ACIT, New Delhi V. M/s. Diamond Hut India (P) Ltd., New Delhi

ITA 3373/DEL/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69509 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Assessee Lawyers: VIKAS JAIN S
• Keywords: Unexplained investment
• Section: 131; 69; 145

Judgement Text

ITA NO.3373/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.3373/DEL/2010 ASSESSMENT YEAR : 2006-07 ACIT, CENTRAL CIRCLE-13, ROOM NO.332, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI. VS. DIAMOND HUT INDIA (P) LTD., 2883/17, REGENT TOWER, HARDHIAN SINGH ROAD, KAROL BAGH, NEW DELHI. PAN : AABCD7234M ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SALIL KAPOOR & SHRI VIKAS JAIN, ADVOCATES DEPARTMENT BY : DR. SUDHA KUMARI, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2006-07 A GAINST THE ORDER OF THE LD. CIT (A)-III, DELHI, DATED 18.03.20 10, TAKING THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT (APPEALS) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THAT ADDITIO N OF RS.8,13,31,097/- MADE BY THE AO ON ACCOUNT OF DIFFERE NCE IN STOCK VALUE AS PER STATEMENT SUBMITTED TO THE BANK BY THE ASSES SEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ITA NO.3373/DEL/2010 2 RS.8,13,31,097/- BEING DISCREPANCY BETWEEN STOCK STATE MENTS FILED IN BANK AND STOCK SHOWN IN BOOKS OF ACCOUNTS HOLDING THAT BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED WHEREAS ADDITION HAS B EEN MADE TOWARDS UNEXPLAINED INVESTMENT COVERED UNDER SECTION 69 OF INCOME TAX ACT, 1961 WHEREIN PROVISIONS OF SECTION 145 OF IN COME TAX ACT, 1961 ARE NOT APPLICABLE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,13,31,097/- HOLDING THAT THERE WAS NO ADEQUATE MAT ERIAL WHEREAS (A) STOCK OF GOLD/DIAMOND CANNOT BE STATED BY THE ASSESS EE ON ESTIMATE BASIS AS SUCH PURCHASES/STOCK ARE RECORDED B Y VARIOUS AGENCIES DEALING IN THIS BUSINESS AT VARIOUS LEVELS A ND WHICH THE ASSESSEE FAILED TO DISCLOSE IN BOOKS OF ACCOUNTS AND (B) BANK ALLOWED CREDIT FACILITY OF ABOUT RS.15 CRORES ON THE BASIS OF S UCH DECLARATION OF STOCK. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,13,31,097/- WITHOUT ANY MATERIAL ON RECORD TO THE C ONTRARY TO PROVE THAT THE ASSESSEE HAD NOT DISCLOSED SUCH EXCESS S TOCK TO BANKS. 2. GROUND NO.1 IS GENERAL. 3. GROUND NOS.2 TO 5 PERTAIN TO A SINGLE COMMON ISSUE, I.E., CHALLENGE TO THE CIT (A)S ACTION IN DELETING THE ADDITION OF RS.8 ,13,31,097/-, MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN STOCK VALUE AS PER THE STATEMENT SUBMITTED BY THE ASSESSEE TO THE BANK BY THE ASSESSEE AND THE VALUE O F STOCK STATEMENT FURNISHED DURING THE ASSESSMENT PROCEEDINGS. 4. THE FACTS ARE THAT DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE HAD BEEN AVAILING CASH CREDIT FACILITY FROM STATE BA NK OF INDIA. THE SAID CASH CREDIT FACILITY WAS AVAILED AGAINST HYPOTHECATION OF STOCK AND BOOK DEBTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SUMMONS U/S 131 WERE ISSUED UPON THE MANAGER OF SBI, SOUTH EXTENSION-I, NEW DELH I AND THE COPY OF THE STOCK STATEMENT AS ON 31.03.2006 SUBMITTED BY THE ASSESSE E TO THE BANK WAS CALLED FOR. IN RESPONSE TO THAT THE MANAGER OF SBI FURNISHED THE COPY OF THE STATEMENT OF STOCK AS ON 31.03.2006, WHICH WAS FURN ISHED BY THE ASSESSEE TO THEM. THE COPY OF THE SAME (FIVE PAGES) HAD BEEN MADE PART AND PARCEL OF THE ASSESSMENT ORDER AND WAS ENCLOSED AS AN NEXURE-A THEREOF. ITA NO.3373/DEL/2010 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE H AD ALSO FURNISHED THE QUANTITY-WISE AND VALUE-WISE DETAILS OF C LOSING STOCK AS ON 31.03.2006 AS PER HIS BOOKS OF ACCOUNTS. THE COPY OF TH E SAME WAS ALSO ENCLOSED AS ANNEXURE-B AND FORMED AN INTEGRAL PART AN D PARCEL OF THE ASSESSMENT ORDER. ON COMPARING THE ABOVE TWO STOCK STATE MENTS, I.E., ANNEXURE-A AND ANNEXURE-B, IT HAD BEEN FOUND THAT N EITHER THE QUANTITY NOR THE VALUE OF ANY OF THE ITEMS OF STOCK MENTIONED IN A NNEXURE-A AND ANNEXURE-B TALLIED WITH EACH OTHER. FOR EXAMPLE, ON PERUSAL OF BOTH THE ANNEXURES, IT HAD BEEN NOTICED THAT THE QUANTITY AND VALUE OF LOOSE DIAMONDS AND POINTERS AS PER ANNEXURE-A HAD BEEN SHOWN AT 7168.57 CT. AND RS.52,330,834/- RESPECTIVELY AND IN ANNEXURE-B TH E QUANTITY AND VALUE OF THE SAME (AGGREGATE OF THE ITEMS MENTIONED AT SERIA L NUMBERS 2, 4, 8 AND 9) HAD BEEN SHOWN AT 646.21 CT. AND RS.8,118,378/-RESP ECTIVELY. THUS, THERE WAS A DIFFERENCE OF 6522.36 CTS. IN THE QUANTITY OF L OOSE DIAMONDS AND POINTERS SHOWN IN THE TWO DIFFERENT STOCK STATEMENTS F OR THE SAME PERIOD AND THE DIFFERENCE IN TERMS OF THE VALUE WAS RS.44,212,456 /-, WHICH WAS QUITE SUBSTANTIAL. MOREOVER, THE TOTAL VALUE OF THE STOCK WA S ALSO NOT TALLYING. AS PER ANNEXURE-A, THE VALUE OF STOCK AS ON 31.03.2006 W AS RS.14,62,56,230/- AND AS PER ANNEXURE-B, THE VALUE OF STOCK AS ON 31.03. 