Income Tax Appellate Tribunal - Amritsar
Ishar Infrastructure Developers ... vs Department Of Income Tax on 26 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. No. 198(Asr)/2013
Assessment year:2009-10
PAN :AABCI2581A
Dy. Commr. of Income Tax, vs. Ishar Infrastructure Developer (P) Ltd;
Circle-1, Bathinda. Bathinda.
(Appellant) (Respondent)
I.T.A. No. 536(Asr)/2013
Assessment year:2010-11
PAN :AABCI2581A
Dy. Commr. of Income Tax, vs. Ishar Infrastructure Developers (P) Ltd;
Circle-1, Bathinda. Bathinda.
(Appellant) (Respondent)
I.T.A. No. 199(Asr)/2013
Assessment year:2009-10
PAN :AAIFR7212D
Dy. Commr. of Income Tax, vs. M/s. Royal Deep Construction Co.
Circle-1, Bathinda. Bathinda.
(Appellant) (Respondent)
I.T.A. No. 200(Asr)/2013
Assessment year:2009-10
PAN :AAHFB6283B
2
Dy. Commr. of Income Tax, vs. M/s. Bhalaria Constructions,
Circle-1, Bathinda. Bathinda.
(Appellant) (Respondent)
I.T.A. No. 571(Asr)/2013
Assessment year:2010-11
PAN :AABCE7889F
Income Tax Officer, vs. M/s. Euro Infrastructure & Power Ltd.
Ward-1(1), Bathinda. Bathinda.
(Appellant) (Respondent)
Department by:Sh. Tarsem Lal, DR
Assessees by:Sh.P.N.Arora, Advocate
I.T.A. No. 457(Asr)/2013
Assessment year:2009-10
PAN :AAHFR9629R
Dy. Commr. of Income Tax, vs. M/s. Ram Kumar Bansal
Circle-1, Bathinda. Bathinda.
(Appellant) (Respondent)
C.O.No.16(Asr)/2014
(Arising out of I.T.A. No. 457(Asr)/2013)
Assessment year:2009-10
PAN :AAHFR9629R
.M/s. Ram Kumar Bansal vs. Dy. Commr. of Income Tax,
Bathinda. Circle-1, Bathinda.
(Appellant) (Respondent)
Department by:Sh. Tarsem Lal, DR
Assessees by:S/Sh.P.N.Arora & P.K.Singla Advocate
Date of hearing:04/02/2015
Date of pronouncement:26/03/2015
3
ORDER
PER B.P.JAIN,AM:
These six appeals of the Revenue in the case of five assesses arise from different orders of CIT(A), Bathinda, as per details given below. :
S.No. ITA No. Particulars of Detail of Date of Asstt.
the case CIT(A) order of
CIT(A) Yr.
1. 198(Asr)/2013 Ishar Bathinda 31.01.2013 2009-
Infrastructure
Developers 10
(P) Ltd.
2. 536(Asr)/2013 -do- -do- 30.05.2013 2010-
11
3. 199(Asr)/2013 Royaldeep -do- 31.01.2013 2009-
Construction
Co. 10
4 200(Asr)/2013 Bhalaria -do- -do- -do-
Constructions
5. 571(Asr)/2013 Euro -do- 27.06.2013 2010-
Infrastructure
& Power 11
L:td.
6. 457(Asr)/2013 Ram Kumar -do- 22.03.2013 2009-
Bansal
10
7. CO.No.16(Asr)/14 Ram Kumar -do- -do- -do-
Bansl
4
2. The assessee Sh. Ram Kumar Bansal has also filed cross objection bearing No.16(Asr)/2013.
3. The Revenue in the case of Ishar Infrastructure Developers Pvt. Ltd., in ITA No.198(Asr)/2013 for the assessment year 2009-10, has raised the following grounds of appeal:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.6,39,30,292/- as its closing stock as at 31.03.2009 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.4,66,13,761/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places.
He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence."
4. The Revenue in the case of Ishar Infrastructure Developers Pvt. Ltd., in ITA No.536(Asr)/2013 for the assessment year 2010-11 has raised the following grounds of appeal:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself 5 supplied a figure of Rs.10,82,22,030/- as its closing stock as at 20.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.7,52,50,550/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence."
5. The Revenue in the case of M/s. Royaldeep Cnstruction Co., in ITA No.199(Asr)/2013 for the assessment year 2009-10 has raised the following grounds of appeal:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.1,67,04,000/- as its closing stock as at 31.03.2009 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.1,15,60,000/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of 6 stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence."
6. The Revenue in the case of M/s. Bhalaria Constructions, Bathinda, in ITA No.200(Asr)/2013 for the assessment year 2009-10 has raised the following grounds of appeal:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.1,28,69,000/- as its closing stock as at 31.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.19,89,130/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence."
7. The Revenue in the case of Ram Kumar Bansal in ITA No.457(Asr)/2013 for the assessment year 2009-10 has raised the following grounds of appeal:
7"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.2,99,50,000/- as its closing stock as at 31.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.12,13,814/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence.
3. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in deleting the addition made by the AO on the basis of difference in the value of book debt as per Drawing Power Register of the Bank vis-à-vis value of book debts as per Balance sheet filed before the department."
8. The Revenue in the case of Euro Infrastructure & Power Ltd. in ITA No.571(Asr)/2013 for the assessment year 2010-11. has raised the following grounds of appeal:
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of :
i) Rs.2,69,86,910/- on account of excessive stock being difference in stock statements submitted to the bank and balance sheet submitted to the department..
ii) Rs. 6,60,000/- on account of non charging of interest on debit balance from debtors.8
2. That it is prayed that the order of the ld. CIT(A) be set aside and that of the AO be restored.
9. In C.O. bearing No. 16(Asr)/2013, the assessee has raised the following grounds :
1. That in the facts and circumstances of the case the ld. CIT(A) has erred not adjudicating grounds No. 5 and 11 on the plea that as the main ground of appeal has been decided in favour of the assessee. The 5th and 11th grounds of appeal are as under:
Ground No.5: Without prejudice to the abov, the ld. AO has erred in law and on facts in recasting the trading account by only taking the inflated figure of closing stock as per bank statement and taking the opening stock as per books of account. If both the figures are taken as per bank account instead of books of accounts, there remain no difference. As such, addition made of Rs.39155957/- on this account is uncalled for. The same is deleted.
Ground No.11:That the Ld. AO has erred in law and on facts in making addition of Rs.41415652/- in the returned income of the assessee without pointing out any defect in the books of account maintained in the regular course of business as maintained in the past, duly audited by the Chartered Accountant. As such, addition made without rejecting the books of accounts is uncalled for. The same be deleted."
10. The Ld. DR, Mr. Tarsem Lal, at the outset, argued that the issue in all the appeals is identical and was accepted by the ld. counsel for the assesses appearing in all the appeals, Sh. P.N.Arora, Advocate that the issue is identical in all the appeals raised by the Revenue. The minor differences are 9 there in few of appeals which will be discussed in the course of arguments by both the parties.
11. Since the issue in all the appeals is similar, as argued by both the parties, accordingly, with the consent of both the parties, the arguments were made by both the parties in the case of Ishar Infrastructure Developers Pvt.
Ltd. in ITA No.198(Asr)/2013 for the assessment year 2009-10. Therefore, we proceed to decide the appeal in the case of DCIT vs. Ishar Infrastructure Developers Pvt. Ltd. Bathinda in ITA No.198(Asr)/2013 for the AY 2009- 10 and our decision hereinbelow shall be identically applicable in all the appeals mentioned hereinabove, as the issue in all the appeals is similar as discussed hereinabove.
12. ITA No.198(Asr)/2013 for the AY 2009-10 - DCIT vs. Ishar Infrastructure Developers Pvt. Ltd; Bathinda.
The brief facts of the case as arising out of AO's order are reproduced hereinbelow:
"The assessee continued to pursue his business of contractorship during the year. The case was selected under scrutiny through CASS. Notice u/s 143(2) dated 01.09.2010 was issued and served upon the assessee by ACIT, Circle-1, Bathinda. Therefore, notice u/s 142(1) alongwith detailed questionnaire was issued on 29.11.2010 was issued by her. Notice u/s 142(1)/143(2) was issued on
13.12.2010 fixing the case for 21.12.2010. After the change of incumbent, fresh notice u/s 143(2) dated 07.06.2011 was issued by the undersigned fixing the case for 16.06.2011. In response to these notices, S/Sh. Chander Raheja, Chartered Accountant and Tarsem Kappor, ITP, counsel for the assessee attended the assessment proceedings from time to time and furnished information as requisitioned. During the course of assessment proceedings, books of accounts, 10 bills and vouchers were produced which were test checked. The case discussed with him.
During the course of scrutiny it was noticed that as per books of account (duly audited by Sh. Sunil Bansal, CA, the closing stock of the firm as on 31.03.2009 stands at Rs.6,19,75,800/- while as per physical inventory prepared by the assessee and submitted before the bank authorities i.e., Punjab National Bank, Arya Samaj Branch, Bathinda to obtain loan/limit facility from Bank in A/c No.870002192 as on 31.03.2009, the value of closing stock was shown at Rs.12,59,06,092/-. The bank authorities have submitted certified copy of drawing power register showing stock position of the assessee from July 2007 to 31.01.2010 which is signed by the Officer who physically verified the stock, stock statement and further signed by the incharge incumbent Manger which has been placed on record. The bank authorities also intimated quarterly stock position of the assessee as under:-
Date of Stock Statement Amount of Stock (Rs.) 31.03.2008 61,569,440 30.06. 2008 68,507,860 30.09. 2008 72,915,600 31.12.2008 74,605,500 31.03.2009 125,906,092
It reveals the difference of Rs.6,39,30,292/- (Rs.12,59,06,092/- minus Rs.6,19,75,800/-) on account of stock as shown in balance sheet submitted to I.T. Department.
An opportunity of being heard was afforded to the assessee vide this office letter dated 04.11.2010 to state as to why an addition of Rs.6,39,30,292/- be not made on account of difference in physical stock as shown in regular books of account and as to why penalty proceedings u/s 271(1)© for furnishing of inaccurate particulars be not initiated. The certified copies of the all documents and letters as received from bank were also supplied to the assessee. In response to the query, the assessee submitted his written submissions duly signed by the counsel of the assessee which is reproduced as under:-
"During the course of assessment proceedings, the assessee has been cofronted with the stock statement furnished to the bank for availing the overdraft facility. As per the stock statement as on 31.03.2009, submitted to the bank, the assessee had a stock of Rs.12,59,06,092/- while as per balance-sheet, the same stood at Rs.6,19,75,800/-.
2. For this difference in stock, it is respectfully submitted that the statement filed with the bank was in the nature of stock hypothecated and not pledged. The stock remained in the possession and under the control of the assessee at different locations in different states e.g.J&K, Madhya Pradesh, Punjab & Chandigarh where contract works were being executed. The stock hypothecated with bank was never physically verified at different sites by the bank authorities. It is a matter of common knowledge that in the case of contractors, the stock remain scattered at different locations in the open area. In our case, these locations were in different 11 States mentioned above. Further, in the State of M.P., the works were being executed over a radius of more than 50 km. In view of the nature of business of assessee, it is also difficult to take exact measurements of material/stock actually available and consumed on day to day basis. Thus the value of the stock is shown to the bank on simply estimated basis.
3. Further, it is pertinent to bring it to your kind notice that the assessee had submitted 'performance bank guarantees' to various departments and the works were to be completed within stipulated frame of time. As the payments receivable by the assessee were held up by the Departments, the assessee was running short of funds. In order to complete the on-going works within stipulated time and to avoid revoking of 'bank guarantees' by the departments, the assessee submitted inflated stock statement to the bank to get loans for running/continuing the on- going works by making available optimum amount of funds needed for business purposes. Raising of such loans from the bank does not affect the income of the assessee in any manner. However, it is a fact that whatever amount was received from the bank, the same was put to use wholly, exclusively and necessarily for business purposes and by virtue of it, the assessee in a way, made an effort to increase its income/gains. The assessee has been maintaining books of account on regular basis and keeping complete records of recipts and expenses under different heads. It is also submitted that the object of assessment is to tax the real income of the assessee, for which books of account have been maintained on day to day basis.
4. Needless to mention here that this has come up for adjudication in a number of cases before various Hon'ble Courts wherein they have given their verdict that no adverse view in such circumstances need be taken against the assessee. For favour of your kind consideration, the following judgments are relied upon:
i) The Hon'ble Punjab & Haryana High Court in a recent case of Commissioner of Income tax, Ludhiana v. M/s Santosh Box Factory (P) Ltd. reported at (2011) 44 Reps 473 (P&H) has held as under. :
"Income Tax Act, 1961-Section143(1)-Assessment-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- whether correct-Held, Yes- The stock statement furnished to the bank many be material which may be required to be gone into during assessment but cannot be treated as conclusive. Whether in 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 are correct, there is no absolute bar to such explanation being accepted. In the present case, the CIT(A) and the Tribunal have recorded a concurrent 12 finding of fact which is not shown to be perverse. No substantial question of law arises.
A copy of the aforesaid judgment is also enclosed for favour of your kind perusal and consideration. It does not require any mention that the orders of the jurisdictional High Court have binding effect on the subordinate offices falling under the area of the said High Court.
ii) In the case of Ashok Kumar vs. Income-tax Officer, reported at (2006)201 CTR(J&K)178 2005) 149 Taxman 479, the Hon'ble Court of Jammu & Kashmir has conclude as under:-
" Addition could not be made on the basis of difference between closing stock declared in the trading account and the stock shown in the statement submitted by the assessee to the bank as the stock position shown to the bank was on estimate basis and inflated value was shown to avail more credit from bank."
