Commissioner Of Income-Tax, Ludhiana v. M/S Santosh Box Factory Pvt. Ltd

Income-tax Appeal No.629 of 2010 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.629 of 2010Date 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 appealhas been preferred by the revenue underSection 260A of the Income Tax Act, 1961 against order dated16.7.2009 passed by the Income Tax Appellate Tribunal,Chandgiarh Bench 'B', Chandigarh in ITA No.724/Chd/2009, for theassessment year 2006-07, claiming following substantial question oflaw:- “i).Whether on facts and in the circumstances of thecase and in law, the Tribunal was legally justified indismissing the appeal of the department by placingreliance on the decision of Hon'ble High Court ofPunjab & Haryana in the case of CIT Vs. Sidhu Rice& General Mills 281 ITR 428 ignoring the fact that the facts of the case of the assessee are clearlydistinguishable from the facts of case CIT Vs.Sudhu Rice & General Mills?” 2.The Assessing Officer made addition to the declaredincome of the assessee on the ground that in the statement withregard to value of hypothecated stock furnished to the bank, theassessee had given higher figure of value of stock than the valuereflected in the books of account. The finding was set aside on theground that figure furnished to the bank was on estimate basis andcannot be treated as value of stock for computation of income. Theobservations of the CIT(A) are as under:- “I have carefully considered the contention of the ld.Counsel for the appellant and perused the relevantrecord. Addition in this case has been made by theA.O. on the basis of the difference in the closing stockas per books of accounts and as depicted in the stockstatements submitted to the bank for availing creditfacilities against hypothecation of stocks. Whereas theappellant has been contending that the figures given inthe stock statement were on estimate basis and thatthe stocks as per books were the correct stocks of theappellant, the A.O. Did not accept ht contention.Reliance place by the appellant upon various decisionsincluding the decision of the Hon'ble jurisdictional HighCourt of Punjab & Haryana in the case of Sidhu Rice & General Mills (supra) has also not been accepted bythe A.O. The A.O. is of the view that in view of thespecific verification in the bank stock statements whichare duly signed by the appellant the ratio of thesedecisions would not apply. As per him, the case lawsrelied upon by the appellant were distinguishablemainly owing to the fact that such verification did notappear to have been considered by the Hon'ble HighCourts. However, I do not agree with the A.O. in thisregard. It cannot be presumed that the Hon'ble HighCourt have not considered certain aspect of the case tocome to the conclusion in a particular case. In thecase of Sidhu Rice & General Mills which has beenrelied upon by the ld. Counsel the Hon'ble High Courthad taken note of the fact that the credit facilities givenby the bank in that case was against the hypothecationof stocks and not against the pledge of stock as is alsothe case of the appellant. The Hon'ble jurisdictionalHigh Court deleted the addition in that case on theground that except for the photocopies of the stockstatement allegedly furnished to the bank by thatassessee, no material had been brought on record toshow that the assessee in fact possessed largerquantity of stocks. In the case of the appellant alsothe overdraft facility has been availed against the hypothecation of stocks and except for the copies ofthe stock statement there is no material to show thatthe appellant did not possess stocks more than thoseshown in the books of accounts. Even otherwise, asdiscussed by the A.O. Also at various placed in theassessment order, the difference in the amountsmentioned in respect of valuation of closing stock in thebooks of accounts and in the stock statement is onaccount of the excessive value considered in thestatements. There is no difference in the quantity.Rather in the stock statements furnished to the bank noquantities are mentioned. In the absence of suchdetails, again no cause could be made out against theappellant that it possessed stocks more than thatshown in the books of accounts on a particular day.The fact that the figures of sales and purchases madeby the appellant have been verified and accepted bythe Sales Tax Department, the accounts of theappellant are audited and that the GP rate shown bythe appellant in the assessment year underconsideration is 15.43% is better than the GP rate of15.14% shown in the preceding year would further go infavour of the appellant in as much as there is noground for presuming that the appellant hadunderstated its income by showing lower value of closing stock etc. Though the A.O. has placedreliance upon certain decision in making the impugnedaddition, as the case of the appellant is covered by theratio of decision of the Hon'ble jurisdictional High Courtof Punjab and Haryana in the case of Sidhu Rice &General Mills (supra), the ratio of the decisions cited bythe A.O. would not help his case. Keeping in view thefacts & circumstances discussed above and particularlythe ratio of decision of Hon'ble Punjab & Haryana HighCourt in the case of Sidhu Rice & General Mills (supra),the addition made by the A.O. is not sustainable andthis is accordingly deleted. This ground of appeal is,therefore, allowed.” 3. 3.The finding recorded by the CIT(A) has been upheld bythe Tribunal following the judgment of this Court in CIT Vs. SidhuRice & General Mills (2006) 281 ITR 428 (P&H). 4.We have heard learned counsel for the appellant. 5. 5.The stock statement furnished to the bank may bematerial which may be required to be gone into during assessmentbut cannot be treated as conclusive. Whether in a given case thestock statement could be accepted as basis for computing the valueof the stock depends upon the circumstances of each case. If theassessee is able to show that the statement was given only onestimate basis and value reflected in the books of account wascorrect, there is no absolute bar to such explanation being accepted. *** In the present case, the CIT(A) and the Tribunal have recorded aconcurrent finding of fact which is not shown to be perverse. Nosubstantial question of law arises. 6.Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge March 01, 2011Pka (Ajay Kumar Mittal) Judge