TMI Blog2002 (7) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... f valuation and worked out a difference of Rs. 2,88,990 on 18 items, details of which are given in para 6 at page 2 of the assessment order. Assessing Officer finding that the figures given to the bank were on ad hoc basis, stock statement was not furnished by the bank and it was a case of hypothecation, books were duly audited, no defects in purchases and sales were there, made the impugned addition. Before learned CIT(A), it was submitted that the assessee was engaged in the business of manufacturing of various automobile plastic components being supplied to manufacturers of repute, i.e., Telco, Maruti, Bajaj, Escorts, Swaraj Mazda, Mahindra, etc. and these components were not sold in open market, therefore, no question of any stock outside the books arose. Regular books were maintained in accordance with the method of accounting consistently followed, g.p. and net profit were in accordance with the earlier years and no defects were pointed out by the Assessing Officer in the audited books. Stock statements were furnished to the bank on ad hoc basis just immediately after end of the month to comply with requirements of the bank without verifying the stock physically. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of stock will not affect profit of the assessee. Statement given to the bank is merely a formality and is not a conclusive proof for actual stock being held. Sales shown are duly accepted by the Assessing Officer, ST authorities and Excise authorities and no discrepancy in quantitative tally was found. Therefore, no addition is required to be made. In this regard, he relied on the following decisions, copies of which are placed in the paperbook: 1. Jai Sharda Rice Mills v. ITO [1991] 36 ITD 254 (Asr.) 2. Bansal Sons (India) v. ITO [1995] 53 TTJ (Chd.) 523 3. CIT v. Gopal Rice Mills [1994] 77 Taxman 581 (All.) 4. ITO v. Lavkush Hosiery Factory 37 CTR 71 (Chd.) 5. ACIT v. Lakshmi Printing Co. [1993] 46 TTJ (Chd.) 177 6. ITO v. Jiwan Singh Pritam Singh 46 TTJ 523 (Asr.) 7. ITO v. Jagdip Kanji Bhai [2000] 112 Taxman 280 (Ahd.) (Mag.). Learned DR, on the other hand, relied on the assessment order, particularly para 7 and submitted that there was lot of difference in value of stock as shown in hypothecation statment and closing stock statement. Addition has rightly been made by the Assessing Officer and sustained by learned CIT(A). He relied on their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this decision will also not assist the assessee. Lavkush Hosiery Factory ( supra ) - In this case, the assessee enjoyed overdraft facility but bank safeguarded its interest by obtaining equitable mortgage on title deeds of immovable properties and also by keeping in its custody the FDR of the same amount. Under these circumstances, the Tribunal held that furnishing of stock list was considered to be a formality by banks, therefore, hypothecation statement furnished to the bank on merely estimate basis cannot be relied and no addition can be made on the basis of hypothecation statement furnished. In the case before us, learned AR has drawn our attention towards page 14 of the paperbook, in which banks have written that the credit facility was duly secured by suitable mortgage of land and building. Therefore, furnishing of stock statement to bank may be regarded to be a formality and this case, in our view, will assist the assessee. Lakshmi Printing Co. ( supra ) - In this case, addition made by the Assessing Officer relying on the statement of hypothecation submitted to the bank, was deleted by the Tribunal because no discrepancy in account books was found at the end of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suitable mortgage of land and building belonging to the assessee. The assessee is maintaining regular books of account, books were duly accepted by the Assessing Officer, ST Department and Excise Department, no addition has been made by the Assessing Officer by rejecting the books, neither purchases/sales shown in the regular books are doubted. Stock as shown in the assessee s books is Rs. 9,88,280, while stock as per statement given to the bank is Rs. 7,13,395. Therefore, the assessee has shown stock at a figure higher by Rs. 2,73,855. We also find force in the submissions of the assessee that if value of closing stock is increased in the year, corresponding value of opening stock in succeeding year will also go up and thus, if any addition is made in the succeeding year, the assessee will get the benefit by claiming deduction of the same amount by increasing value of opening stock. Assessing Officer has not brought any material or evidence that the assessee has dealt in these goods outside the books of account. Until and unless such material is brought on record, the addition made in closing stock of one year will not upset the profitability over the period of various years. We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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