Copy of the aforesaid judgment is enclosed for favour of kind perusal and consideration.
iii) In the case of Commissioner of Income-tax vs. Khan & Sirohi Steel Rolling Mills reported at (2006) 200 CTR (All.) 595, the Hon'ble Court has concluded as under:
"Tribunal was justified in accepting the explanation of the assessee that in view of the prevailing practice, the value of stock hypothecated to bank was inflated to avail of more overdraft facilities and deleting the addition on account of difference between stock shown to bank and the stock shown in the books of the assessee."
A copy of this judgment is also enclosed herewith.
iv) In the case of Commissioner of Income Tax vs. N Swamy reported at (2000)241 ITR 363 (Mad.), the Hon'ble High Court has held as under:-
" The assessee's income is to be assessed by the ITO on the basis of the material which is required to be considered for the purpose of assessment and ordinarily not on the basis of the statement which the assessee may have given to a third party unless there is material to corroborate that statement of the assessee give to a third party, even if it be a bank. The mere fact that the assessee had made such a statement by itself cannot be treated as having resulted in an irrefutable presumption against the assessee. The burden of showing that the assessee had undisclosed income is on the Revenue. That burden 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 which was not directly related to the assessment and making that sole foundation for a finding that the assessee had deliberately suppressed his income. That the burden is on the Revenue to prove that the income sought to be taxed within the taxing provisions and there was in fact income, are propositions which are well settled. The rejection of the explanation was a matter for the Tribunal. The Tribunal has exercised its jurisdiction and the question decided by it is a question of fact. Therefore, there is no scope for interference with the order of the Tribunal -coimbatore Spinning & 13 Weaving Co. Ltd. vs. CIT (1974) 95 ITR 375(Mad.): TC 1R, 607 and Parimisetti Seetharamma vs. CIT(1965) ITR 532(SC): TC 58R.371 applied"
v) Similarly, in the case of CIT v. Relaxo Footwear (2002)123 Taxman 322 (Raj.), it has been held that where the Tribunal accepted the assessee's explanation that the stock statement submitted to the bank was to make it easier for the assessee to have availed higher credit facility by inflating the stock position to the bank, it was justified in deleting addition on account of the discrepancy between the stock shown in the books of account and the stock shown in the statement of the bank. In view of the aforesaid submissions, it is requested that no adverse inference in this regard may kindly be drawn."
The reply of the assessee has duly been considered, the cases referred by the counsel of the assessee in his written submissions are distinguishable on the ground of facts and circumstances of the case as they are entirely different. It was noticed that as per books of account as reported by the Chartered Accountant in the balance sheet which is part of the audit report form No.3CB audited by Sh. Sunil Bansal, CA the closing stock of the firm as on 31.03.2009 is at Rs.6,19,75,800/- while as per physical inventory prepared by the assessee and submitted before the bank authorities i.e., Punjab National Bank, Arya Samaj Branch, Bathinda in lieu of bank loan/limit facility obtained by vide A/c No. 870002192 as on 31.03.2009 has been shown at Rs12,59,06,092/-. The bank authorities have forwarded stock statements for the period ending on 31.03.2009. The amount of stock mentioned in the drawing power register is on the basis of quantified details of stock of the assessee as provided by them which has been verified by the Bank Manager and again signed by Incharge Incumbent Manger of the branch of the bank. Certified copy of the page No.36 of the register showing periodical position of stock of the assessee as available with the bank for this period is submitted to the department.
The value of quantified stock mentioned in drawing power register as obtained from the bank is reproduced as under:-
Sr. No. Date Value of stock as submitted Value of drawing by the assessee power calculated by the bank 1 31.03.2008/ 61,569,440 350 lacs 01.04.2008 2 20.04.2008 64,064,710 350lacs 3 31.05.2008 67,629,580 350lacs 4 30.06.2008 68,507,866 420 lacs 5 31.07.2008 68,507,860 420 lacs 6 31.08.2008 72,915,600 420 lacs 7 31,10.2008 60,857,320 450 lacs 8 04.12.2008 70,992,150 450 lacs 9 31.12.2008 74,605,500 450 lacs 10 31.01.2009 90,518,375 450 lacs 14 11 28.02.2009 77,747,685 450 lacs 12 31.03.2009 125,906,092 900 lacs As is evident from the above table, the assessee continued to have higher stock in his possession till the end of financial year 2008-09 whereas he declared lesser amount of stock in his return of income which reveals a difference of Rs.6,39,30,297/- (Rs.12,59,06,092/-) minus Rs.6,19,75,800/-) on account of stock.
It may also be noted here that the figures are exact to the last digit as is prima facie visible. Can these be estimates ony?
In this context, I am inclined to rely on the judgment of Punjab and Haryana High Court in the case of M/s Devgon Rice and General Mills vs. CIT(2003) 263 ITR
391), where a case with similar facts but differing in trade was discussed and adjudged in favour of Revenue. I wish to highlight the defining parts of thejudgment in influencing my facilities in adjudicating this case. Hon'ble Judge G S Singhvi has made the following observations while allowing reopening of a case to include the difference of value of stock furnished to the bank to obtain overdraft facility and the value appearing in the return of income i.e. Regular books of account.
The Observations:
1. "From a perusal of the bank statement not only contention of the assessee with regard to the over-valuation of stocks has been found to be misleading, even there is a large variation in the quantity of stocks hypothecated with the bank vis-à-vis those disclosed to the Department".
2. "Not to speak of the over valuation of stock hypothecated with the bank as claimed by the assessee in respect of certain items of stocks, the assessee has clearly made under valuation of the closing stock and this is quite evident from the details as given above. The valuation of the closing stock as per statement filed with the return is the admitted value of closing stock as on March 31st 1977 which the assessee can under no circumstances dispute now and if the valuation of the stock hypothecated with the bank is made at the same rate the total valuation of stock available with the assessee as on March 31st 1977 would work out to Rs.9,06,000/-."
3. "From the information now collected by the Department, it is evident that during the course of regular assessment proceedings, the assessee had suppressed the particulars of the closing stock both in terms of its quantity and valuation as on March 31st, 1977 and, therefore, income chargeable to tax amounting to Rs.3,18,108/- had escaped assessment at the time of original assessment."15
4. "In my opinion, the case set up by the assessee at the time of initiation of assessment that the value of the stocks was inflated for availing of higher overdraft facility and there was deficiency in quantify of the stocks lying with it and disclosed in the return on the one hand and that furnished to the bank is prime facie proved to be false by the contents of the letter annexure R 2/2. Therefore, respondent No.2 had sufficient reason to believe that the petitioner had not made full, complete and truthful disclosure of the material facts and its income had escaped assessment."
This being the judgment of Jurisdictional High Court, the contents are all the more valuable, directional and binding.
The basic intent of Courts behind their adjudication is that where the figures of quantitative valuations arrived at by applying rates, may these be inflated rates, to secure higher overdraft, are available, the need to be relied upon for the simple reason that the assessee is having complete knowledge of the action, he has completed. He can not apply tow different rates of same commodity according to his convenience knowing well that both the Department i.e., Banks & I.T. Department, are Govt. functionaries and judge an assessee or a customer according to the Books of A/c prepared according to the set principles of Accounting. If everybody starts preparing multiple sets of information for whatever reasons and for whatever use, where will the law of accounting stand. Nowhere in the world multiple sets of information can be supplied of the same commodity and if it happens, it will be defined in one word i.e., illegal.
The please of the assessee has no weightage and is standing on weak footing. The assessee was juggling with account books at will and had scant respect for accounting practices. He supplied information as per his suitability and convenience to two very important revenue earning departments viz. Bank and Income Tax Department, both of which fall under the same Ministry. But his approach to both these departments was calculative. From one of them he was to take loan and to other he was to show his income. Thus, he decided to fudge the account books and prepare different versions of stock. The statements given to bank had Quantitative valuations of stock and the same was duly authenticated by the Bank's Valuation officer whereas the valuation shown in the balance sheet submitted before Income Tax Department had no such authentication from any person except the Auditing Chartered Accountant before whom valuation statements are not produced or if produced, not taken care of. The general plea of assessees in such cases (where the department detects the difference) is that the stock statements were inflated so that he could get higher overdraft facility. This has occurred a number of times in the past and many courts had the opportunity to deal with the such situations. The jurisdictional High Court has categorically pronounced that where the quantitative details of stock are available and the valuation of stock has been made the basis of the rate and quantity available, the assessee cannot deny his possession of such stock, more so when such a valuation is made every month and both assessee and the bank are an authenticating it. In 16 this connection, it is emphasized that it does not make any difference whether the physical possession remains with this Bank or the assessee. The certification of valuation of an asset by A) Assessee B) Valuation Officer of Bank who physically verified the stock and C) Bank Manager being Incharge Simultaneously, speak of authentication of figures. Is it a mandatory circumstances that only figures or valuations of stock are to be accepted which are in possession of bank and no cognizance should be taken of such valuation where the physical possession is not with bank? Millions of assessee all over the country file statements of stock in their returns and their valuations are accepted by Income Tax Department. The department accepts the valuation of stock on the basis of the papers filed without taking possession of stock. Are all of them erroneous? No, they are fully reliable. Only duplicate sets of figures are questioned and penalized. Therefore, there is no force in the argument of the assessee that the stock which is not in possession of a Government agency, like bank, has no authenticity value wise. The assessee took the plea that stock statements are filed on estimated basis with the bank but such an estimate cannot be imaginary or erroneous so as to create a difference of mammoth Rs.6,39,30,292/- in valuation of stock. The estimation has to be logical, rational and not blatantly unimaginable.
In the instant case the figures reported in stock statements are thoroughly quantified after giving valuation of articles like cement, steels, bricks etc. and that too several times in a year duly certified and accepted by assessee and bank. If the assessee and bank are playing with figures to inflate value of stock to get higher O/D limits then it should bear some semblance to the figures returned in the Income Tax return. In other words, these figures should be forgotten that loan is given out of PUBLIC MONEY with which the assessee fools around with a mischievous mind influenced by criminal intent. If the banks rely on the customers for their declaration, it shows that there is a strong element of trust exhibited by the bank towards the customers. It is a case of breach of trust by the customer where it is found that the actual value of stock in his possession was far less than actual. There is no compulsion on the Banks to go for verification of every item. That is why, Books of A/c and documents, duly certified to be true by a Chartered Accountant, are prepared and relied upon. Everything can not be verified physically in this world and to be practical, the black and white version is strongly relied upon imposing a sense of trust on the supplier or the documents. If these are prepared with a malicious intent to defraud the person or the system before whom these are presented then the consequences have also to be borne by the one who furnishes them.
17The assessee has tried to project pledge as a stronger means of binding the loan taken because of the facts that the physical possession of the article is under control of the Bank. He has tried to show that the hypothecated asset is loosely bound to the bank being not under its control physically. Does it mean that all mobile assets like space crafts, satellites, aeroplanes, ships, multiwheel tankers, trucks, buses etc. are loosely under control of the Bank which finance them so hugely, sometimes into trillion of dollars/rupees. In other words does only "ledge" has the strength of recovery of loan dues and not the "Hypothecatedd" asset? This argument has no force. It is for the Bank to decide how to secure its loan and what terms to impose. I am quite sure that different Banks must be using different terminology to secure the loan i.e., some banks might be using pledge for a particular item whereas at the same time the other banks may be using the term "hypothecated". Therefore, it is simply a tactic of assessee to divert attention from the core issue i.e. Difference in figures of stock in the Bank Books and in the assessee's books. It is the assessee to prove that discrepancy in his Books of A/c, on the basis of which the Return of Income for A.Y.09-10 was prepared, verified, signed and submitted before the Income Tax Dett, was not existing.
It is worth to mention here that the statement of Sh. Tejinder Sharda, Sr. Bank Manager, Punjab National Bank, Arya Samaj Chowk Branch, Bathinda was recorded on oath on 22.11.2011 in connection with assessment proceedings of one M/s Munis Kumar Bansal Contractor for assessment year 2009-10 where a similar issue was discussed to know the modus operandi of maintaining of record by the banks with regard to bank limits/loans facilities granted to the parties (assessees). During the recording of statement, Sh. Tejinder Sharda, Sr. Bank Manager categorically stated that the entry is made on drawing power register on the basis of stock statements submitted by the assessee 9so called client of bank) which is physically verified and signed by the concerned officer/manager in the statement and then entry is made in the drawing power register. Thereafter, drawing power register authenticating the value of the stock lying at the site is finally signed by the Chief Manager/ Incharge incumbent Officer of the branch. The extract of statement recorded in the case of Munish Kumar Bansal, Contractor is also reproduced as under:-
"Question:- Please state you have produced copy f drawing power register page No.76 which is attested by your officer, the value of closing stock as on 30.03.2009/31.03.2009 has been shown at Rs.1,69,17,000/-. What are the basis of this valuation.
Answer:- The party submit stock inventory statement at the end of month and thereafter officials of bank physically verify this stock in possession of the party. After physical verification of stock, the Drawing Power is allowed to the party. One Officer physically checks the stock and incumbent Incharge Officer, sing the Drawing Power Register. The same procedure has been adopted by the bank in the present case. On the basis of valuation of inventory of stock after physically verification the Drawing Power of the party has been calculated and allowed at Rs.100 lacs as on 30.03.2009 on the basis of inventory."18
Thus, it is loud and clear that Drawing Power Register figures of the bank has a formidable basis and is fully authenticated. The information was well concealed by assessee in terms of valuation of stock and I am convinced t hat unaccounted purchases (Purchase of Building Material) have been made from the sources not known to Department i.e. undisclosed source and therefore, the same needs to be treated as the assesee's UUEXPLAINED INVESTMENT to be added to his income up 69 of the Income Tax Act, 1961.
