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TMI Blog2008 (3) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement given to the bank and as per the books of account were justified?" 3. The Assessing Officer found, that in the balance sheet the assessee had shown the closing stock of the goods at a particular amount in different assessment years, while the statement submitted by the assessee to the Bank for the purpose of obtaining financial assistance, did also come to the notice of the Assessing Officer, wherein a higher valuation of the stock was given, and therefore, the Assessing Officer, after making certain calculation, added the different amounts, as income of the assessee from undisclosed source. In so making these additions, the learned Assessing Officer relied upon a judgment of Madras High Court, in Coimbatore Spinning and Weaving Co. Ltd. v. Commissioner of Income Tax, reported in [1974] 95 ITR 375. The assessee unsuccessfully assailed the order in appeal before the learned Commissioner Income Tax (Appeals), who negated the contention, though partly allowed the appeal, vide order dated 18.7.2002. The matter was further carried in appeal before the Tribunal. The learned Tribunal considered the matter from different aspects, as contended by the rival parties, with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ton had been declared to the bank, and an excess comes to 1,73,237 lbs. valued at Rs. 2,29,132, and the assessee's submission was, that the stock of all the varieties had to be taken together, on an overall basis, and if so taken, there was an excess of 6631 lbs. as per its books, that it is possible that it committed a mistake in declaring the quantity, in respect of each of the varieties of cotton, and so on. In that case, the explanation given by the assessee was not accepted by the authorities below, and the Madras High Court found it to be a question of fact, by holding, that the finding of the learned Tribunal that there were excess stock cannot be interfered with by the High Court, as it is exclusively a matter for the Tribunal to accept or reject the assessee's explanation, on the facts and circumstances of the case. Therefore, the rejection of the explanation was upheld by the High Court. 8. On the other hand, learned counsel for the assessee has relied upon the following judgments:- 1. Commissioner of Income Tax v. Relaxo Footwear [2003] 259 ITR 744 (Raj); 2. Commissioner of Income Tax v. Apcom Computers P. Ltd. [2007] 292 ITR 630 (Mad); 3. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to the branch office remained intact, and was hypothecated to the bank. Then, regarding 180 kgs of stainless steel sheets, the explanation was, that the entire material was damaged, therefore, it was shown as nil in the statement, but overdraft facility was availed by hypothecating the said stock with the bank. It was submitted by the assessee, that the stock was merely hypothecated with the bank, which means, that the goods remained in the possession and control of the assessee, and that they were not physically verified at the time of the hypothecation, in which regard the letter from the Bank Manager was also produced, which was relied upon by the learned Tribunal. The High Court dismissed the appeal, by finding all these conclusions to be finding of fact, not giving rise to any question of law. 11. Then, in Sri Padmavathi Cotton Mills' case (1999) 236 ITR 340 (Mad), again, the assessee showed in his return the closing stock as on 30.6.81 at 30851 kgs. of cotton and finished goods, whereas it had declared the closing stock at 31660 kgs. to the bank, for the purpose of obtaining loan. The value of the discrepant amount was Rs. 1,47,557, which was added. In that case the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaving Co.'s case [1974] 95 ITR 375 (Mad) were reproduced, and then it was found by the High Court to be little difficult to agree with those observations. It was found, that the assessee's income is to be assessed by the Income tax Officer on the basis of the material which is required to be considered for the purpose of assessment ordinarily, and not on the basis of the statement which the assessee may have given to a third party, unless there is material to corroborate that statement of the assessee given to a third party, even if it be a bank, rather the mere fact, that the assessee had made such a statement, by itself, cannot be treated as having resulted in an irrebuttable presumption, against the assessee. The burden of showing, that the assessee had undisclosed income, is on the Revenue, which cannot be said to be discharged by merely referring to the statement given by the assessee to a third party, in connection with a transaction, which was not directly related to the assessment, and making that the sole foundation, for a finding, that the assessee had deliberately suppressed his income. Then it was also found, that on the facts of that case (in Coimbatore Spinning and W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult of investigation, and details contained in the form of statement of stock, submitted to the bank, has reached a definite finding, that the statement to the bank was motivated one, and it did not reflect the true position of the stock position, but was rightly reflected in the books of accounts. 16. After a review of all the judgments cited at the bar, we are of the view, that of course, in Coimbatore Spinning & Weaving Co.'s case [1974] 95 ITR 375 (Mad)) it has been observed, that the alleged practice showing inflated figure to the bank is not recognised in commercial circles or by court, and the Tribunal is not expected to take judicial notice of such substandard morality, but then, the plethora of judgments cited on the side of the assessee, do clearly show, that there can be circumstances, where there may be difference in the quantity of stock, as appearing in the balance sheet, and as appearing in the hypothecation made to the bank, and that if there is any explanation coming forward for the discrepancy, then the addition need not be made, and that, sufficiency or reliability of the explanation, offered by the assessee, is a question of fact, and the findings thereon, as r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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