TMI Blog2015 (3) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... with the order of the ld.CIT(A). Therefore, respectfully following the ratio laid down in the judgement of the Hon’ble Jurisdictional High Court in the case of CIT vs. Veerdip Rollers P.Ltd.(2007 (10) TMI 376 - GUJARAT HIGH COURT), this ground of Revenue’s appeal is rejected. - Decided in favour of assessee. - I.T.A. No.2449/Ahd/2011 - - - Dated:- 19-3-2015 - G.D. Agarwal And Shri Kul Bharat JJ. For the Appellant : Shri M.K. Singh, Sr.DR For the Respondent : -None- ORDER Per Shri Kul Bharat, JUDICIAL MEMBER : This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-VI, Ahmedabad ( CIT(A) in short) dated 01/07/2011 pertaining to Assessment Year (AY) 2005-06. The Revenue has raised the following grounds of appeal:- 1. The ld.CIT(A) erred in law and on facts in deleting the addition in respect of undisclosed stock of ₹ 32,42,815/-. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above, since the assessee has failed to disclose his true income. The appellant prays that the order of CIT(A) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was purchasing the spare parts directly from the Principal Company Eicher Motors Ltd and selling the same to the various parties as a distributor. However from A.Y.2005- 06 i.e. year under assessment onwards the principal company Eicher Motors Ltd. changed the policy decision and decided to appoint a Consignment Agent instead of a distributor who sells the goods to the various parties including the assessee company. (iii) The Principal Company Eicher Motors Ltd. therefore requested the assessee company's group to form a new entity which should work as its consignment agent. The group therefore established a new entity namely Auto Agency , a partnership firm w.e.f. 14/05/2004 to act as consignment agent of the principal company Eicher Motors Ltd. (iv) That on formation of the Consignment Agent, the Principal Company Eicher Motors Ltd. started supplying the spare parts to Auto Agency instead of the assessee company and now the assessee company has to purchase the spare parts from Auto Agency as per its requirement. (v) That on the formation of Consignment Agent, the position of stock changed and major stock was now lying with Auto Agency instead of the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records and no defects have been found either in the books of accounts or the accounting system followed by the assessee company during the course of regular assessment proceedings u/s. 143(3) of the Act by the then assessing officer for the year under consideration. The assessee company during the course of regular assessment has also furnished the month wise details of purchase sales in terms of quantity as well as in value as per Page No. 2 of Exhibit -2 of letter dated 05/12/ 2007. Not only that the assessee company has also submitted the month wise details of purchase and sales of some of the high value items both in terms of quantity and value vide Page No. 12 to 16 Of Exhibit -3 of letter dated 07/12/2007. No discrepancies have been brought on record by the then assessing officer in respect of the quantitative details furnished by the assessee company during the course of original assessment proceedings. 4. It may not be out of place to mention here that there is not an iota of evidence to suggest that there is a case of purchase or sale outside the books of account resulting in such excess stock. Thus, no credence is required to be given to the stock statement furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent years i.e. A.Y.2004- 05 and A.Y.2006-07, the stock statement submitted to the bank reflects less stock then the stock shown in the books of accounts. Does this mean that the stock submitted to the bank is the correct stock? Will the department accept such position and reduce the income of the company for such years. A yet another question arises as to whether the A.O. will adopt the figure of closing stock taken by him during the year as opening stock for subsequent year since if this figure is considered along with the figure of closing stock figure submitted to the bank in subsequent year which is less than the book stock, then it would result in loss in such subsequent year. Will the department work out such loss and allow the same as against profit shown as per books? This is to bring home the point that the stock statements furnished to the bank are merely a formality to meet with the terms of the bank as stated hereinabove and are based on estimates rather than the actual position. It is to further contend that if your honour intends to rely on the stock statements furnished to the bank then as stated hereinabove the same criteria requires to be adopted for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts discussed by the Tribunal there was no reason to hold that the