The counsel of the assessee further submitted through the written submission on 23.12.2011 in which has stated that some of the payments amounting to Rs.5.42,81,001/- were received on 30th and 31st March,2009 i.e., on the last two days of the financial year. They were received in lieu of raising of the bills towards the contracts executed during the F.Y.2008-09. Such payments were received on account of actual work in progress and not on account of completion of work. Actually, the assessee had submitted stock statements to the bank on last working day of the financial year i.e. on 31.03.2009. At the time, work in progress was also treated as value of closing stock but after receipt of payment or confirmation of work, it was converted into work done instead of work in progress or closing stock. This amount was duly reflected in contract receipts for FY 2008-
09. The reply of the assessee is reproduced as under:-
"Respectfully it is submitted that during the course of assessment proceedings, inter alia, the assessee was required to explain the reasons and circumstances for difference in the value of stocks available as per books of account and the value of stocks submitted to the bank at the close of the year.
2. The reply as per legal aspect to the above query has already been submitted keeping in view of the judgments pronounced by various Hon'ble Courts on this issue. The present reply explains the factual position in this regard which is as under:-
In order to maintain DP the stock statement was submitted to the bank as on 31.3.2009. Before giving any further details, clarifications and justification regarding difference in stock position submitted to the bank on 31/3/2009 & the figure available in books of account, it would be appropriate to narrate here the various stage that take place before the finalization of the bill so that a clear picture regarding stock difference may emerge.
Here it is-First of all measurements are taken by an independent consultancy deployed by the respective departments. These measurements are then recorded in the Measurement Books by Consultancy people and recommended for cross- verification to the Department. It does not require any mention to submit here that Measurement Book is internal record of the department and remains in the safe custody of the concerned officer. The measurements are cross verification by the department official & further submitted to Accounts section for vetting. Once it gets vetted by the Accounts Section, it is further submitted to the concerned Executive Engineer for final approval. Once it gets approved by the Executive Engineer, the bill gets finalized & pass order is executed & various deductions 19 e.g. Income Tax, Sales Tax etc. are made from the Gross Bill. However, the payment to the contractor is made on availability of LOC from the Government. All above mentioned procedure takes place at the back end office of the department. This process takes average 10to15 days but the working is made for a specified date.
In the case of the assessee, while submitting the stock statement to the bank on 31/3/09, the assessee by no stretch of imagination could anticipate that some of the departments would be clearing the completion of certain works up to 31-3-2009 and deducting the tax at source thereon. The various departments certified bills of already completed works to the tune of Rs.5,42,81,001/- had been included as stock submitted to the bank by the assessee on 31/3/2009 being unaware of the facts regarding finalization of bills and deduction of tax at source .
This fact came to the notice of the assessee after submission of stock statement to the bank, at the time of reconciliation of accounts, contract receipts and the tax deductions at source at later stage. On passing of these entries in books of account regarding finalization of bills amounting to Rs,5,42,81,001/- on 30-3- 2009 & 31/3/2009. the stock given in bank statement on 31/3/09 got reduced by Rs.5,42,81,001/- in books of accounts. This amount of Rs.5,42,81,001/- was taken into account as "Contract Receipts" on 31/3/09 by the assessee as tax on these amounts had also been deducted at source. It may be further clarified again that in order to maintain the DP, the assessee has to submit the stock statement to the bank on last working day of every month. In this case the stock statement was submitted to the bank on 31/3/09 and also deducted tax at source as on 31/3/2009 and consequently issued Form-16A afterwards. As the aforesaid developments of deducting tax at source by various departments on total amount bill of Rs.5,42,81,001/- took place on the last day of the accounting year i.e.30-3-2009 and 31-3-2009, and that too without the knowledge of the assessee, the same could not be taken into account in the stock statement already submitted to the bank on 31/3/2009 is given below for your ready reference and kind consideration:-
S. Name of Department Bill Date Gross Tax Tax
No. Amount Amount Deposited
Date
1 MPRRDA JHABUA 30/03/2009 1,941,997 44,006 13/04/2009
1A MPRRDA JHABUA 30/03/2009 1,937,511 19,884 13/04/2009
1B MPRRDA JHABUA 30/03/2009 296,471 4,991 13/04/2009
TOTAL 4,175,979 68,881
AMOUT(1+1A+1B)
2 PAN INDIA (ROB 31/03/2009 14,283,959 161,838 31/03/2009
RATLAM)
TOTAL AMOUNT 14,283,959 161,838
3 B&R FATEHABAD 31/03/2009 7,607,240 172,380 11/05/2009
3A B&R FATEHABAD 31/03/2009 8,600,963 194,898 11/05/2009
3B B&R FATEHABAD 31/03/2009 9,323,581 211,272 11/05/2009
20
TOTAL AMOUNT 25,531,784 578,550
4 EMAAR MGF 31/03/2009 3,396,150 77,093 29/05/2009
4A EMAAR MGF 31/03/2009 6,893,129 156,474 29/05/2009
TOTAL 10,289,279 233,567
AMOUNT(4+4A)
G.TOTAL 54,281,001 1,042,836
The above mentioned entries have already been got verified by your good office from the records & books produced by the assessee. Hence, the difference in stock submitted to the bank as on 31/3/09 & taken into books of accounts as on 31/3/2009 may kindly be considered as justified. In the circumstances of the case, it is requested that no adverse view in this regard may kindly be drawn.
At this stage it is further submitted that the remaining difference is stocks as per books Vs. Stock statement furnished to the bank is on account of estimation of stock lying at various sites in open, without measurement and taking actual physical stocks verifications etc. This difference is with in margin of tolerance and even various Hon'ble Courts have held that no adverse view in this regard/difference may be taken. Copies of such judgments has already submitted for your kind perusal."
The reply of the assessee has been considered. On a careful scrutiny of the reply of the assessee in which he has submitted the details of receipts on 30th /31st March,2009, it has been observed that contention of the assessee is partly correct for the reason that out of the total amount of contract receipts of Rs.2,55,31,784/- as received from P B&R Fatehabad on31.03.2009, 26AS statement reveals that the assessee received Rs.86,00,963/- on 04.03.2009 & Rs.93,23,581/- on 26.03.2009 respectively whereas Rs.76,o7,240/- was received on 22.01.2009. Thus the contract receipt of Rs.76.07,240/- has already found place in the stock statement of January, 2009 and cannot be reduced from the closing stock amounts as shown by the bank as on 31.03.09. However, a benefit of Rs.1,79,24,544/- (Rs.86,00,963/- +Rs.93,23,581/-) as claimed by the assessee and discussed above is allowed in respect of contract receipts received from P B&R Fatehabad out of the sum total of Rs.2,55,31,784/- as claimed and shown in the statement above. Therefore, a total amount of stock which stands explained as per the reply of the assessee is Rs.4,66,13,761/- (Rs.5,42,81,001/- minus Rs.76,07,240/-) and the remaining difference of stock between bank and assessee of Rs1,73,16,531/- (Rs.6,39,30,292/- minus Rs.4,66,761/-) is reflected in the recasted trading and profit & loss account.
Now the important question is--- when did and where from the assessee made purchases of this stock over the year? The sum total of purchase vouchers submitted before the department is different from the quantity of material shown to the bank. It means the Purchase account of the assessee shown to me is unreliable and misleading and can in no way influence my mind to deduce the profitability of the assessee in the justified way, though the other account heads are apparently reliable. In such a situation I am not inclined to reject all the account heads except Purchase Account which does not lead me to proper 21 assessment of assessee's profits. I, therefore, reject assessee's Purchase Account and rely on the figures as calculated above to arrive at the closing stock so that the purchase account is also appropriated automatically. The recasted trading account is reproduced as under:-
DESCRIPTION SCHEDULE AMOUNT AS AT 31.03.2009
Sr. INCOME
No.
1 Contract Receipts Rs.27,96,36,043/-
2 Miscellaneous J Rs.10,88,156/-
Income
3 Increase In Stock K Rs.3,88,06,532/-
(Rs.2,14,90,000/-
+Rs.6,39,30,293/-minus
Rs.4,66,13,761/-)
4 Profit on Sale of Rs.1,53,898/-
Assets
Total Rs.31,96,84,629/-
Rs.30,23,68,097/-
+Rs.1,73,16,532/-)
Sr. EXPENDITURE
No.
1 Material Consumed L Rs.10,88,41,059/-
2 Works Expenses M Rs.14,74,18,714/-
3 Administration N Rs.47,12,197/-
Expenses
4 Financial Expenses O Rs.1,86,73,072/-
Loss on Sale Assets 0
Total Rs.27,96,45,043/-
1 Profit Before Rs.4,00,39,585/-
Depreciation (Rs.2,27,23,053/-
+Rs.1,73,16,532/-)
2 Depreciation F Rs.1,12,46,852/-
Profit Before Tax Rs.2,87,92,733/-
(Rs.1,14,76,201/-
+Rs.1,73,16,532/-)
1 Less -Provision For Rs.29,39,925/-
Income Tax
2 Less-Provision For Rs.29,140/-
Fringe Benefit Tax
3 Less-Provision For Rs.9,14,652/-
Deferred Tax
22
Liability
4 Add- Provision For 0
Deferred Tax Assets
Net Profit Rs.2,49,09,061/-
(Rs.75,92,484/- + Rs.1,73,16,532)
The difference on account of excessive stock held by the assessee at Rs.1,73,16,531/- has no other treatment except to be added to his income of this year being undisclosed investment under section 69. "
13. The Ld. CIT(A) deleted the addition vide its order dated 30.05.2013 considering the submissions of the assessee.
14. The Ld. DR, Mr. Tarsem Lal, argued the case at length and thereafter submitted the written submissions dated 02.02.2015 as to what has been argued by him and the said written submissions have been placed on record.
In the written submissions submitted by the Ld. DR at pages 1 & 2, he has stated about the findings of the AO and thereafter has stated that the ld.
CIT(A) has allowed the relief by making perverse appreciation of facts of the case, which were discussed in the said written submissions.
15. The parawise findings by the ld. CIT(A), in the case of the assessee, M/s. Ishar Infrastructure Developers Pvt. Ltd. for the assessment year 2009-10 have been discussed in the written submissions by the Ld. DR, as under:
"Para 5(i) This conclusion is perverse on the face of it only. The imputation that the bank authorities are not concerned with the availability of adequate stock as their interests are covered by the collateral security provided by the assessee to bank, is 23 self assumed and if the bank authorities feel that their interests are secured by collateral securities then why they should in the first place ask for hypothecation of the stock and enter into hypothecation agreements. Further, Drawing Power is determined on the basis of the stock and not on the basis of collateral securities and the limit sanctioned is subject to variation depending upon the availability of stock with the assessee. Therefore, this finding is patently perverse and needs not to be given any cognizance.
Para 5(ii) The ld. CIT(A) has ignored the statement of the Sr. Branch Manager of the same very branch from which the assessee had raised limit who had deposed that the authentication of DP register by the bank manager carries in its sweep the fact that the stock has been physically verified by the officer/manager who has authenticated the DP Register. The ld. CIT(A) has no where doubted the correctness of the statement of the Sr. Branch Manager Sh. Tejinder Sharda and the same could not be trashed by the ld. CIT(A) without giving some cogent reasons. His statement had substantial evidentiary value.
Without prejudice to the above, it may be submitted that given the categorical statement of Sh.Tejinder Sharda that the party submits stock inventory statement at the end of month and thereafter officials of bank physically verify this stock in possession of the party and after physical verification of stock, the Drawing Power is allowed to the party. One officer physically checks the stock and incumbent incharge officer sign the Drawing Power Register. The same procedure has been adopted by the bank, he meant to say, in all cases and it is on the basis of valuation of inventory of stock after physical verification, the Drawing Power of the party is calculated and allowed, if the ld. CIT(A) still was of the opinion that the AO ought not to have depended upon the statement of the Sr. Branch Manager but ought to have recorded the statement of the bank officer who had actually verified the stock and authenticated the Drawing Power Register, he could do so himself by invoking his co-terminus powers with the AO or else remanded the case to the AO to record the statement of the bank manager who had authenticate the DP Register. But this 24 choosing to ignore the statement of Senior authority of the bank who exercises administrative control over the officer who had physically inspected the stock, is really ill-merited and thus perverse.
Para 59iii) The finding in this para constitute hasty conclusion and that too without any basis. The ld. CIT(A) is drawing a conclusion without the support of material facts. He could hold so only and only if the bank manager who had signed the Drawing Power register and determined the limit had stated that he had not made physical verification. Unless either the said bank manager denies or he is provided false, the ld. CIT(A) had no jurisdiction to draw the conclusion that no inspection/physical verification of the stock was carried out. Thus, his findings are patently perverse and deserve to be dislodged. His findings that the stock was scattered at different places and it was not possible to count/weigh the stock is of little significance given the fact that the Sr. Branch Manager has deposed that signature on the DP Register is an assertion of the fact that the stock has been physically verified. The ld. CIT(A)'s findings have got no footing whereas the AO's findings have the support of the authenticated DP Register and further corroborated by the statement of the Sr. Branch Manager.
In view of above, it is clear that the ld. CIT(A) has erred in deleting the addition. It is, therefore, prayed that the order of the ld. CIT(A) be vacated and that of the AO be restored.
