M/S Jullundur Engineering Complany, Jalandhar v. Commissioner Of Income Tax, Jalandhar And Another

ITA No. &2 of 2000} 1] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 82 of 2000Date of decision: 13.1.2020 M/s Jullundur Engineering Complany, Jalandhar .. Appellant V. Commissioner of Income Tax, Jalandhar and another .. Respondents CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGANHON'BLE MR. JUSTICE AVNEESH JHINGAN Present: |Mr. Alok Mittal, Advocate for the appellant.Mr. Vivek Sethi, Senior Standing Counsel for the Revenue,Mr. Vivek Sethi, Senior Standing Counsel for the Revenue, AVNEESH JHINGAN, J. The assessee is in appeal under Section 260A of the IncomeTax Act, 1961 (for short, ‘the Act’) against the order dated 28.2.2000 passedby the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short,‘the Tribunal’) partly allowing the appeal of the revenue. Following!substantial questions of law have been claimed in the appeal: >8*9Whether in the facts and circumstances of the case, the orders Annexures P-1 and P-3 are legally sustainable? 8**9Whether in the facts and circumstances of the case, theIncome Tax Appellate Tribunal was right in sustaining anaddition of Rs. 12,89,080/- (wrongly typed as additionsustained is of Rs. 11,88,530/-) on account of discrepancyIncome Tax Appellate Tribunal was right in sustaining anaddition of Rs. 12,89,080/- (wrongly typed as additionsustained is of Rs. 11,88,530/-) on account of discrepancy ITA No. &2 of 2000|2] between the stocks as per books of account and as perbank records? (111) Whether in the facts and circumstances of the case, theLT.A.T. was right in sustaining the addition ofRs.12,89,080/- in view of the statements given by thebank officials that the stocks statement as furnished on31.3.1988 continued to be reflected in their accountsbeing upto 28.4.1988?LT.A.T. was right in sustaining the addition ofRs.12,89,080/- in view of the statements given by thebank officials that the stocks statement as furnished on31.3.1988 continued to be reflected in their accountsbeing upto 28.4.1988? (iv) Whether in the facts and circumstances of the case, theLT.A.T. was right in sustaining the addition ofRs.12,89,080/- on account of discrepancy between thestocks reflected in the books of account and as per bankrecords specially when the discrepancy was only asregards the entry made in the D.P. Register and with theinfirmity, defect or discrepancy as otherwise present in thebooks of accounts of the assessee-appellant?LT.A.T. was right in sustaining the addition ofRs.12,89,080/- on account of discrepancy between thestocks reflected in the books of account and as per bankrecords specially when the discrepancy was only asregards the entry made in the D.P. Register and with theinfirmity, defect or discrepancy as otherwise present in thebooks of accounts of the assessee-appellant? 8.9Whether in the facts and circumstances of the case, theLT.A.T. was right in sustaining the addition ofRs.12,89,080/-, the same being made without any basisignoring the cogent and material evidence placed onrecord by the assessee-appellant showing to thecontrary?”LT.A.T. was right in sustaining the addition ofRs.12,89,080/-, the same being made without any basisignoring the cogent and material evidence placed onrecord by the assessee-appellant showing to thecontrary?” The necessary facts are that the assessee on 31.10.1989 filedreturn for the assessment year 1989-90, declaring income of=97,480/-.During the assessment proceedings, discrepancy of stock in terms ofquantitative as well as value reflected in the books of account and furnished ITA No. &2 of 2000}3] 8.9Whether in the facts and circumstances of the case, theLT.A.T. was right in sustaining the addition ofRs.12,89,080/-, the same being made without any basisignoring the cogent and material evidence placed onrecord by the assessee-appellant showing to thecontrary?”LT.A.T. was right in sustaining the addition ofRs.12,89,080/-, the same being made without any basisignoring the cogent and material evidence placed onrecord by the assessee-appellant showing to thecontrary?” The necessary facts are that the assessee on 31.10.1989 filedreturn for the assessment year 1989-90, declaring income of=97,480/-.During the assessment proceedings, discrepancy of stock in terms ofquantitative as well as value reflected in the books of account and furnished ITA No. &2 of 2000}3] to the bank for hypothecation and pledge was noticed by the AssistantCommissioner of Income Tax Circle 1(2), Jalandhar (hereinafter describedas ‘the Assessing Officer’). Show cause notice was issued stating that in thebooks of account the value as on 28.4.1988 of closing stock is shown asL25,96,803/-, whereas