2006 WAS RS.13,27,89,412/-. THERE WAS A DIFFERENCE OF RS.1,34,6 6,818/- IN THE VALUE OF STOCK SHOWN IN TWO DIFFERENT STOCK STATEMENTS. IN THIS B ACKDROP, THE ASSESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 12.12.2008 TO E XPLAIN THE DIFFERENT ITEMS OF STOCK SHOWN BY IT IN ANNEXURE-A AND ANNEXURE -B AND ALSO TO RECONCILE THE DIFFERENCE IN THE TOTAL VALUE OF STOCK S AS PER THOSE ANNEXURES.. IN RESPONSE TO THE SAID QUERY, THE ASSESSEE VIDE ITS LETTE R DATED 15.12.2008 HAS SUBMITTED AS UNDER:- IN THIS CONNECTION IT IS SUBMITTED THAT THE STOCK STATEMEN T FILED WITH THE LENDING BANK WAS FOR THE PURPOSE OF AVAILING MAXI MUM AMOUNT OF CREDIT LIMIT SANCTIONED BY THEM. ACCORDINGLY THIS STATEME NT WAS PREPARED WITHOUT PHYSICALLY VERIFYING THE STOCK LYING A T THE BUSINESS PREMISES OF THE ASSESSEE AS WELL AS WITHOUT CONSULTING ITS VALUE AS PER BOOKS OF ACCOUNTS. THIS IS THE USUAL PRACTICE OF E VERY BUSINESSMAN WHO IS AVAILING SUCH CASH CREDIT FACILITY . THEY FILED STOCK ITA NO.3373/DEL/2010 4 STATEMENT KEEPING IN VIEW THE AMOUNT OF CREDIT FACILITY AV AILABLE TO HIM. BECAUSE THIS STATEMENT IS USED FOR CALCULATING DRAW ING POWER OF THE ASSESSEE HENCE PREPARED EITHER ON INFLATED PRICES OR INFLATED QUANTITY OR BOTH 4.1 THE ASSESSEE IN CONTINUATION OF ITS EARLIER SUBMISSION, FURTHER SUBMITTED ON 18.12.08 AS UNDER:- IN CONTINUATION OF OUR LETTER DATED 15.12.2008 ON THI S POINT AND AS IT WAS DISCUSSED WITH YOU ON 15.12.2008 THAT EVEN THOUGH TH E QUANTITY OF STOCK DOES NOT RECONCILE BUT THERE IS NO DIFFERENCE IN OVERALL VALUATION OF STOCK AS PER STOCK STATEMENT FORWARDED BY B ANK WITH THE STOCK EXHIBIT AS PER BOOKS OF ACCOUNTS, BECAUSE THE VAL UATION IN THE BANK STOCK STATEMENT IS AT MARKET VALUE WHEREAS AS PER BOOKS, IT IS AT COST PRICE. IF OUT OF THE VALUATION AS PER BANKS STOCK STATEMENT, THE GROSS PROFIT MARGIN IS REDUCED, STOCK AS PER BOOKS Y OU WILL FIND IS MORE THAN THE STOCK AS PER BANKS STOCK STATEMENT AS CALCU LATED BELOW: VALUATION AS PER STOCK STATEMENT FORWARDED BY BANK 14,62,56,230 LESS: GROSS PROFIT RATE 11.06% 1,61,75,939 VALUE OF STOCK SHOULD BE AS PER BOOKS OF ACCOUNTS 13,00,80,291 SINCE THE STOCK AS PER BOOKS OF ACCOUNTS IS RS.13,27,8 9,412/-, WHICH IS MORE THAN THE STOCK AS CALCULATED ABOVE. HENCE THERE IS NO LEAKAGE OF REVENUE FROM THE INCOME TAX POINT OF VIEW. 4.2 THE ASSESSEE, THEREFORE, CONTENDED BEFORE THE AO TH AT: (I) THE STOCK STATEMENT FILED WITH THE LENDING BANK WAS FOR THE PUR POSE OF AVAILING MAXIMUM AMOUNT OF CREDIT LIMIT SANCTIONED BY THE BAN K AND ACCORDINGLY, THIS STATEMENT WAS PREPARED WITHOUT PHYSICALLY VERIFYI NG THE STOCK LYING AT THE ASSESSEES BUSINESS PREMISES AND ALSO WITHOUT CONCEALING I TS VALUE AS PER THE BOOKS OF ACCOUNT; (II) THERE IS NO DIFFEREN CE IN OVERALL VALUATION OF STOCK AS PER STOCK STATEMENT FORWARDED BY BANK WITH TH E STOCK EXHIBIT AS PER BOOKS OF ACCOUNTS, BECAUSE THE VALUATION IN THE BANK S TOCK STATEMENT IS AT MARKET VALUE WHEREAS AS PER BOOKS, IT IS AT COST PRICE. IF OUR OF THE VALUATION AS PER BANKS STOCK STATEMENT, THE GROSS PROFIT MARGIN IS REDUCED, STOCK AS PER BOOKS WILL BE MORE THAN THE STOCK AS PER BANK STOCK STATEMENT; AND (III) IN ORDER TO AVAIL MAXIMUM CREDIT LIMIT IT HAS INFLAT ED THE STOCK QUANTITY AND THE VALUATION SUBMITTED TO THE BANK. ITA NO.3373/DEL/2010 5 4.3 THE AO, HOWEVER, HELD THAT WHILE FURNISHING THE STOCK STATEMENT TO THE BANK, THE ASSESSEE HAD ALSO FILED CERTIFICATES SIGNED BY ITS DIRECTOR, AS PER WHICH, THE STOCK HAD BEEN VERIFIED AND VALUED.; THAT AS PER ONE OF THESE CERTIFICATES, THE STOCK AND OTHER ASSETS HAVE BEEN VALU ED IN THE SAME MANNER, AS DONE EARLIER, AS NOTED IN THE ASSESSEES LAST A UDITED AND PUBLISHED ACCOUNTS, AS PER WHICH, THE STOCK HAD BEEN VA LUED AT COST PRICE AND NOT AT THE MARKET VALUE; THAT THE ASSESSEES EXPLANA TION THAT IT WAS IN ORDER TO AVAIL MAXIMUM CREDIT LIMIT FROM THE BANK, THAT IT HAD INFLATED THE STOCK QUANTITY AND THE VALUATION SUBMITTED TO THE BA NK, WAS ALSO NOT ACCEPTABLE, SINCE AS PER THE CERTIFICATION GIVEN TO T HE BANK, THE STOCK STOOD VALUED IN THE SAME MANNER AS THAT SHOWN IN THE COMPANY S AUDITED ACCOUNTS, AT COST PRICE; AND THAT EVEN OTHERWISE, SIN CE VERIFICATION IS MADE BY THE BANKS, THE EXPLANATION OF INFLATION PROFFERED BY THE ASSESSEE COULD NOT STAND. 