Without prejudice to the above, it is prayed that it is clear that if the ld. CIT(A) was of the opinion that the AO ought not to have relied solely on the statement of the Sr. Branch Manager and ought to have examined on oath the bank manager who had actually authenticated the DP register in token of his having physically verified the stock, he ought to have invoked his co-terminus power to record his statement or else remanded the case back to the AO for this purpose. It is, therefore, prayed that the matter be restored to the file of the AO with the direction to record to the statement of the bank manager who had authenticated the DP Register in token of his having physically verified the stock and decide the issue on the 25 basis of the facts as deposed by the manager before the AO. The ld. CIT(A)'s approach is clearly prejudicial to the interests of the revenue and it is, therefore, prayed his order be vacated.
The Ld. CIT(A) appreciation of the judicial pronouncements is also not relevant which is discussed hereunder judgment wise as mentioned at pages 13 to 15 of his order.
Para (i) Nothing has been shown as to how this judgment is not relevant to the facts of the case. The upholding of the initiation of proceedings u/s 148 on the ground of difference in quantity and valuation, had clear relevance to the making of assessment as well and not only to initiation of proceedings u/s
148. Para (II) This is judgment of the Hon'ble High Court is not relevant to the cases as the AO had brought on record the authenticated DP register and also the statement of the Sr. Branch Manager who had exercised control over the manager who authenticated the DP register in token of his having physically verified the stock.
Para (iii), (iv), (vi), (vii) & (viii): These judgments are not relevant in view of the findings of the AO as discussed above and at para (ii) above.
Para (V), The ld. CIT(A) has erred in drawing support from the fact of dismissal of the department's appeal in the case of the judgment cited at para (iv), above as the dismissal of an appeal only tentamounts to the Hon'ble Supreme Court's refusal to exercise its power to allow special leave to, petition and it does not clothe the judgment of the High Court with its approval.
It is further submitted that the ld. CIT(A)'s order is perverse on multiple counts which are discussed herewith.
(a) Firstly, the concerned bank manager has given a statement that the stock has been physically verified when OD facility is allowed to such assessee's in these circumstance, the 26 statement of the manager who is incharge of the branch represents the true affairs and business practice of the concerned bank and therefore, it carries high evidentiary value.
(b) Further more the Branch Manager has given the statement in the capacity of responsible head of the branch and it certainly covers the point of view of his juniors who must have physically verified the stock and reported to him in this regard.
(c) Without prejudice to the above, the ld. CIT(A) should have raised the issue before taking any decision in this matter.
He has not doubted the authenticity and evidentiary value of the statement of the concerned bank manager. On the contrary, the ld. CIT(A) has merely applied the case law in favour of the assessee without appreciating the difference of facts in the present case.
It is further submitted that the issue is wholly covered by a recent judgment of the Hon'ble P & H High Court in the case of Smt. Shakuntala Thukral vs. CIT reported in 366 ITR 644. The factual matrix of both the case is almost identical. In the case before the Hon'ble P & H High Court, the assessee had claimed that she had shown inflated the quantity as well as the value of the stock with a view to availing higher loan facility and in the case of the assessee also,, the assessee had claimed that it had shown inflated value of the stock with the similar objective as discussed in para 3 of the assessment order. Therefore, this judgment of the Hon'ble High Court has dovetailing suitability to the facts of the case and the appeal of the department eminently deserves to be allowed and it is prayed accordingly."
16. The Ld. counsel for the assessee, Mr. P.N.Arora, Advocate, on the other hand, relied upon the submissions made before the AO and the order of the ld. CIT(A). The ld. counsel Mr, P.N. Arora, Advocate further argued that as to the written submissions and arguments made by the Ld. 27 DR the department while filing the appeal before the Hon'bel Bench has stated in the statement of facts that an addition of Rs.1,73,16,531/- was made on account of difference in the closing figures, as shown in the re-casted trading & proit and loss account file during th course of assessment proceedings at Rs.4,66,13,761/- and the figures as available in the Drawing Power Register of the assessee's Bank, PNB, Bathinda at Rs.6,39,30,292/-.
Hence, it has been admitted by the department that the addition has been made by relying upon the drawing power register. The Ld. DR has made presumption that Sh. Tejinder Sharda meant to say that in all cases the stock statement at the end of the month was submitted by all the parties who availed cash credit limit on the basis of hypothecation of stock which was physically verified. Thus, it is a presumption of the DR that the statement recorded in one case is applicable to all the cases.
16.1. The Ld. counsel, Mr. P.N.Arora, Advocate, further argued that the findings of the Ld. CIT(A) in para 5(iii) on page 12 of the appellate order are that it is not possible for the bank staff to count/weigh the stock worth crores of rupees lying in open in different states are based on the contention of the assessee raised before the AO and which has been reproduced in para 3 of the appellate order. It was also stated before the AO that the stock remained in possession and control of the assessee in J & K, MP, Punjab and 28 Chandigarh where contract works were being executed and further that in the state of MP the stocks were scattered at every work location in a radius of 50 Km. in view of the construction of roads. This categorical statement of the assessee has not been rebutted by the department at any stage. He further submitted that the ld. CIT(A) has never recorded a finding in A.Y. 2009-10 that the AO should have examined the bank officer who had actually verified the stock, the finding is limited to extent as recorded in para 5(ii) that AO has tried to prove in the present case that the stock was physically verified by bank manager by relying on the statement of bank manager in the case of Manish Kumar Bansal Contractor but in the opinion of the ld.
CIT(A) unless the AO proved that the stock was physically verified, no addition can be upheld. Since the department failed to prove that any physical verification of the stock was carried out by the bank the addition was deleted by the CIT(A) as finally held in the concluding paragraph on page 13.
16.2. The ld. counsel, Mr. P.N.Arora, Advocate further stated that the stock statement filed by the assessee has been found to be unsigned (page 12 & 13 of the paper book for AY 2009-10 filed on 02.02.2015). As regards the Drawing Power Register on which heavy reliance has been placed by the Ld. DR, the copy of the same has been enclosed alongwith the paper book ( 29 filed on 2.2.2015 for AY 2009-10 in which the photocopy is on page 12 and typed copy is on page 15 & 16 for period from Jan, 2007 to 31.12.2009.).
16.3. He further stated that there are following deficiencies in the register and vital information relating to physical verification of the stock has not been recorded:
i) There is no column in this register for keeping the record that on which date stock statement has been received.
ii) The column for accountant initials is blank.
iii) The column for inspection is mostly blank except initials in some of the columns and date of 19.01.2010 against the stock statement of 31.08.2009, 30.09.2009 and 31.10.2009 which shows the reality of physical verification of stock as on different dates of three months.
iv) The column for full signature of incumbent incharge is also blank except starting from entries for the month of March, 2009 to Dec. 2009 but no name of the person who did the initials can be made out.
Thus, applying the ratio of order of ITAT, Amritsar in the case of 'Jai Sharda Rice Mills, the Senior Bank Manager Sh. Tejinder Sharda guessed that his predecessor must have gone through the modus operandi of maintaining the records by the bank as he was not in the branch of the bank during the relevant period i.e. the alleged physical verification of stock as per stock statement dated 31.03.2009. The ld. counsel stated that the above said facts proves that the bank has no records for physical verification of the 30 stock as on 31.03.2009 and the Drawing Power Register cannot be relied upon. Moreover, there are no signature of Sh.Tejinder Sharda in this register either as inspecting officer or the incumbent incharge which proves that whatever he stated before the AO is only a procedure and it is for the department to prove that whether the prescribed procedure for physical verification of stock was adhered to by the bank. Thus, the argument of the ld. DR that the statement of the manager who is incharge of the branch represents the true affairs and business practice of the concerned bank and therefore, it carries high evidentiary value and should have been accepted by the CIT(A) is a gospel truth and drawing power register as a sacrosanct document to the extent that the drawing power is calculated on the basis of entries of entries in this register, stands rebutted keeping in view the facts as discussed supra.
16.4. As regards the judgment of Punjab & Haryana High Court in the case of Devgan Rice & Gen. Mills relied upon by the AO , the ld. counsel for the assessee submitted that the issue before the Hon'ble High Court was that where the bank provided the details of the stock hypothecated to the bank after the completion of the assessment proceedings by the AO, the reopening of the assessment on account of escapement of income was valid or not. The Hon'ble Court held that the reassessment proceedings initiated 31 were valid. The CIT(A) has given a clear cut finding in para 3.1 on page 16 of the appellate order that the judgments relied upon by the AO are distinguishable on facts.
16.5. He further submitted that the judgments of Hon'ble Punjab & Haryana High Court, relied upon by the ld. CIT(A) in the cases of 'Santosh Box Factory, Sidhu Rice mills and in the case of Devi Dayal Rice Mills are squarely applicable to the facts of the case as the department failed to prove the physical verification of stock and neither the stock statement nor the drawing power register can be relied upon.
16.6. He further stated that the reliance of the ld. CIT(A) on the dismissal of SLP by the department in the case of Veerdip Roller (P) Ltd., is only one of the cases but the CIT(A) has placed reliance on all the judgments as a whole.
16.7. The Ld. counsel for the assessee has invited our attention to the distinguishable facts of the case, as facts of the case have been discussed in detail by the ld. CIT(A) in the case of Smt. Shakuntla Thukral vs CIT (2014) 366 ITR 644 (P&H) vide order dated 24.02.2010, as under:
i) The contention of the assessee in the case of Shakuntal Thukral is that the stock as on 31.03.2005 was inflated to make payment of import of machinery by giving higher stock has been rejected because according to the CIT(A) the payment of machinery was released in the month of Feb, 2005 and according to the ld.
CIT(A) the higher stock statement was submitted for import of 32 machine is not supported by any evidence ( para 2.12 (page 24 & 25 of the order).
But in the case of the assessee, it has been the contention of the assessee during the course of assessment as well as appellate proceedings that the stock statement was inflated to get higher cash credit limit. No such finding has been given by the ld. CIT(A) in the case of the assessee.
ii) The assessee has not disputed that stock of the value which was submitted to the bank was actually in the business premises (opening line para 2.12.2 page 25).
But in the case of the assessee it has always been the contention of the assessee that the stock was inflated and the assessee was never in possession of such stock.
iii) The ld. CIT(A) has recorded a categorical finding that the stock was verified by the bank through physical inspection and by examination of relevant records. According to ld. CIT(A) the inspection and audits are carried out on test check basis and with reference to relevant register (para 2.12.1 page 25).
But in the case of the assessee the finding of the CIT(A) is that firstly it was not possible for the bank to physically verifythe stock because of the nature of stock and it was lying in different states and secondly because the AO did not make any effort to bring any material on record to prove the physical verification of stock except recording the statement of the bank manager (para 5(ii), 5(iii) page 12 & 13 of the appellate order).
iv) The AO concluded in this case that the assessee's books were not accurate ( para 2.3.1 page 4).
But in the case of the assessee, the AO has accepted the fact that the books of account were produced alongwith bills and vouchers and these were test checked (para 2 page 1 of the assessment order but no finding regarding any defect whatsoever).
33v) The valuation of closing stock was found defective by the AO (para 2.8 page 6).
But no such finding of the AO was there in the case of the assessee in the assessment order.
16.8. The ld. counsel for the assessee further stated that it is relevant to point out that the Hon'ble Punjab & Haryana High Court in the case of Sheena Exports in ITA No.382(Asr)/2011, vide order dated 13.03.2012, reported in 20 Taxman .Com page 644, has once again decided this issue in favour of the assessee. This order is available at page Nos. 70 to 72 of the paper book. The Hon'ble High Court in the said case has held that the addition could be made only if quantity of stock submitted to the bank was higher than the quantity as per books, which were pledged, counted or verified by the bank official and since the stock statement was not verified by any bank official, the stock statement given to the bank could not be relied upon. Further, the details comments of the assessee on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Smt. Shakuntla Thukral vs. CIT (2014) 366 ITR 644 relied upon by the AO has been given in the brief synopsis by Ld. DR for AY 2010-11 and this case is not at all applicable to the assessee's case.
16.9. The ld. counsel for the assessee, Mr. P.N. Arora, in furtherance to his arguments submitted the comments on the decision of the Hon'ble Punjab & 34 Haryana High Court in the case of Smt. Shakuntla Thukral vs. CIT (supra) that:
"A bare perusal of the order of the ld. CIT(A) makes it clear that the AO had given categorical findings in the assessment order that :
i) as given in para 2.3.1 page 4 of Ld. CIT(A)'s order which is reproduced in the relevant column that the assessee's books were not quite accurate because of specific defect of non recording of sales to the books of account.
ii) In para 2.8 page 6 of CIT(A)'s order that stock statement filed on 04.07.2007 has been replaced by other stock statement which establishes that no stock inventory was prepared at the close of the financial year.
There is no such finding by the AO in the case of the assessee.
Further, the ld. CIT(A) has recorded categorical finding:
i) In para 2.11 page 24 of the order of ld. CIT(A) that the contention of the assessee that the higher stock as on 31.03.2005 was given for the purpose of making payments for import of machinery cannot be accepted as the payment for purchase of machinery had already been release in Feb, 2005.
ii) In para 2.12.1 page 25 of the order of ld. CIT(A) it has been stated that there are reports of physical inspection carried out by the bank authorities in respect of assessee's stock at quarterly intervals is available and such findings has not been rebutted by the assessee before the Hon'ble ITAT or the Hon'ble High Court.
But in the present case we have established that no physical inspection of the stock has been carried out, as stated by the bank manager.
iii) In para 2.12.2 page 25 of ld. CIT(A)'s order, it has been stated that the assessee has not disputed the stock of the value which was submitted to the bank was actually lying in business premises as on 31.03.2005.
35But in the present case we have all along stated before the AO and before the ld. CIT(A) that the stock was inflated to get the cash credit limit from the bank."
