stock - Assessee is in the business of manufacturing of woollen and shoddy yarn and has taken loan against hypothecation of stock and debtors - As per assessee AO made the addition mainly by recasting the trading account for a brief period of 10 days from 22nd March, 2005 to 31st March, 2005, whereas the assessee is a partnership concern and is engaged in woollen shoddy yarn manufacturing and dealings - CIT(A) deleted the impugned addition mainly on the reasoning that the addition on account of difference in stock given to the bank and as per books may be made when it is clear on the basis of the facts of the case that the quantity of the stock given to the bank was higher than the quantity as per the books and the stock was either pledged or counted and verified by the bank officials but in a case where difference in the quantity of stock does not exist and the stock is neither pledged nor verified by the bank officials then no addition can be made. HELD THAT:- As we find that in the instant case it is not in dispute that the credit facility was extended by the bank to the assessee against hypothecation of stock and the valuation of the stock declared to the bank was higher than actual stock available in the books of accounts and this inflation of the stock was done by the assessee to obtain higher credit limit from the bank. Hence, in our opinion on the basis of the case law the CIT(A) in a well-reasoned order has rightly deleted the impugned addition because in the instant case the AO has not brought on record any evidence to show that the assessee was in fact in possession of higher quantity of stock, therefore, mere comparison of the stock declared to the bank and the one shown in the books of accounts the addition could not be made on the difference between the two. Accordingly, the order of CIT(A) in deleting the impugned addition is upheld and ground of appeal taken by the Revenue is rejected. Appeal filed by the Revenue is dismissed.
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