4.4 IT WAS IN THIS MANNER THAT THE AO ADDED THE EXCESS VALUE OF THE ITEM- WISE STOCK SHOWN BY THE ASSESSEE IN THE STOCK STATEMENT SUBMI TTED TO THE BANK TO THE VALUE OF THE CLOSING STOCK SHOWN IN THE BA LANCE SHEET. 5. THE LD. CIT (A) DELETED THE ADDITION. 6. THE LD. DR HAS CONTENDED THAT THE ORDER OF THE L D. CIT (APPEALS) IS NOT CORRECT IN LAW AND FACTS; THAT THE LD. CIT (A) HAS ER RED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,13,31,097/- MADE BY TH E AO ON ACCOUNT OF DIFFERENCE IN STOCK VALUE AS PER STATEMENT SUBMITTED T O THE BANK BY THE ASSESSEE; THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.8,13,31,097/- BEING DISCREPANCY BETWE EN STOCK STATEMENTS FILED IN BANK AND STOCK SHOWN IN BOOKS OF ACCOUNTS HOL DING THAT BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED WHEREAS ADDITION HAS B EEN MADE TOWARDS UNEXPLAINED INVESTMENT COVERED UNDER SECTION 69 OF IN COME TAX ACT, 1961 WHEREIN PROVISIONS OF SECTION 145 OF INCOME TAX ACT, 1961 ARE NOT APPLICABLE; THAT THE LD. CIT (A) HAS ERRED IN LAW AN D ON FACTS IN DELETING THE ITA NO.3373/DEL/2010 6 ADDITION OF RS.8,13,31,097/- HOLDING THAT THERE WAS N O ADEQUATE MATERIAL WHEREAS (A) STOCK OF GOLD/DIAMOND CANNOT BE STATED BY THE ASSESSEE ON ESTIMATE BASIS AS SUCH PURCHASES/STOCK ARE RECORDED BY VARI OUS AGENCIES DEALING IN THIS BUSINESS AT VARIOUS LEVELS AND WHICH THE ASSESSEE FAILED TO DISCLOSE IN BOOKS OF ACCOUNTS AND (B) BANK ALLOWED CRE DIT FACILITY OF ABOUT RS.15 CRORES ON THE BASIS OF SUCH DECLARATION OF STOCK; A ND THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIO N OF RS.8,13,31,097/- WITHOUT ANY MATERIAL ON RECORD TO THE CONTRARY TO P ROVE THAT THE ASSESSEE HAD NOT DISCLOSED SUCH EXCESS STOCK TO BANKS. RELIANCE HA S BEEN PLACED ON DHANSIRAM AGGARWALA VS. CIT, 201 ITR 192 (GUWAHATI) , WHEREIN IT HAS BEEN, INTER ALIA, HELD THAT NO PRACTICE FOLLOWED BY BUSINE SSMEN WAS SHOWN TO EXIST, WHEREBY BUSINESSMEN DECLARE LARGER STOCKS TO BANKS FOR T HE PURPOSE OF GETTING HIGHER LOANS, NOR WAS SUCH A PRACTICE RECOGNIZ ED IN COMMERCIAL CIRCLES OR COURTS; THAT EVEN ASSUMING THAT SUCH A PRACTI CE EXISTS, THE TRIBUNAL IS NOT UNABLE TO TAKE JUDICIAL NOTICE OF SUCH SUBSTAND ARD MORALITY ON THE PART OF THE ASSESSES SO AS TO ENABLE THEM TO GO BACK ON THEIR O WN SWORN STATEMENT GIVEN TO THE BANKS AS TO THE STOCKS HELD AND H YPOTHECATED BY THEM TO THE BANKS. THE LD. DR HAS FURTHER CONTENDED T HAT THE LD. CIT (A) HAS ERRED IN OBSERVING THAT THE EXCESS STOCK FOUND DURING T HE SURVEY WAS OFFERED BY THE ASSESSEE AS ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION; THAT THIS IS ONLY PARTIALLY CORRECT; THAT THE AO, IN THIS R EGARD, HAS OBSERVED THAT THE ASSESSEE COMPANY HAD SURRENDERED A SUM OF RS.80 LACS, I N THE SURVEY OPERATION, ON ACCOUNT OF DIFFERENCE IN THE VALUE OF STOCK ACTUALLY FOUND AT THE BUSINESS PREMISES AND THE VALUE OF STOCK AS RECORDED IN T HE BOOKS OF ACCOUNT ON THE DATE OF THE SURVEY; THAT THE LD. CIT (A) HAS GONE WRONG IN OBSERVING THAT THE BANK AUTHORITIES CERTIFIED THAT TH E STOCK STATEMENT WAS ON AN ESTIMATE BASIS; THAT THIS FINDING OF THE LD. CIT (A) HAS NEITHER ANY BASIS NOR ANY EVIDENCE TO SUPPORT IT; THAT GOLD/DIAMOND STOCK C ANNOT BE DECLARED ON ESTIMATE BASIS, SINCE SUCH SALES ARE RECORDED BY VARIOUS AU THORITIES; THAT BESIDES, THE ASSESSEE HAS GIVEN ALL DETAILS TO THE BANKS; TH AT THE LD. CIT (A) HAS ERRED IN PLACING RELIANCE ON CIT VS. SHREE PADMA VATHY COTTON MILLS, 236 ITA NO.3373/DEL/2010 7 ITR 340 (MAD), SINCE IN THAT CASE, THE STOCK POSITION W AS TALLIED WITH THE RG REGISTER WHICH IS NOT THE POSITION HEREIN; THAT CIT V S. GOPAL RICE MILLS, 211 ITR 492 (ALL) HAS ALSO BEEN WRONGLY RELIED ON; THAT I N THAT CASE, THERE WAS A SECOND INSPECTION BY THE REGIONAL FOOD CONTROLLER AND SO, THE BANK STATEMENT WAS NOT CONSIDERED RELIABLE; THAT IN THE PRE SENT CASE, SUCH FACTS ARE NOT PRESENT; THAT IN CIT VS. KHAND SIROHI AND ST EEL ROLLING MILLS, 200 CTR 595 (ALL), THE MATTER WAS DECIDED BY THE TRIBUN AL ON THE BASIS OF THE PRACTICE OF DECLARING HIGHER STOCK TO THE BANK TO GE T HIGHER LOAN FACILITY; THAT THE HONBLE HIGH COURT UPHELD THIS ORDER OF THE