16.10. The ld. counsel for the assessee further submitted that the AO in the case of Shakuntal Thukral after pointing out defects in books of account of the assessee recorded a categorical finding in the assessment order that the books of account were not accurate meaning thereby that the books of account were rejected. But in the present case there are no such finding by the AO and the books of account has not been rejected by the AO rather no defect has been pointed out in the books of account.
16.11. The ld. counsel further stated that the ld. CIT(A) in the case of Shakuntla Thukral has relied on the reports of physical inspection carried out by the bank authorities in respect of the stock of the assessee at quarterly intervals and such findings have neither been rebutted before the CIT(A) or before the ITAT or before the Hon'ble High Court. But in the present case of the assessee, it has been established that no physical inspection of the stock has been carried out, as stated by the bank manager.
16.12. The ld. counsel stated that the ld. CIT(A) in the case of Shakuntla Thukral has recorded a categorical finding that assessee has accepted the fact that the stock as per stock statement on 31.03.2005 was 36 lying in the premises of the assessee. But in the present case of the assessee, it has all along stated before the AO and before the ld. CIT(A) that the stock was inflated to get the cash credit limit from bank and the onus is on the department to prove that the assessee owned the stock more than the stock as reflected in the balance sheet as on 31.03.2005.
16.13. The ld. counsel for the assessee further argued that the AO has not rejected the books of account and has not invoked the provisions of section 145(3) of the Act and the AO is not empowered to make any variation in the trading account which includes the closing stock. Accordingly, the ld.
counsel for the assessee relying on the submissions made before the AO and the ld. CIT(A) and the order of the ld. CIT(A) and arguments made hereinabove contradicted the arguments made by the ld. DR and prayed to confirm the order of the ld. CIT(A) and dismiss the appeal filed by the Revenue.
17. The Ld. DR, Mr. Tarsem Lal, in the rejoinder made the arguments and thereafter submitted the counter written submissions as to what has been argued in the rejoinder, which for the sake of convenience are reproduced hereunder:
"BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL: AMRITAR BENCH: AMRITSAR 37 A. M/S.ISHAR INFRASTUCTURE DEVELOPER (P)Ltd, Bathinda ITA No.198/ASR/2013 AY 2009-10 M/s.ISHAR INFRASTRUCTURE DEVELOPER (P) Ltd. Bathinda ITA NO.536/ASR/2013 A.Y. 2010-11 B. M/s.Euro Infrasture & Powers Limited. ITA No. 571/ASR/2013 Assessment year 2009-10 C. M/s.Royal Deep Construction Co.Bathinda ITA No.199/ASR/2013 Assessment year 2009-10 D. M/s.Bholaria Constructions Bathinda ITA No.200/ASR/2013 Assessment year 2009-10 E. M/s.Ram Kumar Bansal Bathinda ITA No.457/ASR/2013 Assessment year 2009-10 COUNTER WRITTEN SUBMISSIONS:
Before counter written submissions are made, it needs to be submitted that the assessee's counsel has filed paper books, written submissions, judgements in piecemeal so many times, it is difficult to keep a track of what documents have been filed and in which case. There may be some papers which the assessee has filed during the course of hearing or otherwise and which may have not been provided by the assessee to the undersigned. Therefore, I am giving below a detail of the various documents filed by the assessee on different dates:
1. List of compilation of judgements on 9.4.2014 in the case of C above.
2. List of compilation of judgements on 9.4.2014 in the case of A above.
3. List of compilation of judgements on 9.4.2014 in the case of B above.
4. List of compilation of judgements on 9.4.2014 in the case of E above.38
5. Paper Book in the case of C above on 28.04.2014
6. Paper book in the case of A above on 28.04.2014
7. Paper Book in the case of B above on 28.04.2014
8. Written submission in the case of B above on 1.5.2014
9. Written submissions in the case of D above on 1.5.2014
10.Written Submissions in the case of D above on 19.08.2014
11.Written submissions in the case of B above on 25.08.2014
12.Written submissions in the case of E above on 25.08.2014
13.Written submissions in the case of A above on 25.08.2014
14.List of compilation of judgements on 10.9.2014 in D above
15.List of compilation of judgements on 10.9.2014 in C above..
16.List of compilation of judgements on 9.9.2014 in E above.
17.Paper Book in the case of D above on 10.9.2014
18.Compilation of judgements in the case of A above on 10.9.2014
19.Compilation of judgements in the case of B above on 10.9.2014.
20.Compilation of judgements in the case of E above on 10.9.2014.
21.Audit Report in the case of D above on 15.09.2014
22.Paper Book in the case of C above on 15.9.2014 39
23.Audit Report in the case of A above on 16.09.2014
24.Paper Book in the case of B above on 16.09.2014
25.Paper bok in the case of E above for hearing fixed on 22.09.2014
26.Paper book on 28.04.2014 in the case of A above.
27.Paper book on 28.04.2014 in D above.
28.List of compilation in B above for hearing on 30.12.2014
29.List of compilation for hearing on 30.12.2014 in A above.
30.Paper book on 2.2.2015 in the case of C, D & A above.
31.Counter written submissions in A & B above on 2.2.2015
32.Compilation of judgements for hearing on 2.2.2015 in A & B above.
33.Counter Comments on written submissions filed on 6.2.2015 in the case of A, C & D above.
34.Paper Book in the case of A, C & D above on 16.02.2015
35.Written submissions for date of hearing on 18.2.2015 in A above.
36.Chart showing details of disputed additions on 18.2.2015 in A above.
37.Copies of two judgements in the case of A above on 19.2.2015
38.Details of appeals filed .Date not mentioned.
39.Comments on the judgement of Shakuntla Thukral for date of hearing on 25.2.2015.40
It may be submitted that I have no other paper, paper book, compilation if any the assessee has filed in any of the above cases. It may be submitted that filing of papers in the above manner is in total disregard of the of section 18(5)of the Income tax Appellate Tribunal Rules, 1963 which envisage filing of paper book only once and not raining documents in the manner as has been delineated above. This puts the departmental representative to great hardship and disadvantage. Nonetheless, the counter-written submissions as directed by the Hon'ble Bench to be filed on 9.3.2015 are submitted hereunder:-
Here each case is discussed separately hereunder:
M/s.Ishar Infrastructure (P)Ltd. Assessment year 2009-10 First issue: It may be mentioned that the bank seeks margin money to the extent of 25% and allows credit for the remaining 75%. A perusal of the Drawing Power Register of PNB wholly disapproves the asseseee's claim that it had submitted inflated stock statement to the bank. It reveals that the assessee had been regularly submitting stock statement of values much higher than 75%. (A copy of DP Register is enclosed for ready reference as Annexure 1). It reveals that the assessee had submitted no inflated stock statement when it had sought higher credit on 31.10.2008 when it had been sanctioned higher limit of Rs.4.5 crore against stock statement of Rs.6,08,57,320/-as against limit of Rs.4.2 crore the value of stock submitted was Rs.7,29,15,600/- on 30.09.2008 and Rs.9,05,18,375/- on 31.01.2009 when higher limit of just Rs.4.5 cr had already been sanctioned to it on 31.10.2008. Now when the assesee submitted stock statement of Rs.9,05,18,375/-, it cannot claim that it had submitted inflated stock statement to avail higher credit limit as the same credit limit of Rs.4.5 41 crore had already been allowed to it. It may further be noted that the assessee had credit limit of Rs.8 crore on 31.05.2010 as against limit of Rs.6 crore at the almost same value of stock which was at Rs.11,85,81,990/- when limit sanctioned was Rs.6 crore and at Rs.11,91,47,712/- when limit sanctioned increased by Rs.2 crore with increase in stock of mere Rs.5.6 lacs.
It needs to be appreciated that the stock statements furnished by the assessee each month during the accounting period relevant to the assessment year 2009-10 and 2010-11, was much higher than the threshold limit after including 25% margin. Thus, it is proved that the stock reflected in the monthly stock statement was real and not inflated. It also needs to be appreciated that the stock was being inspected by the bank and signature of the bank manager were put on the DP register in token of having physically inspected the stock. It is also pertinent to note that when the manager did not inspect the record, it had not put any signature on the DP register. Therefore, it cannot be disputed that the bank manager had put his signature on the DP register without actually inspecting the same which Shri Kamlesh Gupta, Chief Manager, PNB had confirmed in his statement and also cross-examination that physical inspection had been carried out by the bank.
It is further pertinent to mention here that whereas in the assessment year 2009-10 the assessee calimed that it had furnished inflated stock statement for availing hifher credit facility but when it came to AY 2010-11 when no higher credit limit was availed, it did not claim that inflated stock statement was submitted on 20.03.2010 but claimed that loan was covered by collateral security of Rs.16 corre. If the loan 42 was sanctioned against collateral security, the assessee had no reason to contest the physical verification of stock by the bank manager.It ought to have persisted in that but it did not as it knew that the banking autholrities would not support his case that the stock hypothecation had nothing to do with the sanctioning of the credit limit.
It is highly pertinent to point out that the assessee's claim that it had furnished inflated stock statements to the bank to avail higher credit limit has clearly been found to be false on the scrutiny of the DP register and the only logical conclusion of the this critical study is that the stock statements submitted by the assessee to the bank were real. The issue of physical verification is a separate issue which though also emphatically goes against the assessee in view of the examination and cross-examination of Shri Kamlesh Gupta. Shri Gupta has categorically affirmed in his reply question No.4 of the statement that:
As per record, stocks statement as on 20.3.2010 Dh gks miyC/k gS gekjs Record ds fglkc ls Books debt statement o stock statement 20/3/2010 dks gh nh gS blds ckn ugh nh ;}fi stock statement 20.3.2010 dks Bank }kjk Physically verify fd;k x;k gS o Incumbet Officer }kjk Sign Hkh fd;k x;k gS A Thus, it is clear that Sh. Kamlesh Gupta had emphatically confirmed the physical verification of the stock as per record of the bank. He had further confirmed this fact in his cross-examination in an answer to 43 the assessee's counsel's question about physical verification of stock. He had answered:
The stock is physically verified by the Bank Officer and stock audit is also conducted by an independent Auditor. I am submitting a photocopy of the said Audit Report dated 4.2.2010.
It is further pertinent to note that it has been made clear in the cross examination that the stock audit was done in respect of the stock statement submitted by the assessee to the bank as on 31.01.2010 which was declared at Rs.10,75,10,500/- whereas the stock declared to the bank on 20.3.2010 was Rs.10,82,22,030/-. Thus, It is clear that when the assessee was clearly caught on a wrong foot viz a viz stock audit taken by the auditorst on 4.2.2010 of the quantum Rs.10,75,10,500/-, it chose to not to raise any question on the auditors' stock audit on 4.2.2010 and had kept studied silence for obvious reason i.e. it knew that the stock statements submitted are real and it was deliberately question the same as regards the inspection by the bank in the futile hope that the bank may not be able to come forward with the hold record. The assessee did not choose to ask for the auditors' stock audit report on 04.02.2010 as it knew that it would be cornered with the said report. It is highly pertinent to note that stock statement submitted to the bank on 20.3.2010 was Rs.10,82,22,030/- i.e. just more by a meagre sum of Rs.7,11,530/- and that too when no increase in the credit limit had been sought by the assessee. All these facts clearly prove that the stock was physically checked by the bank manager on 15.3.2010 in respect of the stock 44 statement submitted to the bank on 28.02.2010 and earlier also by the auditors' on 4.2.2010. It is further highly pertinent to mention here that in this year, it was never the case of the assessee that it had submitted inflated stock statements to the bank for securing higher credit limit. It needs to be appreciated that when the assessee had demanded cross examination of Sh. Kamlesh Gupta, the assessee did not turn up for cross examination and caused delay in cross examination and when on 5.3.2010, cross examination had taken place, it chose to demand further examination of the bank officer at the fag end of the year who had physically inspected the stock despite his claim that the credit limit had been sanctioned against collateral security and not against inflated stock. It needs to be appreciated that when in this year, the assessee had not contended that it had submitted inflated stock statement, there was relevance for his asking for cross-examination of the banking authorities. It is pertinent to mention here that when the assessee's claim for the AY 2010-11 was not that it had submitted inflated stock to secure higher limit, how could it ask for cross-examination of the bank manager who had inspected his record and how could be choose to ignore the audit statement. It is pertinent to mention here that Sh. Kamlesh Gupta's statement has great evidentiary value as what he had stated was as per the record of the bank and not his personal opinion. Second Issue: The other issue which the assessee has raked in this case is the that stock statement filed for the assessment year 2009-10 was unsigned. In this regard, it may be pointed out that the assessee has only claimed that the statement was unsigned. It has not disputed that the stock statement submitted on 31.3.2009 was not of the value 45 of Rs.12,59,06,092/-. It is highly pertinent to take note of the fact that perusal of Annexure -1 ( DP Register) clearly shows that the bank manager had made inspection of the stock on 03.04.2009 i.e. just after three days of the submission of the statement as his dated signature are appearing on DP Register. The dated signature takes whole of the wind from the sails of the assessee that the stock was never physically checked by the bank. It only remains an allegation without corroboration and cannot be taken any cognizance of. Third Issue:The third issue which the assessee has contested in this case is using the information as given by Shri Tejinder Sharda, Sr.Branch Manager in the case of M/s.Munish Kumar Bansal, Contractors. In this regard, it may be mentioned that the assessee has relied upon the Tribunal's order in the case of M/s.Munish Kumar Bansal which is distinguishable decision as would be shown hereinafter but the statement of the Sr.Branch Manager touching the procedure adopted in the bank and also his statement that in all such cases where signatures are put by the Inspecting Manager, the said signature are in token of having inspected the stock. So such a statement cannot be trivialized as is being attempted by the assessee. Nonetheless, the only point which the assessee is contesting so studiously has been found to be false that it had furnished inflated stock statement to the bank with a view to securing higher credit limit. This claim of the assessee has been demolished with a sledge hammer and the sledge hammer is the DP Register which clearly shows that the assessee had been showing stock in the statements to the bank as was actually in its possession and not at the times when higher limits were required as claimed by the counsel. It is pertinent to mention 46 here that the statement of Sh.Tejinder Sharda and statement of Sh. Kamlesh Gupta, both Chief Manager of the same very bank branch wherefrom the limit had been got sanctioned, converge on facts as regards inspection of the stock by the bank manager and his signing the DP register in token of having physically verified the stock and further countersigned by the Chief Manager at that time. The whole case of the assessee, therefore, stands demolished. Fourth Issue: The issue of assessee's relying upon the decision of the Bench in the case of M/s.Munish Kumar Bansal (ITA No.391/ASR/2012 dated 12.03.2013) in such a situation is clearly not applicable to the facts of the case as discussed above. Nonetheless, it may be mentioned that in the said case, the Tribunal had found that the asseseee had claimed that there was no difference in the bank stock statement and the stock shown to the department as on 31.3.2008 as the alleged difference in stock of a sum of Rs.1,69,17,000/-had already been cleared by the assessee by sales as on 31.3.2009 and it was in appreciation of this fact that the Tribunal had deleted the addition. In the case of the assessee, the AO has already considered this issue and taken the difference in the stock as reconciled to the extent of Rs.4,66,13,761/- and made addition of Rs.1,73,16,531/-only. The assesee did not contest this issue before the first appellate authority that the AO had erred in not taking the whole of difference as reconciled. Thus, clearly there is admission on the part of the assessee that difference of Rs.1,73,16,531/- could not be reconciled. IT IS HIGHLY PERTINENT TO POINT OUT THAT WHEN THE ASSESSEE CLAIMED THAT ITS STOCK WORTH Rs.5,42,81,001/- was to be reduced from the total stock statement 47 submitted to the bank as the stock of this value had been consumed and payments received and which the AO accepted to the extent of Rs.4,66,13,761/-, then it becomes eminently clear that the assessee owns up the total stock at Rs.11,62,56,801/-
Stock shown to the department as
per audited accounts. =Rs.6,19,75,800
Stock claimed by the assessee as
having been consumed on
30.3.3009 and 31.3.2009 Rs.5,42,81,001
Rs.11,62,56,801/-
This figure of Rs.11,62,56,801/- is the figure which the assessee himself admits as against the actual stock statement furnished to the bank at Rs.12,59,06,092/- and thus according to the assessee it had inflated the stock by only a sum of Rs.86,49,191/- (12,59,06,092/- minus Rs.11,62,56,801/- to avail higher credit limit on 31.3.2009 for which he only needed to show stock at Rs.12 crore only and not excess by Rs.59,06,092/- or at Rs.13,46,44,500 for June, 2009 and Rs.13,26,44,125 for July, 2009. Thus, it becomes that the stock statements submitted to the bank were real. The assessee is blowing hot and cold in the same breath. On the one hand, it is claiming that it had inflated the stock for availing higher credit limit and on the other hand it is claimed that it had consumed the stock as on 30.03.2009 and 31.3.2009. The falsity in the assessee's contention is too obvious to be missed out.
