CIT JALANDHAR vs. M/S DOSHI RICE MILLS

ITR/150/1998HC Punjab & HaryanaPHHC01037940199804 December 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages

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What were the facts?

The Income Tax Officer (ITO) made an addition of Rs. 9,68,474/- to the income of M/s Doshi Rice Mills for the assessment year 1981-82. This addition was based on a difference between the value of stock hypothecated with the bank and the stock shown in the assessee's books of account. The Commissioner of Income-Tax (Appeals) [CIT(A)] set aside this addition, finding that the stock statement furnished to the bank as of December 31, 1980, appeared inflated, but there was no discrepancy as of March 31, 1981. The Income Tax Appellate Tribunal (ITAT) affirmed the CIT(A)'s finding. The Commissioner of Income-Tax (Revenue) has filed a reference to the High Court.

What did the High Court hold?

The High Court held that the ITAT was right in law in deleting the addition of Rs. 9,68,474/-. The Court reasoned that a mere discrepancy between the bank statement and the assessee's accounts is not sufficient to justify an addition to income if the position can be satisfactorily explained. In this case, both the CIT(A) and the ITAT had recorded concurrent findings that the assessee had duly explained the difference. The CIT(A) had specifically noted that while the stock statement as of December 31, 1980, appeared inflated, there was no discrepancy as of March 31, 1981. The revenue failed to show any vitiation in these concurrent findings. The High Court relied on its earlier decision in The Commissioner of Income-Tax, Panchkula Vs. M/S Chauhan Paper Pvt. Limited, Chhoti Line, Yamuna Nagar ITA No.358 of 2006 decided on 12.10.2006. The question of law was answered against the Revenue and in favour of the assessee. The reference was disposed of.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition of Rs. 9,68,474/- made by the ITO on account of difference in the value of stock hypothecated with the bank and that shown in the books of account of the assessee, relating to assessment year 1981-82? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's order, affirmed by the High Court, indicates that the assessee had duly explained the discrepancy. The CIT(A) had found that the stock statement as of 31.12.1980 was inflated, but no discrepancy existed as of 31.3.1981. Revenue's Contention: The revenue, represented by the Commissioner of Income-Tax, argued that the addition made by the ITO was justified. The revenue's counsel was unable to demonstrate that the concurrent findings of the CIT(A) and the ITAT, which favored the assessee, were vitiated.

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Cause title — parties, addresses and appearances

I.T.R No.150 of 1998 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R No.150 of 1998 Date of decision:4.12.2006 The Commissioner of Income-Tax, Jalandhar ...Petitioner Versus M/S Doshi Rice Mills, Guru Har Sahai Road, Mukatsar ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE RAJESH BINDAL Present: Dr.N.L.Sharda, Advocate for revenue-petitioner Mr.Akshay Bhan, Advocate for the revenue. ****

JUDGMENT Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh arising out of its order dated 9.1.1990 passed in I.T.A.No.3/ASR/86, in respect of the assessment year 1981-82. “Whether on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition of Rs.9,68,474/- made by the ITO on account of difference in the value of stock hypothecated with the bank and that shown in the books of account of the assessee?”

The Assessing Officer has made an addition to the income declared by the assessee on account of difference in stock shown in the books of account and statement furnished to th

The order continues below.

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