TRI BUNAL; THAT HOWEVER, THIS POSITION IS AGAINST SHREE PADMAVATHY COTTON MILLS (SUP RA); THAT IN CIT VS. DAS INDUSTRIES, 303 ITR 199 (ALL), NO OD FACILITY WAS INVOLVED AND THEREFORE, THIS DECISION IS ALSO NOT APPLICABLE HERETO; THAT N. SWAMY, 241 ITR 363 (MAD) IS ALSO NOT APPLICABLE ON FACTS; THAT HEREIN, TH E DISCREPANCY IS NOT ONLY IN THE VALUE, BUT ALSO IN THE STOCK, WHICH FACT HAS N OT BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT (A) AND WHICH FACT IS AP PARENT FROM THE CHART CONTAINED IN PARA 4.7 OF THE ASSESSMENT ORDER; THAT THE LD. CIT (A) HAS FAILED TO CONSIDER THE FINDING OF THE AO THAT THE ASSESSEES CON TENTION THAT THERE WAS NO DIFFERENCE IN THE OVERALL VALUATION OF THE STO CK, SINCE THE VALUATION IN THE BANK STOCK STATEMENT WAS ON MARKET VALUE, WHEREAS ACCORDING TO THE BOOKS, IT WAS AT COST PRICE, WAS NOT TENABLE IN VIEW O F THE CERTIFICATE THAT THE STOCK HAD BEEN VALUED IN THE SAME MANNER AND ON THE SA ME BASIS, AS ADOPTED IN THE COMPANYS LAST AUDITED AND PUBLISHED A CCOUNTS, AT COST PRICE AND NOT AT MARKET VALUE; AND THAT THEREFORE, THE OR DER UNDER APPEAL, BEING UNSUSTAINABLE IN LAW, BE ORDERED TO BE SET ASIDE AND T HAT PASSED BY THE ASSESSING OFFICER BE REVIVED, ON ALLOWING THE APPEAL FI LED BY THE DEPARTMENT. 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MAT ERIAL ON RECORD. THE ISSUE IS AS TO WHETHER THE LD. CIT (A) IS CORRECT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN STOCK VALUE AS PER THE STATEMENT SUBMITTED TO THE BANK BY THE ASSESSEE. ITA NO.3373/DEL/2010 8 8. IT REMAINS AN UNDISPUTED FACT THAT THE ASSESSEE HAD FI LED THE STOCK STATEMENT WITH THE BANK FOR THE PURPOSE OF AVAILING M AXIMUM AMOUNT OF CREDIT LIMIT, AS SANCTIONED. BEFORE THE ASSESSING OFFICE R, THE ASSESSEE HAD SUBMITTED A VALUATION STATEMENT OF STOCK OUGHT TO HAVE BEEN AS PER THE BOOKS OF ACCOUNT, TAKING THE VALUATION AS PER THE STOC K STATEMENT FORWARDED BY THE BANK AT ` 14,62,56,230/- AND REDUCING THEREF ROM, GROSS PROFIT RATE AT 11.06%, AMOUNTING TO ` 1,61,75,939/-. THIS VALUATION THUS CAME TO `13,00,80,291/-. THIS WAS SHOWN TO BE LESS THAN THE ACTU AL STOCK AS PER THE BOOKS OF ACCOUNT AT ` 13,27,89,412/-. IT WAS CONTENDE D THAT HENCE, THERE HAD BEEN NO LEAKAGE OF REVENUE. IT REMAINS THE STAND OF T HE ASSESSEE THAT THE STOCK STATEMENT FILED WITH THE BANK WAS PREPARED WITHO UT ACTUALLY PHYSICALLY VERIFYING THE EXISTING STOCK POSITION, SINCE SUCH STATEME NT WAS ONLY FOR THE PURPOSE OF AVAILING MAXIMUM AMOUNT OF CREDIT LIMIT SA NCTIONED BY THE BANK. IT IS ALSO MAINTAINED BY THE ASSESSEE THAT THE VALUATION IN THE STATEMENT FURNISHED TO THE BANK WAS AT MARKET VALUE AND THAT AS PER THE ASSESSEES BOOKS, WAS AT COST PRICE, AND SO THERE WAS NO DIFFERENC E IN THE OVERALL VALUATION OF THE STOCK. THE ASSESSEES CASE IS THAT THE STOC K QUANTITY AND VALUATION SUBMITTED TO THE BANK HAD BEEN INFLATED O NLY SO AS TO AVAIL MAXIMUM CREDIT LIMIT. 9. THE ASSESSING OFFICER, HOWEVER, MADE THE ADDITION BY OBSERVING, INTER ALIA, THAT AS CERTIFIED BY THE DIRECTOR OF THE COMPA NY ITSELF BEFORE THE BANK, THE STOCK HAVE BEEN VALUED IN THE SAME MANNER AS THAT DEPICTED IN THE AUDITED ACCOUNTS OF THE COMPANY, I.E., AT COST PRICE AND NOT AT MARKET VALUE; AND THAT EVEN OTHERWISE, BANKS THEMSELVES MAKE VERIFICA TION IN SUCH MATTERS. 10. IN THIS REGARD, IT IS SEEN THAT DESPITE MAKING OBSER VATIONS AS ABOVE, THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUN T OF THE ASSESSEE, NOR WAS ANY SUPPRESSION OF EITHER PURCHASES OR SALES WAS POINTE D OUT BY THE ASSESSING OFFICER. BOTH THE PURCHASES AND SALES WERE DULY SU PPORTED BY VOUCHERS. THE BANK HAD CERTIFIED THAT THE STOCK STATEM ENT SUBMITTED BY THE ITA NO.3373/DEL/2010 9 ASSESSEE TO THE BANK WAS ON AN ESTIMATE BASIS AND THAT THER E HAD BEEN NO VALUATION OF THE STOCK BY THE BANK EXPERTS. THE DIFFE RENCE BETWEEN THE VALUE OF STOCK AS DECLARED TO THE BANK AND THAT FURNISHED BE FORE THE ASSESSING OFFICER HAS NEVER BEEN DENIED. ADDITIONAL INCOME OF ` 80 LACS WAS DECLARED FOR THE CONCERNED YEAR. 11. THE DEPARTMENT HAS CONTENDED THAT THE ADDITION IN THIS CASE WAS MADE U/S 69 OF THE IT ACT AND AS SUCH, THERE WAS NO QUESTION OF EITHER REJECTION OF BOOKS, OR ESTIMATION OF PROFITS BY THE ASSESSING OFFICER. IN THIS REGARD, AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, THE ASSESSMEN T ORDER NOWHERE SHOWS THE INVOCATION OF THE PROVISIONS OF SECTION 69 BY THE ASSESSING