Nonetheless, in this regard, it may be mentioned that a perusal of the DP register clearly reveals that the branch manager had put his signature on the date of inspection i.e. 3.4.2009. A perusal further 48 reveals that the branch manager had put his signatures on many other occasions also when he had inspected the stock. Thus, the DP register is completely reliable and the assessee cannot impute motives to the factum of signatures having been put in token of having inspected the stock. This is without prejudice to the basic fact that the assessee had been submitting stock statement of far higher value even when it had not to seek any raise in the credit limit. If the assessee had been regularly submitting stock statement far more than 25% margin and also on several occasions when it had not to seek any raise in credit limit then it can surely be concluded that it had been showing actual stock in the statement to the bank. As regards, the assesee's contention that the bank has not proved that the bank manager had actually inspected the stock lying at different places in MP and other places, such an argument is emerging out of assessee's frustration. It is pertinent to mention here that the bank manager has put his signature in the column "inspected by" in the DP register, the assessee has not brought anything on record that it had asked the bank manager as to how he has been reporting in the DP register that he has inspected the stock when he has actually not 2done. This clearly is an attempt made out of frustration and fits well in the phrase 'drowning man catches at a straw'. This is not withstanding the fact that the assessee's version of submitting inflated stock statement has been proved to be false as discussed in detail above.
Fifth Issue The assessee has further mentioned that the department had taken copies of P & L account and balance sheet from the bank which is of no consequence as the same had been obtained during the 49 assessment proceedings and which the assessee had submitted after getting its accounts audited. It may further be mentioned that the bank authorities after having inspected the stock physically had little interest as to what amount of stock the assessee discloses to the department. The bank authorities would have immediately launched prosecution proceedings against the assessee on its submission of balance sheet with lesser stock if the bank authorities had not physically checked the correctness of the stock declared in the bank statement. In such a situation, the assessee would have taken the stand that its stock had been physically checked by the bank authorities and found the same as correct and then how can the bank launch prosecution proceedings when it had itself physically checked the record.
Sixth Issue: The assessee has claimed that its stock was hypothecated and remained under its control. This claim is of no consequence as the stock under hypothecation though remains in the possession of the assessee but the bank carries the right to inspect the same. If on an inspection, it is discovered by the bank that the stock is not in the possession of the assessee or stock is short then the bank can immediately withdraw the limit and serve a notice for the recovery of the amount already withdrawn from the CC limit account. All that the assessee seems to suggest by pointing out the fact that the stock remained under its control is that the banking authorities have nothing to do with the stock which is never the case. No bank sanctions limit in any case where stock is hypothecated without the actual existence of the stock which the assessee seems to suggest.
50Assessmnt year 2010-11: In this assessment year, the only point which the assessee has raked is that it had submitted stock statement on 20.3.2010 and the difference of stock as on 31.3.2010 cannot be treated as unexplained. In this regard, it may be submitted that the AO had considered this fact and after taking into consideration the consumption of stock between 21.3.2010 to 31.3.2011, worked the difference unexplained at Rs. 3,29,71,480/-. The consumption of stock had been taken at Rs.7,52,50,550/- . The assessee had been making a blanket claim that it had shown inflated stock for availing higher credit. It is pertinent to mention when stock statement of Rs.10,82,22,030/- was submitted b y the assessee to the bank on 20.3.2010, it had not sought any raise in its credit limit which in fact had been instead reduced from Rs.9 crore to Rs.6 crore on 31.1.2010. Thus, falsity in the assessee's claim is coming to the surface in each of its claim.
In this year, the asseessee's counsel had crossed examined the senior Chief Manager, Shri Kamlesh Gupta, PNB Arya Samaj Bank, Bathinda and who had maintained that the stock of the assessee was physically verified. In the cross examination made by Shri Ashwani Juneja, ITP, counsel for the assesse, Shri Kamlesh Gupta had confirmed that stock was was physically checked by the bank officers and on being asked whether any record of movement of bank officer has been maintained by the bank, Shri Kamlesh Gupta had stated that "No records have been brought. If any record is available, the same will be made available to the department." Further when asked whether any record for physical verification of stock statement on 26.3.2010 was available, Shri Kamlesh Gupta had stated that the 51 stock was being checked as per the stock statement. It may be further mentioned here that the bank gets annual stock audit of the parties availing higher limit from higher outside agencies i.e. Chartered Accountants and in the case of the M/s.Euro Infrastructure, Shri Kamlesh Gupta had admitted that report of such checks are available which are dated 09.04.2009 and 24.11.2010 and thus it is clear that the assessee cannot submit inflated stock statements which are monthly checked by the bank manager and annually by the external agencies. (Refer last question of cross examination in Euro Infrastructure which is enclosed as Appexure).. In view of these facts, the factum of physical inspection of the stock gets well established.
M/s.Euro Infrastructure and Powers Limited. Assessment year 2010- 11 In this case also, the factual matrix is almost the same as in the above case. Here also, the assessee had contended before the AO that inflated stock statement was submitted to the bank. The veracity of this statement when examined brings to the fore the same results as have come out in the aforementioned case. Here in this case, the AO has reproduced the copy of the bank statement at page 2 of the assessment order where stock Rs.4,68,82,440/-has been reported. A copy of the Drawing Power Register has also been reproduced by the AO in his assessment order at page 7. A perusal of this DP register reveals that when the assessee availed credit limit of Rs.3 crore, it had submitted stock statement of the value of Rs.6,29,18,775/- on 30.4.2010 and submitted stock statement of the value of Rs.6,21,80,415/- when limit sanctioned was Rs.5 crore which is of lesser value. This clearly shows 52 that when statement of stock at Rs.6,29,18,775/- was submitted there was no occasion for seeking raise in the credit limit yet still stock statement was submitted of higher value when credit limit of Rs.5 crore was sanctioned.
The assessee has pointed out that stock statement was submitted on 26.03.2010. In this regard, it is submitted that the assessee had never claimed before the AO though represented by the same learned counsel namely Shri Ashwani Juneja that it had consumed the stock during the period 27.3.2010 to 31.3.2010. Therefore, there is no merit in this assertion of the assessee as it only remains assertion which has not been contested before the learned CIT(A) as was contested in the case of M/s.Ishar Infrastructure Developer(P)Ltd.for the assessment year 2010-11 and the AO taken as reconciled the difference after considering the consumption of material in between 21.3.2010 to 31.3.2010.
It may be mentioned here that the asesseee has claimed that cross examination of the bank manager was not allowed in this case. It is incorrect. The assessee had been allowed cross examination on 31.05.2013 which has entirely gone against it. Therefore, the assessee still cannot thrive on the charge that the AO had not allowed him cross-examination of Shri Kamlesh Gupta, Chief Manager, PNB, Arya Samaj Branch, Bathinda.
M/s.Royal Deep Construction Co.,Bathinda Assessment year 2009-10 Similar story is emanating in this case also. Here also, the assessee had submitted stock statement to the bank at Rs.186.08 lacs to secure credit limit of Rs.1 crore when there was no necessity for the same as 53 on 30.06.2008, the stock statement submitted was of the value of Rs.159.82 crores which covered more than 25% margin required and as such higher credit limit of Rs.1 crore could be sanctioned without submitting inflated stock statement as claimed. Further it is pertinent to mention here that the assessee had submitted stock statement of much higher value of Rs.235.61 lac for September, 2009 against limit of the same Rs.1 crore which was not at required. It represented the actual stock lying with the assessee and the asssessee cannot claim that this higher value stock statement was submitted for securing higher credit limit. The detail of various stock statements submitted to the bank by the assessee have been incorporated in his order by the AO at page 3 of his order.
Thus, in this case also, the assessee's story that it had submitted higher stock statement to the bank to secure higher limit is found to be false. Tthe AO had reproduced copy of DP register in his order at page 2.
M/s.Ram Kumar Bansal Contrator, Bathinda Assessment year 2009-10 Similar story is emanating in this case also. The AO has reproduced copies of stock statements submitted by the assessee to the bank in the body of his assessment order. The study of these statements can be made from the following tabulation:
S.No. Date of submission of stock Value in Rs Limit sanctioned statement 1 30.08.2008 2,95,76,208 Rs.2 crore 2 31.05.2008 2,93,00,000 Rs.2.2 crore 54 3 30.06.2008 2,97,50,000 Rs.2.2 crore 4 31.07.2008 3,09,00,000 Rs.2.2 crore 5 31.10.2008 3,27,00,000 Rs.2 crore 6 31.03.2008 2,81,00,000 Rs.2 crore It is pertinent to note that when the assesee had been availing limit of Rs.2 crore on stock statement at Rs.2,95,76,208/- as on 30.08.2008, it had been allowed higher credit limit of Rs.2.2 crores on submitting stock statement of the lower value of Rs.2,81,00,000/-. Thus, it would be seen that there is no relation of submission of inflated stock statement with a view to securing higher credit limit. This is the false story of the assessee and deserves to be rejected forthwith.
M/s.Bhalaria Constructions, Bathinda Assessment year 2009-10 Similar story is emanating in this case also. Here also, the assessee had submitted stock statement to the bank at Rs.1,28,69,000/- and Rs.1,23,50,00/- at different dates against limit of Rs.1 crore. The statements clearly suggest that the margin limit of 25% is invariably retained and the assessee submits stock statement of value as lying in his actual possession.
As regards the assessee's contention that the stock statement was not signed by the assessee, it is pertinent to mention here that the assessee has not denied the submission of the statement though unsigned inadvertently. It has not disputed the stock declared in this stock statement to the bank. The Bank manager had inspected the stock and put his signature on the backside of the stock statement on 30.09.2009 and when the bank manager checked the stock statement submitted by 55 the assessee on 31.3.2009 after six months, he must have checked the stock with reference to the present position of the stock as on 30.09.2009. Therefore, it is wrong to say that the bank authorities are concerned with the stock hypothecated to the bank. Of particular importance is the statement of Shri Kamlesh Gupta who had informed that if any client fails to submit stock statement within ten days of the following month, penal interest is charged in such cases.
Thus, it becomes clear that the statements submitted to the bank reflect true state of affairs and the assessees' claim that inflated valued stock statements were submitted to procure higher limit is wholly untrue. This is the only inescapable conclusion which emerges out of the above discussion. There remains not even an iota of doubt that the higher stock statements were not submitted for procuring higher credit limits but were the actual stock statements. The assessees' assertion, thus, deserves to be rejected being without any merit whatsoever and also being misleading.
