TMI Blog2010 (11) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... main in the possession of the assessee. Therefore, the burden is on the assessee to prove that what was stated in the stock statement submitted to the bank was not correct and what is existing in the books is the real state of affairs - Held that: onus shall lie upon the assessee to prove as according to sworn statement submitted to bank, the assessee has submitted the quantity of stock on the strength of which it has drawn the money from the bank - Decided in favour of the assessee by way of remand to CIT(A) - ITA No. 3803/Del/2008 - - - Dated:- 30-11-2010 - G.E. Veerabhadrappa, I.P. Bansal, JJ. Arvind Sonde, Adv., for the Appellant Ashok Pandey, CIT, DR, for the Respondent ORDER I.P. Bansal: This is an appeal filed by the assessee. It is directed against the order of the CIT (A) dated 3rd November, 2008 for assessment year 1999-2000. Grounds of appeal read as under:- 1. The CIT (A) has erred in confirming the reassessment u/s 147 of the Income Tax Act, 1961 by the Assessing Officer, the reassessment is wrong and bad in law in the facts and circumstances of the assessee's case and the same should be cancelled. 2. The Ld. CIT (A) has failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment from the bankers of the assessee that the assessee company was showing less stock in the books as compared to the stocks pledged with the Central Bank of India, Basti, where the assessee was having cash credit limit account. It was found that there was understatement of stock of 87191 bags of sugar as the quantity of stock pledged with the bank was in excess of what appeared in the books of account of the assessee. Accordingly, notice u/s 148 dated 28th March, 2006 was issued requiring the assessee to file the return of income in response to which return declaring nil income after adjusting the brought forward losses was filed on 12th May, 2006. It was noticed by the Assessing Officer that the assessee had pledged the stock of sugar of 398125 bags of a quintal each. However, as per the books of the assessee, the closing stock was 310934 bags. Thus, it was found that there was understatement of 87191 bags of sugar. In response to query raised by the Assessing Officer, it was submitted that the closing stock was as per books of the assessee at 310934 quintals which was valued at Rs.4,314.10 lacs and it was submitted that the said quantity and value was also as per record maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books is only Rs.4,314.10 lacs consisting of 310934 bags, thus, there was difference of 87,191 bags, the value of which comes to Rs.1,139.05 lacs and since the assessee has not been able to establish that the quantity of stock reported to the bank was not the correct quantity available with it as on 31st March, 1999, the higher stock reported to the bank represents the correct quantity of stock available with the assessee at the close of the year. Thus, the excess stock of 87,191 bags of sugar was held to be the stock which was manufactured and sold outside the books of account and the assessee was considered to have undervalued the stock to that extent. It is in this manner, an addition of Rs.11,39,05,000/- was made. After adjustment of brought forward losses the income has been assessed at nil. The matter was carried in an appeal filed before the CIT (A). 5. Before the CIT (A), the main contention of the assessee was that its books of accounts are audited and production records of sugar were regularly submitted to various governmental authorities like Directorate of Sugar, excise authorities and others. In Form 3CD for the year 1999-2000 the assessee has shown the closing sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning and Weaving Ltd. vs. CIT 95 ITR 375 (Mad) iv) India Motor Parts and Accessories Pvt. Ltd. vs. CIT 60 ITR 531 (Mad). 6. Ld. CIT (A) has confirmed the addition made by the Assessing Officer on the ground that the difference in stock was not explained by the assessee with any irrebuttable evidence. Ld. CIT (A) referred to the decision of Karnataka High Court in the case of Recon Machine Tools Pvt. Ltd. vs. CIT 286 ITR 637 (Kar) wherein it was held that particulars of closing stock declared to the bank was an acceptable evidence and the addition could be made after taking into consideration the statements furnished to the bank and he observed that the facts of the assessee's case are similar to the facts of that case. Ld. CIT (A) has also rejected the submission of the assessee that the opening stock also should be taken as per bank statement on the basis of the following decisions:- i) CIT vs. Mopeds India Ltd. 173 ITR 347 (AP) ii) Melmould Corporation vs. CIT 202 ITR 789 (Bom). 