OFFICER. SECTION 69 OF THE ACT TALKS OF UNEXPLAINED INVESTMENT S, I.E., INVESTMENTS NOT RECORDED IN ITS BOOKS OF ACCOUNT BY THE ASSESSEE. IN THE ABSENCE OF THE ASSESSMENT ORDER EVINCING THE ASSESSING OFFICER TO HAVE CAL LED IN SERVICE THE PROVISIONS OF SECTION 69 OF THE ACT, IT DOES NOT STAND MADE OUT AS TO HOW THE DEPARTMENT MAINTAINS THAT THE ADDITION IN QUESTION WA S MADE UNDER THE SAID SECTION. OTHERWISE ALSO, IT HAS NOT BEEN SHOWN AS TO HO W SUCH AN ADDITION U/S 69 OF THE ACT COULD HAVE BEEN MADE IN THE PRESENT CASE, PARTICULARLY WHEN THE UNDISPUTED POSITION IS THAT THE STOCK AS PER TH E BOOKS OF ACCOUNT OF THE ASSESSEE WAS OF ` 13,27,89,412/-, I.E., MORE THAN TH E STOCK AS CALCULATED AT ` 13,00,80,291/-, CONSIDERING THE VALUATION AS PER THE STOCK STATEMENT FURNISHED TO THE BANK, AT ` 14,62,56,230/- AND REDUC ING THEREFROM GROSS PROFIT OF ` 1,61,75,939/-, @ 11.06%. 12. THE DEPARTMENT HAS ALSO CHALLENGED THE CIT (A)S OBSERVATION THAT THE ASSESSEE HAS OFFERED THE EXCESS STOCK FOUND FOR TAXATION. I T HAS BEEN CONTENDED THAT THIS OBSERVATION OF THE LD. CIT (A) IS ONLY PARTIALLY CORRECT, THE AMOUNT SURRENDERED FOR TAXATION BEING MUCH LESS THAN T HE EXCESS STOCK FOUND. HERE, IT REMAINS UNDISPUTED THAT THE DEPARTME NT ITSELF VERIFIED THE ASSESSEES STOCK DURING THE YEAR. THE DIFFERENCE WAS SURREN DERED. THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NEVER REJECT ED BY THE ASSESSING OFFICER. VOUCHERS SUPPORTING THE COMPLETE PURCHASES AND SALES WERE ITA NO.3373/DEL/2010 10 SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER VERIFIED THE SAME AND NO DISCREPANCY WAS FOUND THEREIN. THE DIFFERENCE IN THE VALUATION, AS FOUND BY THE DEPARTM ENT WAS OF ` 80 LACS ONLY. THIS WAS THE AMOUNT WHICH WAS SURRENDERED BY THE ASSESSEE. THE ASSESSEE HAS FILED, AT PAGES 41-48 OF THE ASSESSEES PAPER BOOK, A COPY OF ITS LETTER DATED 19.11.2008, ADDRESSED TO THE ASSESSING OFFICER, EXP LAINING THE QUANTITY-WISE AND VALUE-WISE DETAIL OF STOCK ON THE DA TE OF SURVEY, I.E., ON 20.01.2006 AND QUANTITY-WISE AND VALUE-WISE DETAIL OF STOCK AS ON 31.03.2006, AS PER THE ASSESSEES BOOKS OF ACCOUNT. IT STAN DS MENTIONED THEREIN (APB 41), THAT DURING THE SURVEY, THE EXACT VALUATION OF STOCK HAD NOT BEEN ASKED FOR BY THE SURVEY TEAM FROM THE ASSESSEE ON TH E BASIS OF COST SYSTEM OF STOCK VALUATION ON FIFO BASIS, WHICH WAS BEING REGULARLY FOLLOWED BY THE ASSESSEE SINCE ITS VERY INCEPTION; THAT RATHER, TH E VALUATION OF STOCK CALCULATED BY THE TALLY COMPUTER SOFTWARE WAS TAKEN A S AT ` 521,54,504/- AND AFTER TAKING THE VALUE OF STOCK OF ` 1,08,89,35 9/-, WHICH HAD BEEN LYING WITH THE GOLDSMITH, THE VALUE OF THE STOCK LYING AT THE ASSESSEES SHOP CAME TO ` 4,12,65,145/-, AS PER THE ASSESSEES BOOKS; THAT THE DEPARTMENTAL VALUER HAD, ON HIS OWN, VALUED THE STOCK LYING AT THE BUSINESS PREMISES OF THE ASSESSEE AT ` 4,93,41,594/-; THAT AS SUCH, THE VALUATION OF THE STOCK WAS IN EXCESS BY ABOUT ` 80 LACS; AND THAT THE ASSESSEE COMPANY H AD ACCEPTED THIS AMOUNT OF ` 80 LACS AS ADDITIONAL INCOME FOR THE CONC ERNED YEAR, I.E., THE YEAR UNDER CONSIDERATION. A COPY OF THE VALUATION OF STOCK AS ON 20.01.2006 WAS ALSO FILED. COPIES OF LEDGER ACCOUNT OF THE ASSESSEE F OR THE PERIOD FROM 20.01.2006 TO 31.03.2006 (PURCHASES) AND FROM 01.05.2 005 TO 31.03.2006 (SALES) (APB 56-80) WERE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, ENCLOSED IN LETTER DATED 21.11.2008 (APB 54-83). THI S LEDGER ACCOUNT CONSISTED OF PURCHASE VAT 1%, PURCHASE (OLD GOLD), DIF FERENCE IN VALUATION OF STOCK, PURCHASE AND PURCHASE RETURN (APB 56-62), SALE A ND SALE LOCAL (FROM 01.04.2005 TO 31.03.2006 (APB 63-80). THE ASSESSING OFF ICER DID NOT POINT OUT ANY DISCREPANCY WHATSOEVER IN THESE DETAILS. THUS, THE CONTENTION OF THE ITA NO.3373/DEL/2010 11 DEPARTMENT THAT THE AMOUNT SURRENDERED FOR TAXATION WAS MUCH LESS THAN THE EXCESS STOCK FOUND, IS INCORRECT. 