In all the above appeals, the issue at stake is the addition made on account of difference in the value of stock shown to the bank by the assesses in their stock statements issued to the bank and as declared to the income tax department in their returns of income. It is submitted that this issue stands resolved by the recent decision of the Hon'ble Punjab & Haryana high Court in the case of Smt. Shakuntla Thukral Vs CIT reported at 366 ITR 644. The assessee has filed detailed submissions and only sought to suggest that the said decision may not be followed. It has been suggested by quoting various 56 decisions including of Hon'ble Punjab & Haryana High Court which had gone in favour of the assessee. In this regard, it is submitted that the judgement of the Hon'ble Hon'ble Punjab & High Court in the case of Smt. Shakuntla Thukral (supra) is the latest judgment and while rendering this judgment, the Hon'ble Court deems to have taken into consideration the whole gamut of the issues involved and has rightly observed that no illegality or perversity in the findings recorded by the Tribunal has been pointed out and further that no substantial question of law arises in the appeal. In view of this categorical finding of the Hon'ble High Court, the counsel's asking the Hon'ble Bench to disregard this decision of the Hon'ble High Court is clearly preposterous. It may be submitted that the factual matrix of the above cases and the case of Smt.Shakuntla Thukra are almost identical as In the case of Smt.Shakuntla Thukral, the assessee had submitted inflated statement of stock with a view to securing higher credit limit to avoid demurrage and in the cases of the above assesses, it is admitted that the inflated stock statement had been submitted to the bank for procuring higher credit limit as the payments were not being released by the departments though this claim of the assessees' counsel that inflated stock were submitted to procure higher credit limit is found to be false and misleading as is emerging from the discussion made hereinafter.
It may be reiterated that the assesee's contention that the stock statements submitted to the bank were inflated and not true and the same had been submitted squarely with a view to availing higher credit limit, is not found to be true in as much as there was absolutely 57 no necessity for furnishing inflated stock statement as the assesses had already submitted stock statements of much higher value to the bank that it could get higher credit against the stock statement already submitted or it had been submitting higher stock statements even when the credit limit remained the same.
In view of the above discussion, the following facts emerge:
1. The stock statements submitted to the bank were real and inflated as invariably stock statements on different dates with much higher value were submitted when no increase in the credit limit had been sought.
2. That the Banking authorities had physically inspected the record and also put the dates of inspection which has been corroborated by the Chief Manager who is a superior officer and whose statement carries great evidentiary value.
3. That there was undertake stock audit by the external agencies also i.e. chartered accountant and this fact has brought on record by none other than the Chief Manager, PNB, Arya Samaj Branch, Bathinda which clearly affirm that the stock statements were real and not inflated.
4. That the case is wholly covered by the judgement of the Hon'ble Punjab & Haryana High Court in the case of Smt. Shakuntla Thukral (supra) wherein the Hon'ble High Court held that when the stock had been inspected, no credence to the assessee's assertion that the inflated stock statement was submitted should be given though in the case of the assessee it has been proved beyond an iota of 58 doubt that the assessee had been submitting real stock statements as stock statements of higher value were submitted even when no increase in credit limit had been sought.
5. The learned CIT(A) has grossly erred in not appreciating the whole factual matrix of the case which he ought to be done in his coterminous jurisdiction with AO and had he done so he would have found that there was no truth in the contention of the assessees that they had furnished inflated stock statements which lie stands fully exposed from the stock statements submitted invariably at much higher figure than the threshold limit of availing the credit i.e. Amount of limit sanctioned by the bank plus 25% margin. The learned CIT(A) has also not taken into consideration the statement of Shri Kamlesh Gupta in its totality where he has not only confirmed that the stock of the assessees was physically verified and produced DP Register as the bank record of physical verification and further stock audits undertaken by the external agencies as mentioned in the statement of Shri Kamlesh Gupta.
6. None of the judgements relied upon by the assessee is applicable to the facts of the case in view of the latest judgements of the Hon'ble Punjab & Haryana High Court in the case of Smt.Shakuntla Thukral (supra).
In view of above, it is prayed that the appeal of the department may kindly be allowed in the above appeals. If any clarification or submissions is still required, the DR may kindly be given an opportunity 59 as the DR could not keep a track of the various documents referred to by the counsel during the course of hearing of the above appeals. Copies of relevant pages of the Dp Registers and copies of statements and cross examinations of Shri Kamlesh Gupta, Chief Manager, PMB in the case of M/s.Ishar Infrastrucure P Ltd and in the case of M/s.Euro Infrastructure and Power Limited are enclosed herewith for ready reference.
Sd/-
Encl: As above ( Tarsem Lal )
Joint CIT(ITAT), Amritsar"
18. We have heard the rival contentions and perused the facts of the case.
The Ld. DR while started the arguments initially took up the matter in the case of M/s. Ishar Infrastructure Developer (P) Ltd. for the assessment year 2009-10 being a lead case and argued that all other matters are identical and therefore, the decision in the case of M/s. Ishar Infrastructure Developer (P) Ltd. for the assessment year 2009-10 is to be followed in other appeals identically. However, the ld. Counsel for the assessee while arguing the matter argued from all the appeals separately and accordingly the ld. DR submitted that counter written submission dealing with each and every appeal, which has been reproduced hereinabove. Accordingly, we deal with matter as under:
6019. The Ld. DR at page 2 to 6 of his written submissions dated 02.02.2015 reproduced hereinabove, as stated that the order of the ld.
CIT(A) is perverse because the findings given by the ld. CIT(A) that the Bank Authorioties are not concerned with the availability of adequate stock as their interests are covered by the collateral security provided by the assessee. If it is so why hypothecation of the stock is made by the bank whereas the Drawing Power is determined on the basis of the stock and not on the basis of collateral securities. The ld. CIT(A) ignored the statement of Senior Branch Manager of the same very Branch and the ld. CIT(A) has not doubted the correctness of the statement of Senior Branch Manager, which cannot be trashed without giving any cogent reasons. However, the ld. DR relied upon the statement of Sh.Tejinder Sharda and DP Register which was ignored by the ld. CIT(A). The ld. Counsel for the assessee has already given his submissions to the said arguments made by the ld. DR which has been considered by us and which has been reproduced hereinabove.
20. Our findings are based on the said arguments made by the ld. DR and the ld. Counsel for the assessee with regard to the said collateral securities and DP Register and the statement of Senior Branch Manager Sh.Tejinder Sharda and the stock statement filed by the assessee for the A.Y. 2009-10 on 02.02.2015 available at PB 12 & 13 which are unsigned . The ld. Counsel 61 for the assessee has pointed out certain deficiencies in the DP register on which the ld. DR has placed heavy reliance but has not been rebutted by the ld. DR in his counter arguments or counter written submissions. The said deficiencies even though reproduced hereinabove by the ld. Counsel for the assessee in his written submissions i.e. vital information relating to physical verification of the stock has not been recorded and there is no column in the register for keeping the record that on which date stock statement has been received. The column for accountant initials is blank and column for inspection is mostly blank except initials in some of the columns and date of 19.01.2010 against the stock statement of 31.08.2009, 30.09.2009 and 31.10.2009 which shows the reality of physical verification of stock as on different dates of three months. The ld. Counsel further argued that column for full signature of incumbent incharge is also blank except starting from entries for the month of March 2009 to Dec., 2009 but no name of the person who did the initials can be made out.
21. As regards the statement of Senior Branch Manager, Sh. Tejinder Sharda, it was only a guess work that his predecessor must have gone through the modus operandi of maintaining the records by the bank as he was not in the branch of the bank during the relevant period. In fact, Bank does not have any record of any physical verification of the stock as on 62 31.03.2009 and the Drawing Power Register cannot be relied upon. That the assessee had in fact more stock as compared to the stock declared in the audited profit & loss account and books of account. In fact, a procedure has been stated by Sh.Tejinder Sharda of maintaining the Drawing Power Register and in fact, nothing has been brought on record to justify that the physical verification has been done. In fact, the present incharge of the bank, who allegedly as mentioned by the AO as verified the stock physically was never cross-examined and nothing has been brought on record by the AO or even by the ld. DR, Mr. Tarsem Lal that the stock which in all the cases mentioned hereinabove, which is lying at different sites, not at one place in one city but at different cities in different States. Not even a single documentary evidence was placed on record to establish that any Bank Officer has ever visited different sites and different cities in different States and that too on any date and there are no details available with the Bank Authorities with regard to the material, specifications and weighment and/or numbers of material available. Had it been verified physically, the same should have been there. The Ld. DR totally relied upon the DP register, a copy of which is part of the assessment order but the same is not backed by any documentary evidence which can prove that the physical verification has 63 been done by any of the Bank Authorities at any point of time during the impugned year in any of the case mentioned hereinabove.
22. Much reliance has been placed on the statement of Bank Manager, Sh.
Tejinder Sharda in the case of Munish Kumar Bansal Contractor but the AO has failed to prove that any physical verification has been made of the stock.
However, a statement recorded of the Branch Manager in the case of Sh.
Munish Kumar Bansal contractor, who has been assessed by the AO, the same cannot affect the assessment of the present appeal and cannot be blindly applied in the present appeal automatically. However, the matter in the case of Sh. Munish Kumar Banal Contractor, travelled upto the ITAT, Amritsar Bench and the ITAT, Amritsar Bench in its decision in ITA No.391(Asr)/2012 dated 12.09.2013 deleted the addition though the facts in that case were different..
23. The Ld. DR has tried to rebut the contention of the assessee that the actual physical verification of the stock has been done by the Bank Authorities by relying on DP Register which shows that the physical verification of the stock statement dated 31.03.2009 was made on 03.04.2009 (page 45). It was explained by the ld. counsel for the assessee that it was impossible for the Bank Authorties to physically verify the stock as per stock statement dated 31.03.2009, as the stock was lying at different 64 sites in Madhya Pradesh. This argument of the Ld. DR cannot be accepted at all in view of the above facts. Hence, it stands proved that the Bank Manager only narrated the procedure and nothing has been brought on record to prove that the stock has been physically verified at any point of time and no documentary evidence has been placed on record by the Revenue.
23.1 As regards the counter comments/submissions by the ld. DR, our findings are :
i) That the stock statements for the assessment year 2009-10 as claimed by the assessee are not inflated but deflated. He has compared the value of the stock as per stock statement with the sanctioned limit instead of stock as per balance sheet as on 31.03.2009. Hence, the counter comment is factually wrong.
ii) The Ld. DR stated that during the AY 2010-11, the assessee has not claimed that he filed inflated stock statement. But on page 6 of the order of the AO, the AO has reproduced in para 2.4 in written submission of the assessee and it has been claimed by the assessee that the inflated stock statements were submitted to the department for getting loans. Hence, the counter comment of the ld. DR is factually wrong.
iii) On page 4 of the counter comments, the ld. DR has discussed regarding cross examination of Sh. Kamlesh Gupta but this cross examination was made by the assessee during the A.Y. 2010-11. Moreover, the ld. CIT(A) has given detailed finding 65 regarding non-physical verification of the stock at para 12(iii) of the appellate order for AY 2009-10
iv) The Ld. DR has discussed on page 5 of the written submission regarding statement of the Bank Manager regarding independent verification of the stock dated 4.2.2010. But the AO has never taken any cognizance of this independent stock audit report in the assessment order. Moreover, this independent verficiation relates to stock statement dated 31.01.2010 allegedly made on 4.2.2010 but not to the stock statement dated 20.03.2010 on the basis of which addition has been made . Hence, no reliance can be placed on the independent stock verification.
v) On page 6 of the counter comments, the ld. DR has stated that the value of the stock has been mentioned at stock statement dated 31.03.2009 at Rs.12,62,06092/- but the assessee never stated that the stock statement was inflated and it has only stated by the assessee that it is unsigned. But in this regard, the assessee has all along stated that the stock as per stock statement has been inflated to avail CC limit from the Bank. The physical verification of the stock has never been proved by the department. Hence, this counter comment of the Ld. DR is also factually wrong.
vi) The Ld. DR has again relied on the DP register for the AY 2009-10 and according to him the Branch Manager signed the D.P.register in token of having physically verified the stock and the same is further counter signed by the Chief Manager at that time. But the assessee in his counter comments has brought 66 out the vital defects in the DP Register, which has been discussed (supra). Hence, this DP Register has no authentic value and the comments of the Ld. DR are liable to be rejected.
vii) The Ld. DR has also stated that the assessee has tried to rely on the decision of this Bench in the case of Munish Kumar Bansal and according to him, the facts of this case are not applicable to the facts of the present assessee. But the assessee has brought to the notice of the Bench that in the above said case, the addition has been deleted and no further reliance has been placed. Moreover, regarding difference of Rs.1,73,16,531/- pointed out by the ld. DR, this issue is covered by the finding that the assessee has filed inflated stock statement.
viii) According to the ld. DR, the assessee has stated that the audited accounts filed with the bank are the same as with the Income tax Department and because of this fact, it was in the knowledge of the bank that the actual stock as on 13.03.2009 and 20.03.2010 was much less than the stock as per stock statement but no action was taken as per stock statement submitted to the bank. As per ld. DR, the comments of the assessee has no relevance. But this fact is important because the bank has not taken note of difference in stock.
ix) The ld. DR has given comments on hypothecation of stock, which has already been discussed in this order supra.
x) The Ld. DR has further stated that the assessee made blanket claim that it has shown inflated stock for the AY 2010-11. This is in contradiction to the counter comments of the ld. DR on 67 page 4 that no such claim was made by the assessee in AY 2010-11.
xi The same facts have been discussed in respect of other cases which are before us and the findings already recorded above shall apply accordingly to all other cases mentioned hereinabove, mutatis mutandis.