finding of the Tribunal was perverse. CIT v. Hindustan Marble (P.) Ltd. (2009) 179 Taxman 289 (Guj.) The assessee was the owner of mines at different sites from which it was extracting marble blocks. Such marble blocks were converted into slabs and marble tiles were manufactured from such slabs. On the basis of a common inventory of the assessee and other two concerns, the Assessing Officer worked out the discrepancy in stock of marble, marble slabs and marble files and made additions by stating that the discrepancy could not be reconciled. On appeal, the assessee accepted that the discrepancy in relation to the marble blocks could not be reconciled. However, insofar as the discrepancy in the stock of marble slabs and marble tiles was concerned, the assessee submitted that the deficit in the stock of slabs would be taken care of by surplus in stock of marble tiles because tiles were manufactured from slabs. The Commissioner (Appeals) rejected the assessee's contention and upheld the order of the Assessing Officer. On second appeal, the Tribunal sustained the addition in respect of shortage of mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the hypothecation of stock and the valuation of the stock declared to the bank was higher than the actual stock available in the books of account and this inflation of the stock was done by the assessee to obtain higher credit limit from the bank. The Assessing Officer had not brought on record any evidence to show that the assessee was in fact in possession of higher quantity of stock. Therefore, on mere comparison of the stock declared to the bank and the one shown in the books of account, addition could not be made of the difference between the two. Thus, the addition was to be deleted. In view of above facts, submissions and details coupled with legal position laid down by various courts of law, the impugned addition of ₹ 32,42,815/-requires to be deleted. 5.1. After considering the aforesaid submissions, the ld.CIT(A) given a finding in para-4.3 of his order, by observing as under:- 4.3 I have considered the facts of the case; assessment order and appellant's submission. Assessing officer made additions on account of unaccounted stock on the ground that amount of the stock disclosed to bank was higher. The stock statement given to the bank did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) made by the assessing officer cannot survive. Respectfully following the decision of jurisdictional High Court in the case of CIT v. Arrow Exim (P) Ltd [2010] 230 CTR 293 and other decisions quoted by the appellant, the addition made by the AO is deleted. In the final result appeal is partly allowed. 5.2. The Revenue has not disputed the fact that there is no discrepancy with regard to quantitative details of the stock items. The only difference is with regard to adopting the value of closing stock. We find that before the ld.CIT(A), the assessee has placed reliance on the judgement of Hon ble Jurisdictional High Court rendered in the case of CIT vs. Arrow Exim (P.) Ltd. reported at (2010) 230 CTR 293 (Guj.) and of CIT vs. Veerdip Rollers (P.) Ltd. reported at (2010) 323 ITR 341 (Guj.). The Hon ble Gujarat High Court in the case of CIT vs. Veerdip Rollers P. Ltd. has held as under:- 3. The issue raised in this question is whether there can be any addition on account of difference in the value of closing stock furnished to the bank and the value of the stock found in the books of account furnished to the IT authorities. The Tribunal has dealt with this aspect in para 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has held : 'Addition could not be made on the basis of difference between closing stock declared in the trading account and the stock shown in the statement submitted by the assessee to the bank as the stock position shown to the bank was on estimate basis and inflated value was shown to avail of more credit from bank'. Their Lordships have applied the decision of CIT vs. N. Swamy (2000) 241 ITR 363 (Mad). In view of the above, there is no justification for making any addition on the allegation of inflated stock shown to the bank. We may mention here that this Bench had occasion to deal with identical issue in some cases and the same has been resolved in favour of the assessee. In the case of Dy. CIT vs. Patidar Silica (P) Ltd. in ITA Nos. 2104 and 388/RJT/2004 dt. 30th Nov., 2005; in the case of ITO vs. Sphykar Aluminium Extrusion (P) Ltd. in ITA No. 626/RJT/2004 dt. 26 Nov., 2005, this Bench of the Tribunal has deleted similar addition. The CIT(A) has sustained the addition at 10 per cent, of the excess stock of ₹ 80,25,662 (i.e., ₹ 1,42,86,870 the stock as per the bank statement minus ₹ 62,61,202 as shown in the regular books of account. In view of ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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