as per D.P. Register with the bank, it wasL49,50,106/-. The assessee re-casted the trading account and showed thevalue of closing stock as on 28.4.1988 of 421,39,176/-. The difference was|explained under three heads. The explanation with regard to412,73,000/-was accepted by the Assessing Officer. As regards to|=12,89,080/-, theassessee averred that the stock was pledged from the already hypothecatedstock. For the remaining difference of43,44 OOO/-, it was stated that thestock was to be received and pledged. The Assessing Officer rejected boththe contentions and vide order dated 26.3.1992, apart from other additionsmade addition of|415,32,530/- on account of stock difference. Appeal wasfiled and the Commissioner of Income Tax (Appeals), Jalandhar [for short,‘the CIT (A)'] vide order dated 16.2.1993 allowed the appeal. The appealfiled by the revenue before the Tribunal was partly allowed on 28.2.2000.The explanation with regard to L3,44.000/- for difference in stock wasaccepted and the addition to the tune of411,88,530/- on account ofdiscrepancy in stock was sustained, hence the present appeal. Learned counsel for the assessee argued that the Tribunal erredin sustaining the addition, as a certificate from the bank was produced to theeffect that no statement of stock as on 28.4.1988 was filed by the assessee.He submitted that figure as on 31.3.1988 of stock value of=20,44,026/-was reproduced by the bank. Contention is that from the hypothecatedstock, pledge of stock worth412,89,080/- was made. ITA No. &2 of 20001/4] The contentions raised do not warrant any interference in theorder of the Tribunal. The assessee before the Assessing Officer failed toproduce any evidence worth reliance, explaining the difference of stock.The books of account of the assessee were rejected and estimate profit onaccount of trading was calculated. The Assessing Officer examined the bankofficial and during his cross-examination, it transpired that the previousfigure given by the assessee was repeated unless there was change in stockposition. Meaning thereby from 31.3.1988 to 28.4.1988 the assessee neverinformed the bank that the stock had reduced. The argument that no stock statement as on 28.4.1988 was filedby the assessee does not enhance its case, rather the position comes to thatthe stand of the assessee with the bank was that hypothecated stock worth420,44,026/- as it existed on 31.3.1988 continued till 28.4.1988. The stockposition as per the D.P. Register as on 28.4.1988 is tabulated below: 1) Hypothecation A/c Rs.20,44,026/- 11) Pledge A/c Rs.12,73,000/- ili) Pledge A/c Rs.12,89,080/-iv) To be pledged Rs.3,44,000/- ??????????????????????? Rs.49,50,106/- ???????????????????????E The argument that no stock statement as on 28.4.1988 was filedby the assessee does not enhance its case, rather the position comes to thatthe stand of the assessee with the bank was that hypothecated stock worth420,44,026/- as it existed on 31.3.1988 continued till 28.4.1988. The stockposition as per the D.P. Register as on 28.4.1988 is tabulated below: 1) Hypothecation A/c Rs.20,44,026/- 11) Pledge A/c Rs.12,73,000/- ili) Pledge A/c Rs.12,89,080/-iv) To be pledged Rs.3,44,000/- ??????????????????????? Rs.49,50,106/- ???????????????????????E The issue raised is only with regard to pledge of 412,89,080/-.The contention is that the stock was from the hypothecated stock ofL20,00,000/- odd. To substantiate the said claim, no evidence was producedbefore the authorities. The bank was never informed that the hypothecatedstock was reduced and out thatL12,00,000/- odd of stock was pledged. Theassessee failed to discharge the onus of explaining the discrepancy. | ITA No. &2 of 2000}5| The matter can be viewed from another angle, i.e., as and whenthere was additional stock of43,44,000/-, the assessee approached the bankto show that the stock had increased. The said stock was pledged with thebank on 29.4.1988 and thereafter drawing power was enhanced byL2,33,600/- and accordingly the value of stock was changed by the bank.The value of hypothecated stock as on 31.3.1988 was repeated subsequentlyon 16.4.1988 and 24.8.1988 as there was no change of value of stock andthe same was not intormed to the bank. The assessee failed to prove incorrectness of entries of D.P.Register. The evidence was duly considered by the Tribunal and partialrelief was granted. No error or illegality is shown in the order of the Tribunalsustaining addition of411,88,530/-. No question of law much lesssubstantial question of law arises, rather the contentions are purely factual. The appeal is dismissed. (AVNEESH JHINGAN)(AJAY TEWARI)JUDGE JUDGE 13.1.20205) Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No