COMMISSIONER OF INCOME TAX-I, LDH. V. M/S SANTOSH BOX FACTORY PVT. LTD.

ITA/629/2010

AI Insights

The case revolves around an appeal by the Commissioner of Income-Tax, Ludhiana against M/s Santosh Box Factory Pvt. Ltd. concerning the assessment year 2006-07. The primary issue was the addition made to the assessee's declared income based on discrepancies between the stock values reported in the books and those estimated in the bank's hypothecation statements. The Assessing Officer had added income based on these discrepancies, which was contested by the assessee. The CIT(A) and subsequently the Tribunal found that the stock values reported to the bank were estimates and should not affect the assessed income, aligning with the precedent in CIT Vs. Sidhu Rice & General Mills. The High Court dismissed the appeal, agreeing with the lower authorities' findings.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 719061 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 01-03-2011
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Sidhu Rice & General Mills
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: DENESH GOEL
• Keywords: Assessment Year 2006-07; Income Tax; Hypothecated Stock; Estimated Value; Bank Stock Statements
• Section: 260A

Judgement Text

"Income-tax Appeal No.629 of 2010 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.629 of 2010 Date of decision: 1.3.2011 Commissioner of Income-Tax, Ludhiana ...Appellant Versus M/s Santosh Box Factory Pvt. Ltd. ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Denesh Goel, Advocate for the appellant. **** ADARSH KUMAR GOEL, J ( Oral) . 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 against order dated 16.7.2009 passed by the Income Tax Appellate Tribunal, Chandgiarh Bench 'B', Chandigarh in ITA No.724/Chd/2009, for the assessment year 2006-07, claiming following substantial question of law:- “i). Whether on facts and in the circumstances of the case and in law, the Tribunal was legally justified in dismissing the appeal of the department by placing reliance on the decision of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Sidhu Rice & General Mills 281 ITR 428 ignoring the fact that Income-tax Appeal No.629 of 2010 -2- *** the facts of the case of the assessee are clearly distinguishable from the facts of case CIT Vs. Sudhu Rice & General Mills?” 2. The Assessing Officer made addition to the declared income of the assessee on the ground that in the statement with regard to value of hypothecated stock furnished to the bank, the assessee had given higher figure of value of stock than the value reflected in the books of account. The finding was set aside on the ground that figure furnished to the bank was on estimate basis and cannot be treated as value of stock for computation of income. The observations of the CIT(A) are as under:- “I have carefully considered the contention of the ld. Counsel for the appellant and perused the relevant record. Addition in this case has been made by the A.O. on the basis of the difference in the closing stock as per books of accounts and as depicted in the stock statements submitted to the bank for availing credit facilities against hypothecation of stocks. Whereas the appellant has been contending that the figures given in the stock statement were on estimate basis and that the stocks as per books were the correct stocks of the appellant, the A.O. Did not accept ht contention. Reliance place by the appellant upon various decisions including the decision of the Hon'ble jurisdictional High Court of Punjab & Haryana in the case of Sidhu Rice & Income-tax Appeal No.629 of 2010 -3- *** General Mills (supra) has also not been accepted by the A.O. The A.O. is of the view that in view of the specific verification in the bank stock statements which are duly signed by the appellant the ratio of these decisions would not apply. As per him, the case laws relied upon by the appellant were distinguishable mainly owing to the fact that such verification did not appear to have been considered by the Hon'ble High Courts. However, I do not agree with the A.O. in this regard. It cannot be presumed that the Hon'ble High Court have not considered certain aspect of the case to come to the conclusion in a particular case. In the case of Sidhu Rice & General Mills which has been relied upon by the ld. Counsel the Hon'ble High Court had taken note of the fact that the credit facilities given by the bank in that case was against the hypothecation of stocks and not against the pledge of stock as is also the case of the appellant. The Hon'ble jurisdictional High Court deleted the addition in that case on the ground that except for the photocopies of the stock statement allegedly furnished to the bank by that assessee, no material had been brought on record to show that the assessee in fact possessed larger quantity of stocks. In the case of the appellant also the overdraft facility has been availed against the Income-tax Appeal No.629 of 2010 -4- *** hypothecation of stocks and except for the copies of the stock statement there is no material to show that the appellant did not possess stocks more than those shown in the books of accounts. Even otherwise, as discussed by the A.O. Also at various placed in the assessment order, the difference in the amounts mentioned in respect of valuation of closing stock in the books of accounts and in the stock statement is on account of the excessive value considered in the statements. There is no difference in the quantity. Rather in the stock statements furnished to the bank no quantities are mentioned. In the absence of such details, again no cause could be made out against the appellant that it possessed stocks more than that shown in the books of accounts on a particular day. The fact that the figures of sales and purchases made by the appellant have been verified and accepted by the Sales Tax Department, the accounts of the appellant are audited and that the GP rate shown by the appellant in the assessment year under consideration is 15.43% is better than the GP rate of 15.14% shown in the preceding year would further go in favour of the appellant in as much as there is no ground for presuming that the appellant had understated its income by showing lower value of Income-tax Appeal No.629 of 2010 -5- *** closing stock etc. Though the A.O. has placed reliance upon certain decision in making the impugned addition, as the case of the appellant is covered by the ratio of decision of the Hon'ble jurisdictional High Court of Punjab and Haryana in the case of Sidhu Rice & General Mills (supra), the ratio of the decisions cited by the A.O. would not help his case. Keeping in view the facts & circumstances discussed above and particularly the ratio of decision of Hon'ble Punjab & Haryana High Court in the case of Sidhu Rice & General Mills (supra), the addition made by the A.O. is not sustainable and this is accordingly deleted. This ground of appeal is, therefore, allowed.” 3. The finding recorded by the CIT(A) has been upheld by the Tribunal following the judgment of this Court in CIT Vs. Sidhu Rice & General Mills (2006) 281 ITR 428 (P&H). 4. We have heard learned counsel for the appellant. 5. The stock statement furnished to the bank may be material which may be required to be gone into during assessment but cannot be treated as conclusive. Whether in a given case the stock statement could be accepted as basis for computing the value of the stock depends upon the circumstances of each case. If the assessee is able to show that the statement was given only on estimate basis and value reflected in the books of account was correct, there is no absolute bar to such explanation being accepted. Income-tax Appeal No.629 of 2010 -6- *** In the present case, the CIT(A) and the Tribunal have recorded a concurrent finding of fact which is not shown to be perverse. No substantial question of law arises. 6. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge March 01, 2011 (Ajay Kumar Mittal) Pka Judge "