7. In this manner, Ld. CIT (A) has confirmed the addition. The assessee is aggrieved, hence, in appeal. 8. Ld. AR, after narrating the facts, pleaded that even though the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 398,125 87,191 114 and 119 Hence, even if bank statements are to be considered, it is clear that the difference of 87188 Qtls. Out of 87211 Qtls lies in the opening stock. Hence to that extent, no addition can be made in the A.Y. 1999-2000. 2. Following is the reconciliation of the company's A.Y. 1999- 2000 year finish stock manufactured during the year with the excise records (R.G.-1) and also with the Bank Records (also provided at page No.118 of the paper book). Reconciliation of Finished Stock of A.Y. 1999-2000. Particulars Qty. (In Qtls) Qty. (In Qtls) Paper Book Page No. to be referred. Stock as per Excise Records Finishing Room 456 Page No.11 Bonded Store Room 226691 227147 Page No.11 Less: BISS/Brown Sugar 2164 Page No.11 Stock as per Bank Records 224983 Page No.119 Hence, the company's finished stock for A.Y. 1999-2000 is fully reconciled with the Bank Records and also with the Excise Records. Whatever difference exists due to the Bank Records, it is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year can be made on the company. 5. Following is the Reconciliation of Excess Stock as per the Bank Stock statement with the Books of Account (the same is also provided at page no.136 of the paper book). Reconciliation of Excess Stock as per the Bank Stock Statement with the Books of Account: Particulars Qty. (In Qtls) Qty (In Qtls) Paper Book Page No. to be referred Finished stock of sugar of F.Y. 1997-98 (as per Bank Statement) as on 31.03.99 (A) - Free Sugar 70,006 Page No.119 - Buffer Stock 18,878 88,884 Pg No.119 and 120 Finished Stock of Sugar of F.Y. 1997-98 (as per Books of Accounts) as on 31.03.99 (B) - Stock of Sugar 89,201 Page No.10 Less: BISS Stock 3,250 85,951 Page No.128 Non-existing Stock of Sugar for F.Y. 1996-97 (A- B) 2,933 Non-existing Stock of Sugar for F.Y. 1996-97 84,258 Pg No.119 and 120 Non-existing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee want to rely upon are submitted at pages 118 to 138 of the paper book which document as stated in the index are as under:- 1. Reconciliation of Current Year Finished Stock as per Excise records (R.G-1) and Bank Records. 2. Stock Statement as per Central Bank of India as on 31.03.1999. 3. Stock Statement as per Central bank of India as on 31.03.1998. 4. Copy of the Excise Records (RG-1) of the season 1996-97 in order to show the verification of stock of sugar by the Excise officials on 01.06.1998. The entire stock was finished by 23.03.1999. 5. Copy of the Excise Records (RG-1) of the season 1997-98 in order to show the quantity of closing stock of BISS/Brown Sugar. 6. Copy of the Excise Records (RG-1) of the season 1998-99 in order to show the verification of sugar stock by the Excise officials on 27.02.1999. 7. Reconciliation of stock with the excise records. 8. Copy of Form RT-8 (C) of the Excise Records for F.Y. 1998-99 9. Reconciliation of Excess Stock as per the bank Stock Statement with the Books of Account. 10. Copy of the Letter of Authority in favour of Chaturvedi and Shah. 10. On the other hand, it was vehementl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the bank. It is not a case of simple hypothecation where goods remain in the possession of the assessee. Therefore, the burden is on the assessee to prove that what was stated in the stock statement submitted to the bank was not correct and what is existing in the books is the real state of affairs. It is a matter of fact and is to be verified after making proper verification not only from the record of the assessee, but also by examining the bank officials, etc. to ascertain the truth. In the present case, it is the main case of Ld. AR that in the stock statement submitted to the bank as on 31st March, 1998 and 31st March, 1999, the opening stock relating to season 1996-97 had remained the same and which only is the reason for difference in the stock submitted to bank and stock existing in the books of account. However, it is seen that the copy of stock statement submitted by the assessee as on 31st March, 1998 is not even signed by the assessee whereas the initials of bank godown keeper are existing. Therefore, presently, as the said statement is not a certified statement, evidentiary value cannot be attached to that statement unless it is got verified from the bank. It has al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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