TMI Blog2013 (12) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... e and that too in respect to only one of the items namely the 'zinc' - Decided against Revenue. - Income Tax Reference No. 94 of 1998 - - - Dated:- 6-8-2012 - Hon'ble Sunil Ambwani And Hon'ble Aditya Nath Mittal,JJ. ORDER 1. We have heard Shri Shambhu Chopra, learned counsel appearing for the department. Shri R.S. Garg appears for the assessee. 2. Brief fact, giving rise to the reference, is set out as follows:- 3. The respondent-assessee is a private limited company engaged in the manufacture and sale of black steel tubes and galvanized steel tubes. For the year under consideration, it had filed its return declaring a loss of Rs. 2, 67, 520/-. The assessment was completed by the Income-tax Officer, Central Circle-IV, Kanpur (A.O) vide order under Section 143 (3) read with Section 144-B of the I.T. Act dated 25.9.1984 on a total income of Rs. 10, 92, 020/-. The AO made a major addition of Rs. 10, 78, 886/- on account of difference in respect of three items of stock in the stock statements submitted to the Hindustan Commercial Bank, with whom such stocks were hypothecated for availing the overdraft facility, and the stocks as per books of account. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, has been partially recalled (vide order dated 30.7.1993) and hence the reference application had become infructuous. 9. The assessee moved a misc. application for recalling the order of the Tribunal dated 8.9.1993, passed in R.A. No. 24 (Alld)/1991, on which the Tribunal by its order dated 22.12.1993 in M.A. No. 95 (Alld) of 1993, recalled its order dated 8.9.1993. 10. Against the order of the Tribunal dated 22.12.1993 in M.A. No. 95 (Alld) of 1993, the department filed a writ petition in High Court. By order dated 18.4.1994 in Civil misc. Writ Petition No. 392 of 1994, the Hon'ble Court stayed the operation of the Tribunal's order dated 22.12.1993, until further orders. 11. The appeal was restored by the Tribunal on the limited issue, by order in M.A. No. 67 (Alld) of 1991 dated 30.7.1993. The issue was decided by it vide its order dated 28.4.1995 in I.T.A. No. 445 (Alld) of 1992. Out of the addition of Rs. 10, 78, 886/-, made on account of difference in the value of three items of stocks, shown in the stock statements given to the bank and as per books of account, the addition of Rs. 6, 14, 720/- representing the value of difference in the stock of zinc, which was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shi Cotton Mill Co. Ltd v. Commissioner of Income Tax, 1989 (180) ITR 651 (All). In the first case this Court held that where the assessee-company carrying on the business of manufacturing yarn and cloth had disclosed a loss in its Pondicherry unit in the assessment year 1960-61, the ITO, from information gathered from the bank about the goods pledged, found that the goods pledged with the bank were in excess of the stock as per books and rejected the book result. Applying a gross profit rate at 10% on sales, the I.T.O, added a profit of Rs. 15 lakhs odd. The explanation given by the assessee was that its Chief Executive Officer at Pondicherry had inflated the value to obtain a large overdraft in the bank. The Tribunal accepted the explanation, but observed that the assessee had failed to furnish any particulars to justify the action of the Chief Executive Officer in regard to the entire discrepancy and maintained the addition for the year 1958-59. For the relevant assessment year 1960-61 the facts and circumstances were in pari materia. The High Court held that the finding recorded by the Tribunal, that the proviso to Section 13 of the Act of 1922 was applicable, had been arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his year is 9.7% as against gross profit of 9.4% in asstt. Year 80-81 and 7.7% in asstt. Year 79-80. Sales of the asseee have also increased in this year from last year. No other comparable case has been pointed out where the gross profit declared is more than the gross profit declared by the assessee. Books of accounts have been maintained. Purchases and sales are vouched, stock register maintained by the assessee gives reasonable details and, therefore, it cannot be said that sales have to be estimated and gross profit rate has to be applied." 19. Shri R.S. Garg submits that on the findings recorded by the CIT (A) there was absolutely no justification for ITAT to have added the maximum of the difference of stock of zinc. In the statements given to the bank and in the books, the ITAT has adopted a slipshod attitude in adding only one of the items, which shows that it did not apply its mind and added the difference of stock in one of the items without considering the question of law raised before it. 20. Shri R.S. Garg has relied upon CIT, Meerut v. Khan Sirohi Steel Rolling Mills (2006) 152 Taxman 224 (All) decided on 7.1.2005. In this case the Court held that where the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, it cannot be said that the sales have to be estimated and the gross profit rates had reconsidered. The CIT had found the gross profit to be progressive, and that no comparable case was pointed, where the profit was more in respect of the same industry comparable to the profits declared by the assessee. The statements given by the assessee to the bank for obtaining overdraft facility, in the practice prevalent to overstate the stocks to obtain overdraft facility could not be treated to add the entire difference and that too in respect to only one of the items namely the 'zinc'. The Tribunal further committed an error in partly allowing the appeal and substituting only Rs.6, 14, 720/- (the discrepancy in stock of 'zinc') without giving any reasons as to why if he had accepted the discrepancy in the stock of 'zinc', he ignored the discrepancy in the stock of 'black tubes' and 'galvanised tubes'. There was no reason given by the Tribunal for picking up of difference in the stock of 'zinc' alone demonstrating the departmental bias, to add something to justify the exercise of appellate powers. 24. For the aforesaid reasons, we decide the questions framed by the Tribunal in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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