24. It is a fact on record that the credit facility has been extended by the Bank to the assessee against the hypothecation of stock and not against pledge of stock, in which the control and possession of the stock remained with the assessee.
25. The AO has not pointed out any discrepancy in the books of account or purchase/sales or has not brought on record to prove that extra purchases have been made by the assessee at any point of time. The books of account of the assessee are audited is not under dispute and no defect by the auditor has been pointed out. It is the real income which can be taxed, whereas in the present cases all the additions are made on conjectures and surmises.
26. Time and again before both the authorities below, the ld. Counsel for the assessee has submitted the explanation that the statement has been submitted before the Bank Authorities only on estimated basis to avail of the bank loan and there is no other purpose. This contention of the assessee has not been rebutted at any point of time by the AO or by the ld. DR. It is a 68 fact that the AO as not pointed out any defects in the books of account and in fact, the AO has not invoked the provisions of section 145(3) of the Act.
As argued by the Ld. DR that cash credit limit is calculated on the basis of DP register, which in turn is maintained on physical verification of the stock and no documentary evidence has been brought on record that the stock mentioned in the .DP register by third party i.e. Bank Authorities, has been maintained on physical verification of the stock, maintained by the assessee at different cities in different States.
27. The AO has much relied on the decision in the case of Devgan Rice & General Mills (supra). The issue before the Hon'ble Punjab & Haryana High Court, in the case of Devgan Rice & General Mills (supra) was with regard to the proceedings u/s 148 of the Act and whether the said proceedings u/s 148 of the Act could be initiated on the basis of information regarding inflating the value of the stock in the bank statement was received from the bank after completion of assessment u/s 143(3) of the Act.. The Hon'ble High Court has held that the reopening in such cases can be done. However, the decision of Hon'ble Punjab & Haryana High Court in the case of Devgan Rice & General Mills (supra) was with regard to a different context and did not prove that the assessee had made unexplained investment u/s 69 of the Act.
6928. Much reliance has been placed by the ld. DR on the decision of the Hon'ble Punjab & Haryana High Court in the case of Smt. Shakuntla Thukral vs. CIT reported at 366 ITR 644. As required order of the CIT(A) in the case of Shakuntla Thukral was placed on record by the party and on perusal of the same in para 2.11 to 2.18 and at page 4 of CIT(A)'s order, it was found that the books of the assessee were not accurate because of specific defect of non-recording of sales in the books of account .pointed out. In para 2.8 at page 6 of CIT(A)'s order in the case of Shakuntla Thukral, stock statement filed on 04.07.2007 has been replaced by other stock statement which establishes that no stock inventory was prepared at the close of the financial year, whereas there are no such finding by the AO in any of the present appeals.
29. Further, in the case of Shakuntla Thukral (supra), the ld. CIT(A) has recorded finding at para 2.11 (page 24), of the order that the higher stock as on 31.03.2005 was given for the purpose of making payment for import of machinery cannot be accepted as the payment for purchase of machinery had already been released in February, 2005. In para 2.12.1 (Page 25) of ld.
CIT(A)'s order, it has been perused that tat there are reports of physical inspection carried out by the bank authorities in respect of assessee's stock at quarterly intervals is availale and such findings has not been rebutted 70 before the ITAT or before the Hon'ble High Court. But in the present case in view of our findings hereinabove, nothing has been established that physical inspection of the stock has been carried out as per facts on record. Further, in para 2.12.2 (page 25), of CIT(A)'s order in the case of Smt. Shakuntla Thukral (supra), it has been stated by the ld. CIT(A) that the assessee has not disputed the stock of the value which was submitted to the bank was actually lying in business premises as on 31.03.2005. But in the present appeal the assessee all along before the AO and the ld. CIT(A) and before us stating that the stock was inflated to get the cash credit limit from bank.
Thus, in the case of Smt. Shakuntal Thukral (supra), the AO after pointing out defects in the books of account of the assessee a categorical finding has been given that the books of account are not accurate and meaning thereby that the books of account were rejected. But in the present appeal, there is no such finding by the AO and no books of account have been rejected and provisions of section 145(3) have not been invoked. In the case of Smt. Shakuntla Thukral (supra), the ld. CIT(A) has relied upon the physical inspection carried out by the bank authorities in respect of assessee's stock at quarterly intervals, as mentioned hereinabove and such findings have neither been rebutted before the ld. CIT(A) or ITAT or Hon'ble High Court.
71But in the present case, the assessee has established that no physical inspection of the stock has been carried as per facts on record.
30. Further and finally, in the case of Shakuntla Thukral (supra), the ld.
CIT(A) has recorded the finding that the assessee has accepted that fact that the stock as per stock statement as on 31.03.2005 was lying in the premises of the assessee.. But in the present appeal, the assessee all along stated before the authorities below and before us that the stock was inflated to get the cash credit limit from bank and the onus is on the Revenue to prove that the assessee owned the stock more than the stock reflected in the balance sheet as on 31.03.2005, which has not been done in any of the case referred to hereinabove.
31. In view of the above discussion, the decision of Smt. Shakuntla Thukral (supra) as relied upon by the ld. DR is not applicable to the facts and circumstances of the present case.
32. The decisions relied upon by the ld. CIT(A) of the Hon'ble Punjab & Haryana High Court, in the cases of M/s.Santosh Box Factory, M/s. Sidhu Rice Mills and in the case of M/s. Devi Dayal Rice Mills are squarely applicable to the facts of the present case as the Revenue as the Revenue has not brought on record during the assessment proceedings or before the ld.
CIT(A) or even before us that physical verification of the stock has actually 72 been done and accordingly stock statements so submitted before the bank authorities and DP register cannot be relied upon.
33. In the case of CIT vs. Veerdip Roller (P) Ltd. (2010) 323 ITR 341 (Guj), the facts are that the AO made addition on account of difference in the value of closing stock furnished to the bank and the value of the stock found in the books of account furnished to the Income Tax Authorities -
inflated stock was hypothetical and not pledged and the bank officials had not verified the statement showing inflated stock so produced by the assessee. The addition on account of difference furnished to the bank as per books of account u/s 69B of the Act can not be sustained. Consequently, the appeal was dismissed by the Hon'ble Gujrat High Court against the said decision, the Revenue went in appeal before the Hon'ble Supreme Court and the Hon'ble Supreme Court vide its order dated 13.12.2008 dismissed the SLP filed by the department.
34. Similar decisions have been made by various courts of law referred to hereinabove:
i) CIT vs. Sidhu Rice & General Mills reported in 281 ITR 428 (P&H)
ii) CIT vs. Santosh Box Factory (P) Ltd.., 44 IT Reps. 472 (P&H)
iii) CIT vs. N. Swamy reportede in 241 ITR 363 (Madras)
iv) ITO vs. Devi Dayal Rice Mills reported in 75 TTJ 24 (ITAT, Amritsar Bench.
v) CIT vs. Sirohi Steel Rolling Mills, reported in 200 CTR 595 (All.) 73
vi) Ashok Kumar vs. ITO, reported in 201 CTR 178 ( J & K)
vii) CIT vs. Das Industries, reported in 303 ITR 199 (All.)
viii) CIT vs. Sri Padmavathi Cotton Mills, reported in 236 ITR 340 (Mad.)
ix) Jai Sharda Rice Mills. Vs ITO reported in 36 ITD 254 (ITAT, Asr.)
x) CIT vs. Riddhi Steel and Tubes (P) Ltd. reported in 220 Taxman 148 (Guj.)
xi) CIT vs. Apcom Computers P. Ltd. reported in (2007) 292 ITR 630 (Mad.).
35. In the facts and circumstances, the arguments made by the ld. DR in his written submissions and counter submissions cannot help the Revenue and accordingly, we find no infirmity in the order of the ld. CIT(A) in the case of M/s. Ishar Infrastructure Developers (P Ltd. in ITA No.198(Asr)/2013 in the impugned year.
36. During the assessment year 2010-11, the AO rejected the purchase account only without rejecting complete books of account and this issue was decided by the ld. CIT(A) in favour of the assessee while deciding the ground No.2 on page 7 in the case of Ishar Infrastructure Developers (P) Ltd., but the department has not filed any ground of appeal against this finding of the ld. CIT(A) which leads to the conclusion that the department has no grievance and the facts of the assessment year 2010-11 become identical to the assessment year 2009-10 because for the assessment year 2009-10 books of account were never rejected by the AO. The ld. CIT(A) 74 has given detailed findings on this issue in his order in para 2 on page 11 & 12, which for the sake of convenience are reproduced hereunder:
"2. In vies of the fact discussed supra, I find that although the AO relied on the statement of the bank manager in which he stated that physical verification of the stock was carried out, in support of his finding that the appellant possessed larger quantity of stock than the stock as per books of account, but the AO has not been able to prove that the stock lying at various sites at Madhya Pradesh as per stock statement dated 20.03.2010 were actually inspected/counted to substantiate the above said finding because the bank officers has not been able to produce the record of the movement of any bank officer from Bathinda to Madhya Pradesh and the records relating to actual counting of stocik. As far as the finding of the AO that the physical verification was proved from the drawing power register, I find tat the drawing power register is not authentic on account of non recording of vital information by the bank officers with regard to date of filing of stock statement and date of physical verification of stock. The AO has also not been able to rebut the contention of the A/R of the appellant that the stock was inflated in the stock statement to avail credit from the bank. Thus, the action of the AO of relying on the statement of the bank manager, the stock statement and the drawing power register for making addition of Rs.3,06,15,504/-, on account of difference in stock, is not justified on facts."
37. There is no rebuttal from the DR on the above findings of the ld.
CIT(A) in the assessment year 2010-11.
38. Further, it is an admitted fact that no stock statement was filed by the assessee on 31.03.2010 and the last stock statement was available on record is dated 20.03.2010, which has been utilized by the AO for making addition on account of difference in stock as per stock dated 20.03.2010 and balance sheet as on 31.03.2010. This fact also goes against the department, 75 as no addition for the difference in stock as on 31.03.2010 could be made by relying on the stock statement dated 20.03.2010.
39. In view of the above, all the grounds of the Revenue are dismissed and our decision hereinabove is identically applicable in all other appeals mentioned hereinabove i.e. in ITA No.536(Asr)/2013 for the AY 2010-11 in the case of Ishar Infrastructure Developers (P) Ltd., in ITA No. 199(Asr)/2013 in the case of Royaldeep Construction Co., in ITA No.200(Asr)/2013 in the case of M/s. Bhalaria Constructions, in ITA No.571(Asr)/2013 in the case of M/s. Euro Infrastructure & Power Ltd. and in ITA No.457(Asr)/2013 in the case of 'Ram Kumar Bansal'.
36. Now, we deal with cross objection bearing No.16(Asr)/2014 for the assessment year 2009-10 in the case of 'Ram Kumar Bansal', where it has been argued that the AO is not justified in recasting the trading account by taking the inflated figure of closing stock as per bank statement and taking the opening stock as per books of account. And if both the figures are taken as per bank account instead of books of account, there remain no difference and as such the addition made is uncalled for. It was also claimed that the AO is not justified in making addition without pointed out any defects in the books of account maintained in the regular course of business, which are 76 duly audited by the auditors' and as such the addition made without rejecting the books of account is uncalled for.
37. Since both these grounds have already been decided in the main appeals hereinabove and therefore, the said grounds taken in the C.O. bearing No.16(Asr)/2014 are infructuous and are accordingly dismissed.
38. As regards ground No.1(ii) in the case of M/s. Euro Infrastructure & Power Ltd, in ITA No.571(Asr)/2013 for the assessment year 2010-11, with regard to charging of interest from debtors. The facts are that the AO made an addition of Rs.6,60,000/- on account of non charging of interest from debtors to whom no fresh advances have been made during the assessment year 2009-10 and there is only opening brought forward debit balance. It has been admitted by the AO that no fresh advances have been given to debtors during the A.Y. 2009-10 and there is opening brought forward debit balance of Rs.50,00,000/- on 01.04.2009 in the account of Sh. Pankaj Garg and Rs.5,00,000/- in the account of M/s. Ram Kumar Bansal, which has been carried forward as on 31.03.2010.
39. The ld. CIT(A) on considering the submissions made before him has deleted the addition, since no advance has been made during the year and it was only brought forward debit balance outstanding in the books of account of the debtors.
7740. After hearing the parties, we find no infirmity in the order of the ld.
CIT(A), since no advance has been made during the year and as such no addition can be made. Thus, the ground of the revenue is dismissed accordingly.
41 In the result, all the six appeal of the Revenue ITA Nos. 198 (Asr)/2013,. ITA No.536(Asr)/2013, 199(Asr)/2013, ITA No.200(Asr)/2013 ITA No.571(Asr)/2013 and in ITA No.457(Asr)/2013 and C.O. of the assessee bearing No.16(Asr)/2014 are dismissed.
Order pronounced in the open court on March, 2015.
Sd/- Sd/-
(A.D.JAIN) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: March, 2015 Pronounced on 26/03/2015 Sd/- JM
/SKR/
Copy of the order forwarded to:
1. The Assessees: i) M/s. Ishar Infrastructure Developers (P) Ltd. ii) M/s. Royaldeep Constructon Co (iii) M/s. Bhalaria Constructions
(iv) M/s. Ram Kumar Bansal Contractor (v) M/s. Euro Infrastructure & Power Co. Ltd. Bathinda
2. The ITO Wards 1(1)/DCIT, Cir.1, Bathinda
3. The CIT(A), Bathina.
4. The CIT, Bathinda.
5. The SR DR, ITAT, Amritsar.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.