13. NEXT, IT HAS BEEN CONTENDED BY THE DEPARTMENT TH AT IT HAS BEEN INCORRECTLY OBSERVED BY THE LD. CIT (A) THAT THE BAN K HAD CERTIFIED THAT THE STOCK STATEMENT FURNISHED TO IT BY THE ASSESSEE WAS ON ESTI MATE BASIS, WITHOUT ANY VALUATION BY EXPERTS; AND THAT THE STOCK OF DIAMONDS/GOLD HAD NOT BEEN DECLARED ON ESTIMATE BASIS, RATHER, THE ASSESSEE HAD GIVEN AN ITEM- WISE BIFURCATION, BOTH OF QUANTITY AND VALUE, AFTER PROPER VALUATION. IN THIS REGARD, THE CERTIFICATE GIVEN BY THE BANK IS AT APB 109. THIS SHORT CERTIFICATE READS AS FOLLOWS:- DATE: 02.03.2010. TO WHOMSOEVER IT MAY CONCERN THIS IS TO CERTIFY THAT M/S DIAMOND HUT INDIA PVT. LTD. W AS SANCTIONED WORKING CAPITAL LIMIT OF RS.9.00 CRORE AND A STAND BY LINE OF CREDIT LIMIT OF RS.1.00 CRORE IN THE MONTH OF DECEMBER 2005. PERMISSIBLE DRAWING POWER TO THE UNIT WAS ALLOWED BASED ON THE STOCK STATEMENT FOR THE MONTH OF DECEMBER 2005 WHEREIN STOCKS WORTH RS.13,44,40,981.80 (RS. THIRTEEN CRORE FORTY FOUR LA C FORTY THOUSAND NINE HUNDRED EIGHTY ONE AND PAISE 80 ONLY) WERE DECL ARED BY THE COMPANY. THE VALUE OF STOCK DECLARED BY THE COMPANY A S ON 31.03.2006 WAS OF THE ORDER OF RS.14,62,56,230.00 (R S. FOURTEEN CRORE SIXTY TWO LAC FIFTY SIX THOUSAND TWO HUNDRED THIRTY ONLY). PHYSICAL VERIFICATION OF THE STOCKS IS CUMBERSOME OWING TO THE NA TURE, VARIETY AND SIZES OF THE STOCK AND CALLS FOR SERVICES OF AN E XPERT IN THE FORM OF A STOCK AUDIT. HOWEVER, AS PER RECORDS AVAILABLE WITH US, NO STOCK AUDIT WAS GOT DONE DURING THE PERIOD 2005-06. SD/- RELATIONSHIP MANAGER (MGG) 14. THUS, IT IS APPARENT THAT THOUGH THE BANK, IN ITS CERTIFICATE, HAS NOT EMPLOYED THE EXPRESSION ESTIMATE BASIS SPECIFICALLY, IT WAS ALIVE TO THE FACT THAT PHYSICAL VERIFICATION OF THE STOCK, ITEM-WISE, WA S MUCH DIFFICULT, IF NOT IMPOSSIBLE, THE BUSINESS OF THE ASSESSEE BEING THAT OF DEA LING IN DIAMONDS AND GOLD ITEMS. IN FACT, IT IS FOR THIS VERY REASON THA T, AS CERTIFIED, SERVICES OF AN EXPERT IN THE FORM OF A STOCK AUDIT, WAS REQUIRED AND AS FOR THE OBJECTION ITA NO.3373/DEL/2010 12 REGARDING NO CERTIFICATION TO THE EFFECT THAT THERE WAS NO VALUATION BY EXPERTS, THIS OBJECTION CLEARLY STANDS OVERRULED WHEN T HE CERTIFICATE STATES THAT NO STOCK AUDIT WAS DONE, AS PER RECORDS AVAILABLE WITH THE BANK. 15. THERE IS ALSO NO MERIT IN THE OBJECTION OF THE DE PARTMENT THAT THE CIT (A) HAS NOT GIVEN ANY FINDING ON THE EXPLANATION BY THE ASSESSEE TO THE EFFECT THAT THE METHOD OF VALUATION OF STOCK BY THE ASSESSEE WAS DIFFERENT FOR THE BANK AND IN ITS BOOKS. SUCH EXPLANATION OF THE ASS ESSEE, AS CAN BE GATHERED FROM THE DRIFT OF THE IMPUGNED ORDER, HAS B EEN DULY ACCEPTED BY THE LD. CIT (A). 16. APROPOS THE CASE LAWS RELIED ON BY THE DEPARTMENT, IN B.T. STEELS VS. CIT, 328 ITR 471 (P&H), THE ASSESSING OFFICER HAD MADE ADDITIONS TO THE DECLARED INCOME OF THE ASSESSEE ON THE BASIS OF STOCK AVA ILABLE WITH THE ASSESSEE, BUT NOT REFLECTED IN THE BOOKS OF ACCOUNT. THE STOCK STATEMENT OF HYPOTHECATED GOODS FURNISHED TO THE BANK WAS ALSO AT VA RIANCE WITH THE STOCK ENTERED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. TH E CIT (A) DELETED THE ADDITIONS, OBSERVING THAT WITHOUT VERIFICATION FR OM THE BANK, THE STOCK STATEMENT FURNISHED TO THE BANK COULD NOT HAVE BEEN R ELIED ON. THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT (A) AND RESTORED THE AD DITIONS MADE BY THE ASSESSING OFFICER. DISMISSING THE APPEAL FILED BY THE ASSESSE E, THE HONBLE HIGH COURT HELD THAT WHETHER DIFFERENCE BETWEEN THE STATEMENT OF VALUE OF STOCK FURNISHED TO THE BANK AND ENTRIES IN THE BOOKS OF ACCOUNT JUSTIFIED ADDITION, WAS A QUESTION OF FACT IN EACH INDIVIDUAL C ASE; THAT THE ASSESSING OFFICER HAD TO DETERMINE THE SAME ON THE BASIS OF BOOK S OF ACCOUNT AND OTHER MATERIAL AVAILABLE; THAT THE BURDEN OF SHOWING TAXABLE INCOME WAS ON THE REVENUE; THAT THE BURDEN COULD BE DISCHARGED BY DRAWING APPROPRIATE INFERENCE FROM THE MATERIAL ON RECORD; THAT THE ASSESSI NG OFFICER DREW INFERENCE FROM THE STATEMENT FURNISHED BY THE ASSESSEE TO THE BANK AND MADE THE ADDITION ON THAT BASIS; THE TRIBUNAL HAD HEL D THAT THE ASSESSING OFFICER NOT ONLY HAD THE BANK STATEMENT BEFORE HIM, BUT ALSO THE VERIFICATION BY THE REGIONAL OFFICER; THAT THE STOCK WAS ACTUALLY LYING WITH THE ASSESSEE; ITA NO.3373/DEL/2010 13 DESPITE DUE OPPORTUNITY TO EXPLAIN THE DIFFERENCE, T HE ASSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION; AND THAT THEREFORE , THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION, AS CORRECTLY HEL D BY THE TRIBUNAL AS A FINDING OF FACT. 17. FROM THESE FACTS, IT IS EVIDENT THAT IN THAT CASE, THE BANK DID VERIFY THE ACTUAL EXISTING STOCK POSITION WITH THE ASSESSEE. THIS IS D IRECTLY AT VARIANCE WITH THE FACTS OF THE PRESENT CASE, WHEREIN, AS NOTED H EREINABOVE, THE BANK HAS CERTIFIED THAT THE STOCK WAS NOT VERIFIED. TRUE, T HAT AS OBJECTED BY THE DEPARTMENT, IN B.T. STEELS (SUPRA), IT HAS BEEN OBSER VED THAT AS PER PROCEDURE, THE BANK HAS TO INSPECT THE STOCK. HOWEVER , IN THE PRESENT CASE, IT REMAINS AN UNDISPUTED FACT, AS ADMITTED BY THE BAN K ITSELF, THAT THE STOCK HEREIN WAS NOT VERIFIED. NOW, ONCE THE STOCK WAS NOT VERIFIED BY TH E BANK, WHAT REMAINED AS AN OPTION WAS BUT TO RESORT TO ESTIMA TE BASIS. B.T. STEELS (SUPRA), AS SUCH, IS OF NO AVAIL TO THE DEPARTMENT. 