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2016 (9) TMI 17 - GUJARAT HIGH COURT

2016 (9) TMI 17 - GUJARAT HIGH COURT - TMI - Addition on account of difference in stock statement as furnished before the bank and the stock recorded in the books of account - Held that:- As in the case of Riddhi Steel and Tubes (2013 (10) TMI 291 - GUJARAT HIGH COURT ) it is held by this Court that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference betwee .....

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asis, when the stock statement had reflected inflated value of the stock, in wake of otherwise satisfactory explanation, both - for the purpose of value as well as quantity and taking into account the actual non verification of stock, we find no reason to interfere with the order of the Tribunal. We hold that the Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account. Decided in fav .....

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venue has preferred the present Tax Appeal. 1.1 This appeal was admitted by this Court on 04.05.2010 for consideration of the following substantial question of law: Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law and on facts in deleting the addition of ₹ 59,00,659/- made on account of difference in stock statement as furnished before the bank and the stock recorded in the books of account 2. The issue involved in this case is a .....

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an addition of the difference pertaining to the month where the maximum difference was noted; treated the same as unaccounted investment in stock. On appeal before CIT(A) by the assessee, the CIT (Appeals) allowed the appeal filed by the assessee. 3. On appeal before the Tribunal by the revenue, by impugned order, the Tribunal upheld the decision of CIT(A) and confirmed the deletion of addition. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the revenue has pre .....

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not on the factum of difference in the quantity of the stock shown in the books of account and in the documents furnished to the banking authorities for the purpose of availing credit facilities/loan. However, this version is not acceptable in as much as the Tribunal has noted that there was no physical verification of the stock by the banking authorities as on 31st March 2009. Although much reliance was placed by the Assessing Officer and CIT [A] on the godown visit by the Bank Manager after c .....

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tails of raw materials, finished goods and semifinished goods. 9.1 Again, the Court cannot be oblivious of the fact that the assessee had been subjected to statutory audit under the Companies Act, 1956 and also tax audit under the Income-tax Act. No errors were found at any stage in the report submitted by these auditors and for the past eight years, the assessee had been following continuously/consistently the method of accounting, as provided under section 145 of the Act, valuing the closing s .....

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he assessee to be true, correct; except finding few discrepancies in so far as inventory is concerned. 9.2 It is a settled law, as rightly held by the Tribunal, that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. If, for the purpose of fulfilling the .....

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mpathetically that after giving effect to the additions made by the Assessing Officer, the financial statement would get completely distorted; if such inclusion/ addition as made by the Assessing Officer is allowed to continue. 5. Similarly, another identical issue had come up before this Court and this Court vide judgement and order dated 19.11.2014 rendered in Tax Appeal No. 198 of 2003 in the case of CIT vs. Sharp Springs & Stapples Co. (P) Ltd observed as under: 10. Insofar as question n .....

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ssessee has duly discharged the onus of explaining the excess stock and the CIT(A) was justified in deleting the addition. 11. In our opinion, no illegality has been committed by the Appellate Tribunal by allowing the deletion. Hence, question no.2 is answered in favour of the assessee and against the Revenue. 6. Mr. P.G. Desai, learned advocate on behalf of the revenue is not in a position to dispute the above and is not in a position to show and/or point out any contrary decision. He is not in .....

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