9911796707
TMI Blog1985 (5) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... s steel sheets and stainless steel utensils. The position according to the bank statement was that the stock of stainless steel sheets was 180 kgs. valued at Rs. 11,160 whereas according to the assessee's books of account, there was no stock of sheets at all. The stock of utensils was 3,201 kgs. as per bank's statement whereas the same was only 455 kgs. in head office and branch office both. Further, it was found that there was no stock of moulding leather rings, nut bolts valued at Rs. 17,650 as per bank's certificate. According to the books of account, there was no such stock at the relevant time. On account of this discrepancy, the ITO directed the assessee to explain as to why the value of the difference in the stock showed in the statement furnished to the bank and the books of account should not be added as income of the assessee from undisclosed sources. 3. In response to the service of a show-cause notice, the assessee vide its letter dated26-3-1983explained as under : " In response to your kind enquiry regarding the alleged discrepancy between the stock statement rendered to the State Bank of India and the actual stock position with us, it is submitted that the actual qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch was not known to the head office and the partners of the firm were not aware that the outstanding amount from the branch was not invested in stocks but was in the form of trade debtors. All these facts do clearly indicate that the assessee was having stocks outside the books. The value of the same is as under : i. Stainless steel sheets (180 kgs.) Rs. at the rate of Rs. 62 per kg. 11,160 ii. Stainless steel utensils 1,845 kgs. (2,301-455) at the rate of Rs. 80 per kg. 1,47,600 iii. Moulding rent, leather rings and nut bolts, etc. 17,650 -------------------- 1,76,410 -------------------- The aforesaid amount of Rs. 1,76,410 was, therefore, proposed to be added as the assessee's income from undisclosed sources. It was contended by the assessee before the learned IAC,Ghaziabad, that as far as parts are concerned, the ITO has completely overlooked the fact that it is a manufacturing concern and the components were used for the manufacture of pumps from1-3-1979to31-3-1979. It was further contended that the limit granted by the bank was against hypothecation of goods, and a charge against the machinery. The custody of goods remained with the assessee and only hypothetical char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to moulding, etc.]. " Consequently, the ITO made the addition. 4. Being aggrieved with the order of the ITO, the assessee took up the matter in appeal. Inter alia, it was explained that the appellant manufactures stainless steel utensils at Bulandshahr and it has sales office atDelhi. After the utensils were manufactured, they were transferred toDelhifor sale. The appellant debits the price of the goods to the branch office and on receipt of money representing the sale proceeds, necessary credit was given to the branch. On28-2-1979, a sum of Rs. 3,80,446.40 was due as outstanding from theDelhibranch on account of goods supplied to the branch. No sale statement or information had been received by the appellant from the branch at the head office at Bulandshahr. It was claimed by the appellant that it was under a genuine and bona fide belief, in the absence of any information of sales from the branch, that the goods had not been sold by the branch office and that these were in stock-in-trade atDelhi. On the basis of the above understanding, the stock position as on28-2-1979was declared by the appellant to the bank. It was also claimed that no one from the head office has visited the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of stocks disclosed by the assessee in the bank on28-2-1979becomes an incorrect figure. It was for the assessee to prove the discrepancy but no convincing material was produced by the assessee. The stock registers produced by the assessee are not reliable because they were not regularly maintained. Even they were not signed by the proper authorities at the time when the statement was submitted to the bank regarding the position of the stocks of the assessee. Many papers in the said stock registers are lying unused. Thus, it was submitted that the addition made by the ITO was perfectly supported by the material on record but the learned Commissioner (Appeals) deleted the same on insufficient grounds. The decisions relied on by the Commissioner (Appeals) are not applicable on the facts of the case. In those cases, the High Court proceeded with the finding of facts arrived at by the Tribunal. 6. The counsel for the assessee supported the order of the Commissioner (Appeals). Mainly, it was submitted that there was no understatement and there was no discrepancy between the stock of statement given to the State Bank ofIndiaand the actual stock in possession with the assessee. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. and 525.600 kgs., respectively. The statement to the bank was given regarding the stocks of the head office and the branch office as on28-2-1979. When the stock was disposed of in the branch on the aforesaid dates and particularly after3-2-1979and14-2-1979, it does not stand to reason why on28-2-1979, those sales in the branch office could not be noticed by the assessee at the time when the statement was given to the bank. 9. We may point out that distance between head office at Bulandshahr and branch office atDelhiis not far off and the stock position of the branch can easily be verified and known from Bulandshahr within few hours. On the face of such facts, it can hardly be believed that when the statement to the bank was furnished regarding the stock position of the articles concerned, it does not stand to reason that the assessee was not aware about its stock position with the bank at that time. Even the bank in their letter dated7-8-1982clearly stated that the stocks were inspected, inter alia, on28-2-1979. The material on record, however, does prove that on behalf of the bank the inspection of the stocks was made regularly. This is also clear from the certificate given b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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