18. DHANSIRAM AGGARWALA VS. CIT, 201 ITR 192 (GAU.) IS ALSO DIFFERENT ON FACTS. THEREIN, STOCK WAS PLEDGED WITH THE BANK. IN TH E PRESENT CASE, HOWEVER, IT WAS ON HYPOTHECATION OF THE STOCK BY THE ASSESSEE THAT OVERDRAFT FACILITY WAS GIVEN. ON BEHALF OF THE ASSESSEE, IT HAS BEE N CONTENDED THAT DHANSIRAM AGGARWALA (SUPRA) STANDS DISTINGUISHED IN CI T VS. UDAIPUR CHEMICALS AND FERTILIZERS (P) LTD., 211 CTR (RAJ.) 1 91. THIS HAS BEEN FOUND TO BE INCORRECT. PARA 17 OF THE JUDGEMENT DEALS WITH D HANSIRAM AGGARWALA AND IT HAS BEEN FOUND TO BE OF NO HELP TO THE DEPART MENT, ON FACTS. STRENGTH, HOWEVER, ACCRUES TO THE ASSESSEE FROM UDAIPUR CHEMICALS (SUPRA), IN THE SENSE THAT THEREIN, THERE WAS NOTHING ON RECORD TO SUG GEST ANY ACTUAL DISCREPANCY IN THE STOCK. 19. THE DEPARTMENT HAS ALSO SOUGHT TO PLACE RELIANCE O N DHANSIRAM AGGARWALA VS. CIT, 204 ITR (ST.) 45, WHEREIN, VIDE ORDER DATED 06.09.1993, THE HONBLE SUPREME COURT DISMISSED THE SLP FILED BY T HE ASSESSEE AGAINST THE AFORESAID DECISION OF THE HONBLE GAUHATI HIGH CO URT, OBSERVING THAT IT ITA NO.3373/DEL/2010 14 REMAINED ADMITTED THAT THE ASSESSEE HAD OVER VALUED TH E STOCK FOR THE PURPOSE OF OBTAINING A LARGER CREDIT FROM THE BANK. THIS, HOWEVER, IN OUR CONSIDERED OPINION, DOES NOT MAKE THE POSITION ANY DIF FERENT. ONCE THE HIGH COURT DECISION IN DHANSIRAM AGGARWALA (SUPRA) IS NOT APPLICABLE TO THE PRESENT CASE ON FACTS, THE SLP DECISION IN THAT MATTER DOES NOT TAKE THE CASE OF THE DEPARTMENT ANY FURTHER. TO REITERATE, OVERDR AFT FACILITY WAS GIVEN BY THE BANK TO THE PRESENT ASSESSEE AGAINST HYPOTHECATION OF STOCKS WHEREAS DHANSIRAM AGGARWALA (SUPRA) WAS A CASE OF PLEDGING OF STOCK WITH THE BANK. 20. IN RECON MACHINE TOOLS PVT. LTD. VS. CIT, 286 ITR 637 (KAR.), THE ASSESSING OFFICER MADE ADDITION IN THE LIGHT OF VARIATI ON IN CLOSING STOCK DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AND TH E STOCK STATEMENT GIVEN BY IT TO THE BANK. THE ADDITION WAS UPHELD BY THE CIT (A) AND THE TRIBUNAL. THE HONBLE HIGH COURT HELD THAT IN THE A BSENCE OF ACCEPTABLE EVIDENCE TO DISBELIEVE THE BANK STATEMENT, THE FINDIN GS OF THE TAXING AUTHORITIES AND THE TRIBUNAL WERE TO BE SUSTAINED. IT WAS OBSERVED THAT THE STOCK SHOWN TO THE BANK WAS OF RAW MATERIAL AND A STATU TORY REGISTER HAD TO BE MAINTAINED IN RESPECT OF RAW MATERIAL. IN THE PRE SENT CASE, ON THE OTHER HAND, THERE WAS A SURVEY CONDUCTED AND THE STOCK WAS V ERIFIED. THE ALLEGED DIFFERENCE OF ABOUT ` 80 LACS WAS SURRENDERED. BESIDES, IN RESPECT OF THE ASSESSEES STOCK, NO STATUTORY REGISTER IS SHOWN TO BE REQUIR ED TO BE MAINTAINED. THE ASSESSEES BOOKS OF ACCOUNT AS WELL AS DET AILS OF COMPLETE PURCHASES AND SALES WERE DULY PRODUCED BEFORE THE ASSESSIN G OFFICER. THE ASSESSING OFFICER DID NOT POINT OUT ANY DISCREPANCY THER EIN. THEREFORE, ON FACTS, RECON MACHINE TOOLS (SUPRA) ALSO DOES NOT AID T HE CASE OF THE DEPARTMENT. 21. SO FAR AS REGARDS MAK TEXTTCHEM PRODUCTS VS. DCIT , 83 ITD 96 (PUNE), HERE ALSO, LIKE IN B.T. STEELS (SUPRA), THE BANK HAD ITSELF VERIFIED THE STOCK AND CONFIRMED THE STATEMENT GIVEN BY THE ASSESSEE, WHICH IS NOT THE CASE HEREIN. ITA NO.3373/DEL/2010 15 22. THE LD. CIT (A) HAS RIGHTLY PLACED RELIANCE ON CIT VS. SHREE PADMAVATHY COTTON MILLS, 236 ITR 340 (MAD). THEREIN , ADDITIONS WERE MADE ON THE GROUND THAT THERE WAS DISCREPANCY IN STOCK SHOWN IN BOOKS OF ACCOUNT AND IN STATEMENT MADE TO BANK. THE TRIBUNAL FOUND TH AT THERE WAS NO SUPPRESSION OF STOCK. THE HONBLE HIGH COURT HELD THAT THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITIONS AND THAT NO QUESTI ON OF LAW AROSE FOR REFERENCE. THE TRIBUNAL HAD NOTICED THAT THE BOOKS O F ACCOUNT HAD NOT BEEN REJECTED BY THE DEPARTMENT AS NOT REPRESENTING THE CO RRECT STOCK POSITION; AND THAT THE ASSESSEE HAD DECLARED A HIGHER QUANTITY O F CLOSING STOCK TO THE BANK FOR THE PURPOSE OF SECURING A LOAN. THE TRIBUNAL ARRIVED AT THE CONCLUSION THAT THE CLOSING STOCK DECLARED IN THE RETU RN FILED BY THE ASSESSEE WAS BASED ON THE BOOKS OF ACCOUNT AND IT SHOULD BE ACCE