TMI Blog2008 (3) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... 3)/250 of the Income Tax Act by the Assessing Officer. We need not go into other aspects of the assessment order, and would better like to mention the facts only about the precise question involved in these appeals, on which these appeals have been admitted being:- "Whether in the facts and circumstances of the case, the additions made in the income of the assessee by the Assessing Officer on account of difference in the stock valuation as per statement 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 Wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake judicial notice of such substandard morality. A heavy burden is on the assessee to prove, that the account books alone give a correct picture. In that case, the assessee had hypothecated stock to the bank, being a case of pledge, and there was considerable discrepancy between the stock of cotton as per the assessee's books of accounts, and the stock declared to the bank. The High Court in that case had noticed, that admittedly excess stock of C.O.4, and Cambodia cotton 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 matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f stainless steel sheets, and 455 kgs. of stainless steel utensils. The Income tax Officer made addition, which was deleted by the Commissioner, as well as the Tribunal. The explanation submitted by the assessee was, that the head office had transferred stock worth Rs. 3,80,446 to the branch office, which was sold by the branch office till the date of hypothecation, but the statement of account was not sent by the branch office to the head office, and therefore, the head office remained under impression, that the stock transferred 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 lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee from the bank was not on key loan account, and that, no verification was made by the bank officials, of the stock disclosed by the assessee, that there was no material to show, that the assessee had undisclosed income, the Tribunal found the judgment in Coimbatore Spinning and Weaving Co.'s [1974] 95 ITR 375 (Mad) case to be distinguishable. Before the High Court again, strong reliance was placed on Coimbatore Spinning and Weaving Co.'s case [1974] 95 ITR 375 (Mad) only, and the conclusions recorded in Coimbatore Spinning and Weaving 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Then it was also found, that no detailed inventory was also available in the statement made to the bank, except a mere value declared for overdraft purposes to the bank, there were no detailed items of stocks in support of the declared value. 15. Then, the last judgment relied upon, is a Division Bench judgment of this Court, in Relaxo Footwear's case (2003) 259 ITR 744 (Raj), where the application moved by the Revenue for calling for reference, in identical circumstances, was dismissed in limine, finding, that the Tribunal on appreciation of evidence, including the result 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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