TMI Blog1973 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding year. Later, on April 11, 1957, a revised return was filed showing a loss of Rs. 28,29,632. The Income-tax Officer considered the trading results of the assessee separately for the two periods, one ending June 30, 1953, and the other from July 1, 1953, to December 31, 1953. He found that the consumption of stores as per the assessee's books for Rs. 4,17,884 was somewhat excessive, that some of the items of purchases of stores could not be verified, that some of the purchases have not been entered in the stock book, and that the marginal notes entered in the store receipt books showed that many items of stores had been diverted to the personal use of the managing agents. He also found that the assessee had obtained loan facilities (both open and key loans) from the Central Bank Ltd., the Canara Bank Ltd. and the Punjab National Bank Ltd. by pledging cotton stocks. The cotton pledged with these banks and the stocks as per the assessee's books as on June 30, 1953, were as under : ---------------------------------------------------------------------------------------------------------------------------------------------- As per the As per bank assessee's statement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved and that a part of the stores purchased had been diverted to non-business purposes. He, therefore, held that an addition of Rs. 50,000 was justified under this head. Regarding the cotton purchases, he agreed with the Income-tax Officer that the purchases made from one Ramaswami Naidu had been inflated. He, therefore, estimated such inflation at Rs. 75,000. With regard to the difference in the cotton stocks, he considered it impossible that the banks would have accepted the assessee's declaration of stocks without proper verification and, therefore, held that the stock declarations made to the banks should be taken to be true and correct and that the value of cotton stocks suppressed would come to Rs. 2,29,132. Thus, the Appellate Assistant Commissioner reduced the additions from Rs. 5,00,000 to Rs. 3,55,000 made up as under : Rs. Inflation under store 50,000 "cotton 75,000 Difference in stock 2,30,000 The assessee appealed further to the Appellate Tribunal. The Tribunal reduced the addition under inflation of cotton to Rs. 50,000, but upheld the other additions. The assessee has sought a reference to this court only as against the addition of Rs. 2,30,000 being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was less than the total stocks on hand, that the banks do not normally make physical verification of the stocks, and, therefore, it was possible for the assessee to get more overdraft facilities by declaring larger stocks of cotton than the actual stocks on hand. The question is how far the assessee's explanation is acceptable. Admittedly an excess stock of C.O. 4 and Cambodia cotton had been declared to the banks and such an excess comes to 1,73,237 lbs. valued at Rs. 2,29,132. The assessee's submission is that the stocks of all the varieties had to be taken together on an overall basis, and if so taken, there was an excess of 6,631 lbs. as per its books, that it is possible that it committed a mistake in declaring the quantities in respect of each of the varieties of cotton and that C.O. 4 commodity of cotton was a controlled commodity and as such stocks of the magnitude shown in the declarations made to the banks would be out of question, He also pointed out that the department itself accepted the overall stock position as revealed by the books of account as on December 31, 1958, and that the something would have been done even during the year in question, The Tribunal was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeded to make the additions for each defect will not lead to the fact that the assessee's books of account were acceptable as regards the stock position. Having regard to the assessee's own statements given to the banks which show a larger stock of cotton in respect of C.O. 4 and Cambodia than had been actually shown in the account books, it cannot be said that the rejection of the stock account of the assessee is not warranted, so long as the assessee's explanation that the stocks were purposely inflated for the purpose of getting higher overdraft facilities from the banks had not been accepted. The learned counsel for the assessee points out that the assessee's explanation that the stock of C.O. 4 and Cambodia cotton were inflated for a specific purpose has to be considered in the light of the following facts. The assessee is not a dealer in cotton and he is only a manufacturer of yarn and cloth. If the excess cotton had been utilised in the manufacture of yarn, the out-turn would have indicated the true position. The assessee is regularly maintaining the mixing books and if the excess stocks had been there, the mixing books would have indicated as to how the excess cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account books is rejected, it automatically follows that the receipts are income, that whether an explanation is acceptable and whether it should be inferred that the receipts constitute income are different aspects of the same question, and that the question as to whether the receipts constituted income or not had to be decided on a consideration of all the facts and circumstances of the case. It is true that the decisions referred to above establish the position that it is for the revenue to show that a particular receipt is an income, that whether the explanation given by the assessee as to the source of that receipt is acceptable or not is primarily a matter for the Tribunal and that the explanation of the assessee as to the source from which the receipts had been obtained had to be considered in the light of all the facts and circumstances. The assessee, relying upon these decisions, points out that the Tribunal was not justified in drawing the inference that the excess stocks of cotton should represent the assessee's income, merely because the assesssee's explanation that there were no excess stocks was not acceptable. But, as pointed out by the Supreme Court in Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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