PTED RATHER THAN THE CLOSING STOCK AS DECLARED TO THE BANK, WHICH WAS MADE F OR THE PURPOSE OF SECURING A LOAN. IN THE PRESENT CASE ALSO, THE BOOKS OF ACCOUNT WERE NEVER REJECTED BY THE ASSESSING OFFICER, AS NOT REPRESENTING THE CORRECT STOCK POSITION. ALSO, A HIGHER QUANTITY OF CLOSING STOCK WAS DECLARED BY THE ASSESSEE TO THE BANK FOR THE PURPOSE OF OBTAINING CASH CR EDIT LIMIT. IT HAS NOT BEEN SHOWN THAT THE RETURN FILED BY THE ASSESSEE WAS NOT BASED ON THE BOOKS OF ACCOUNT. THE TOTAL VALUE OF THE STOCK WAS SHOWN TO THE BANK AT MARKET RATE. IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, ON THE OT HER HAND, IT WAS DEPICTED AT COST. WHEN THE GROSS PROFIT WAS REDUCED FRO M THE VALUATION AS SUBMITTED TO THE BANK, THE RESULTING VALUE OF STOCK CA ME TO ` 13,00,80,291/-, AS PER BOOKS OF ACCOUNT. THE STOCK AS PER THE BOOKS OF A CCOUNT ACTUALLY WAS OF ` 13,27,89,412/-, I.E., MORE THAN THE STOCK SO CAL CULATED. ON FACTS, THEREFORE, SHREE PADMAVATHY COTTON MILLS, (SUPRA) I S SQUARELY APPLICABLE TO THE PRESENT CASE. 23. IN CIT VS. GOPAL RICE MILLS, 211 ITR 494 (ALL), IT WAS OBSERVED THAT IT IS TRUE THAT IN ORDER TO OBTAIN HIGHER CREDIT, THE FIG URES GIVEN BY THE ASSESSEE TO THE BANK ARE GENERALLY INFLATED, OF COURSE, SUBJECT T O SCRUTINY BY THE BANK OFFICIALS. THOUGH IN THAT CASE, AS RIGHTLY POINTED OU T ON BEHALF OF THE ITA NO.3373/DEL/2010 16 DEPARTMENT, THERE WAS, BESIDES THE INSPECTION BY THE BA NK FROM TIME TO TIME, A SECOND INSPECTION MADE BY THE REGIONAL FOOD C ONTROLLER, WHICH WAS FOUND MORE THOROUGH AND CONSTITUTING BETTER EVIDENC E, THE HONBLE HIGH COURT DECIDED THE MATTER BY OBSERVING THAT THE INSPEC TION BY THE BANK OFFICIALS WAS ONLY INDIRECT EVIDENCE AND THAT THE SAME HAD RIGHTLY BEEN DISBELIEVED. 24. IN CIT VS. KHAND SIROHI AND STEEL ROLLING MILLS , 200 CTR 595 (ALL), THE TRIBUNAL DELETED THE ADDITIONS MADE BY THE ASSESSING OF FICER, OBSERVING THAT THERE WAS AMPLE AUTHORITY TO SHOW THAT THE PRACTICE OF DECLARING HIGHER STOCK TO THE BANK TO GET HIGHER LOAN FACILITY, IS A FACT O F LIFE. THE HONBLE HIGH COURT DID NOT FIND ANY ERROR IN THE ORDER OF THE TRIBUNAL . 25. IN CIT VS. DAS INDUSTRIES, 303 ITR 199 (ALL), IT WAS FOUND THAT THOUGH THE BALANCE SHEET HAVE BEEN PRESENTED BEFORE THE BANK , THE BANK HAD NOT VERIFIED, NOR CERTIFIED THE STOCK AVAILABLE WITH THE ASSESSEE; THAT EVEN THE ASSESSING OFFICER HAD NOT ESTABLISHED THAT THE ASSESSEE HAD A BALANCE OF STOCK AS SHOWN BEFORE THE BANK; THAT THE EXPLANATION OF THE ASSESSEE, LIKE THE ONE IN THE PRESENT CASE, WAS ACCEPTED BY THE TRIB UNAL; THAT THE HONBLE HIGH COURT DID NOT DISTURB SUCH FINDING OF THE TRIBUN AL; AND THAT DHANSIRAM AGGARWALA (SUPRA) WAS FOUND NOT APPLICABLE. 26. IN CIT VS. PUNJAB RICE AND GENERAL MILLS, 264 I TR 482 (P&H), THE EXPLANATION GIVEN BY THE ASSESSEE WAS FOUND TO BE SATISFAC TORY. 27. IN THE CASE OF N. SWAMY (SUPRA), IT WAS OBSERVED BY THE HONBLE HIGH COURT, INTER ALIA, THAT THE ASSESSEES INCOME IS TO BE ASSE SSED BY THE ITO ON THE BASIS OF MATERIAL WHICH IS REQUIRED TO BE CONSIDE RED FOR THE PURPOSE OF ASSESSMENT AND ORDINARILY NOT ON THE BASIS OF THE STATEMEN T WHICH THE ASSESSEE MAY HAVE GIVEN TO A THIRD PARTY, UNLESS THERE IS MATERIAL TO CORROBORATE THAT STATEMENT OF THE ASSESSEE GIVEN TO A T HIRD PARTY, EVEN IF IT BE A BANK; THAT THE MERE FACT THAT THE ASSESSEE HAD MAD E SUCH A STATEMENT BY ITSELF, CANNOT BE TREATED AS HAVING RESULTED IN AN IRREBUTTABLE PRESUMPTION ITA NO.3373/DEL/2010 17 AGAINST THE ASSESSEE; THAT THE BURDEN OF SHOWING THAT T HE ASSESSEE HAD UNDISCLOSED INCOME, IS ON THE REVENUE; AND THAT SUCH BU RDEN 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 W HICH WAS NOT DIRECTLY RELATED TO THE ASSESSMENT AND MAKING THAT THE SOLE FOUN DATION FOR A FINDING THAT THE ASSESSEE HAD DELIBERATELY SUPPRESSED HIS INCOME. T HE HONBLE HIGH COURT PLACED RELIANCE ON PARIMISETTI SEETHARAMAMMA VS. CIT, 57 ITR 532 (SC). 28. THUS, CONSIDERED FROM ANY ANGLE, THE ORDER PASSED B Y THE LD. CIT (A) IS WELL VERSED AND DOES NOT REQUIRE ANY INTERFERENCE AT OUR HANDS. AS SUCH, THE SAME IS CONFIRMED. THE GROUNDS RAISED BY THE DEPARTMENT DO NOT HOLD ANY WATER AND THE SAME ARE, ACCORDINGLY, REJECTED. 29. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.11.201 3. SD/- SD/- [ SH AMIM YAHYA ] [A.D. JAIN] ACCOUNTANT M EMBER JUDICIAL MEMBER DATED, 26 TH NOVEMBER, 2013. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.