Addition u/s 69B for difference in stock from statement given to Bank deleted as in preceding year it was deleted following High Court judgment
ABCAUS Case Law Citation:
ABCAUS 3105 (2019) (08) ITAT
Important case law relied upon by the parties:
CIT vs. Sidhu Rice & General Mills, 281 ITR 428
CIT vs. Shri Bharat Bhushan Suri (HUF)
CIT vs. N. Swamy, 241 ITR 363
CIT vs. Khan & Sirohi Steel Rolling Mills, 200 CTR 595
Ashok Kumar vs. Income Tax Officer, 201 CTR 178-
The instant appeal was filed by the assessee against the order of CIT(Appeals) in sustaining addition u/s 69B of the Income Tax Act, 1961 (the Act) on account of difference in stock statement given to the Bank.
The assessee was a proprietor. The Assessing Officer (AO) noted that there was an increase in the turnover as well as GP ratio as compared to the preceding assessment year.
The AO called for information from Manager of the assessee’s Bank u/s 133(6) of the Act to furnish details regarding the stock/assets hypothecated by the assessee for obtaining loans/CC limit and to supply the bank statement submitted to the Bank.
The stock statement revealed that there was a considerable difference in the amount of the stock declared to the bank on the last day of February and the value of the stock as per balance sheet as on 31st March i.e. last day of the financial year.
The AO after calling explanation of the assessee and considering the GP rate made the addition of the difference on account of unexplained investment in stock.
The assessee challenged the addition before the CIT(A) and it was submitted that assessee was having bank facility from the bank and for getting higher credit, it is a common practice to furnish the stock statement to the bank by estimate and not the actual stock.
It was explained that the assessee too followed the common practice and furnished the said stock statement on estimate basis to the Bank by using figures on estimate basis and not on actual basis.
Further, it was explained that the Bank officials had also not verified the physical stock at the premises of the assessee nor value the stock. The stock was not under lock and key of the Bank.
It was explained that the assessee was dealing in Government items and chemicals and same were subjected to physical verification by the Govt. Department. It was pointed out that the stock statement submitted to the Bank on 31st March showed closing stock which tallied with the stock statement as per the books of account of the assessee. Also, the stock value as per the statement furnished to the Bank as on 31st March tallied with the values of stock as per audited account of the assessee.
It was submitted that as on 28th February the books of accounts were not completed and the assessee was required by the Bank to furnish the stock statement to continue his bank facility and, as such, stock statement on estimate was furnished. It was submitted that books of account of assessee were duly audited by Chartered Accountant as required u/s 44AB of the Act and these books had been accepted by AO who had not rejected the books of accounts.
It was also pointed out that the GP rate was better as compared to preceding assessment year. The AO was having only the photocopy of the stock statement furnished to the Bank. The AO had not brought any material on record to show that assessee possessed stocks as reflected in the said statement as against the stocks depicted in the balance sheet. AO had not pointed out any mistake in the maintenance of the books of accounts.
The assessee relied upon number of decisions in support of his contentions. The assessee also submitted that on similar facts for preceding AY, CIT(A) had allowed the appeal of assessee.
The Tribunal observed that the authorities below had heavily relied upon the information provided by the Bank stating that that due to renovation of the branch the file containing stock statement of assessment year under appeal was not traceable at present. However, as per banking practice whenever the party submitted stock statement same is checked/verified by the bank officials.
The Tribunal was of the view that it was evident that the stock statement submitted by the assessee to the bank was not produced before the AO. The bank had merely explained their general practice for verifying the stock statement. However, what happened in the case of the assessee had not been clarified by the bank. Thus, the authorities below merely relied upon the general practice of the bank instead of verifying the actual fact of the case of the assessee.
The Tribunal observed that the assessee submitted that as on the closing of the financial year the closing stock reported to the bank was also certified by the bank. Therefore, the stock statement tallied with the stock statement submitted to the bank at the end of the financial year. The assessee, therefore, rightly contended that the stock statement submitted on 28th Feb, prior to close of the financial year was on estimate basis and not on actual basis.
Further, the Tribunal also noted that the stock of the assessee was subject to physical verification by Govt. Department. However, The AO did not make any enquiries from the concerned Department with regard to discrepancy in the stock.
It was also noted that in the preceding AY the similar addition was deleted by the CIT(A) following the judgment of the Hon’ble Punjab & Haryana High Court. Therefore, CIT(A) should not have taken a contrary view in assessment year under appeal.
The Tribunal stated that it is well settled law that Revenue authorities are bound to follow the rule of consistency. In view of the above, the Tribunal set aside the orders of authorities below and deleted the entire addition.
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