SHREE GANESH INDUSTRIES,NORTH 24 PARGANAS vs. ITO, WARD - 51(3), KOLKATA, KOLKATA

आदेश /O R D E R PER S.S.Viswanethra Ravi, Judicial Member:- This appeal by the assessee against the order dated 07.09.2016 passed by Commissioner of Income Tax (Appeals)-15, Kolkata for assessment year 2012-13.

No. 2, 3 & 4 There was an AIR information that opening stock of the current year was different from the closing stock of the previous year. It was further noted that the gross receipt figures were also different as per the returns filed and as per the audited P & L Ac. It was explained that to get more funds from the banks two types of balance sheets are prepared. To make necessary verification, AO issued summons u/s. 133(6) and in response to the same SBI, Kalyani Branch, reported that as on 31st March 2011 closing stock hypothecated to the bank was Rs.70,90,050/- and the closing stock as on 31/03/2012 was Rs.76,43,000/-. As pr the return filed, closing stock as on 31/03/2011 was Rs.15,15,000/-. AO has added the difference of Rs.55,75,050/- in the current year. During appeal proceeding AR has submitted that AO has made addition on account of increase in opening stock which is not correct, as increase in stock would reduce profit. I have carefully considered the facts of the case and the submission of the assessee. AO has mentioned that books of accounts produced during assessment proceedings showed different turnover, opening stock etc, as compared to the return filed. Assessee submitted that in the immediate proceeding year, its closing stock as per books was Rs.15,15,0100/-. However, it was inflated to Rs.70,90,050/- to get additional bank loan. Whatever happened last year, is not of much relevance in the present appeal what is important is that assessee took the inflated closing balance of last year as opening stock of the current year. In last year’s return closing balance was shown as Rs.15,15,100/- but in the current year’s return opening balance was taken as Rs.70,90,050/-. Thus opening stock of the current year was inflated by an amount of Rs.55,75,050/-, thereby reducing profit to that extent. Assessee has neither submitted any explanation nor brought any evidence on record to establish whether closing stock of the current year are also inflated by any amount. Under the circumstance, AO is justified in making addition because due to inflation of opening stock, profit of current year has been suppressed. Hence addition of Rs.55,75,050/- is confirmed.”

7. Before us Learned. AR submits that the accountant prepares the profit and loss account and balance sheet by inflating the value of stocks to keep financial benefits by way of cash credit limit of loan from bank. The return income filed on the basis of books of account is correct and referred to correct trading profit and loss account at page no-11 of paper book and argued that the trading profit and loss account correctly shows the opening stock 31-03-2012. Other balance-sheet at page 23 which shows the Shree Ganesh Industries vs. ITO Wd-51(3) Kol. Page 4 opening stock at ₹70,90,050/- is inflated and prayed to remand the issue to the file of AO for verification of books of account and to make assessment thereof and placed reliance on the order of co-ordinate bench of this Tribunal in the case of ITO vs. Md. Jearul Haque in dated 20.11.2015 and in the case of Shri Sitangshu Seth vs. ITO Ware 1(4), Hooghly in ITA No.1124-1125/Kol/2015 dated 28.12.2016.

8. Learned DR submits that assessee is maintain two sets of books of account which are against the law and difference of stock value as found by the AO is very difficult to reconcile to each other. CIT(A) discussed the facts in detailed and rightly confirmed the view taken by AO. The Ld. DR opposed the submissions of the AR in praying the Tribunal to remand the matte to the file AO TO assessee the the income of the assessee in terms of books of account and relied on the orders of CIT-A and AO.

9. Heard rival submissions and perused material available on record. The fact of existence of huge difference between manually filed return of income along with inflated profit and loss account, balance-sheet on account of turnover purchase, closing stock are undisputed. It was admitted by the assessee that they prepare two sets of Tax Audit Report with profit and loss account and balance-sheet, out of which one, which is inflated was produced before the bank to keep the cash credit limit balance. It was also admitted that the inflated profit and loss account and balance- sheet was wrongly annexed with the return and a certificate to that effect was issued by the concerned chartered accountant. It is also not disputed that assessee produced the books of account and the AO found opening stock was at ₹15,15,500/-as on 31-03- 2012 in the profit & loss account which is placed at page no-11 of paper book and whereas the opening stock of ₹70,90,050/- as on 31-03-2012 shown before the bank which is placed at page no-23 of paper book establishes the huge difference as rightly pointed by the AO and Considering all these, AO added the difference of value between opening stock in the books and opening stock as reflected in inflated statement submitted to the bank, in our opinion, is not maintainable. We find the order of co-ordinate bench in the case of Md. Jearul Haque (supra) and the decision of Shree Ganesh Industries vs. ITO Wd-51(3) Kol. Page 5 Hon'ble High Court of Gujarat in the case of Riddhi Steel and Tubes Pvt Ltd., reported in 220 Taxman 148 (Guj) no addition could be made on account of difference between stock shown in the books of account and in the statement furnished to the banking authorities. Therefore taking into consideration the principle laid down by the Hon'ble High Court of Gujarat in the case of Riddhi Steel Tubes Pvt. Ltd. (supra) and the submission of Learned AR we deem it appropriate to remit the issue to the file of AO to assess the correct income in terms of actual books of account as was submitted and examined during course of assessment proceedings. The assessee is at liberty to file evidence, if any, in support of its contention. Accordingly, ground No.1 and 2 raised by assessee are allowed for statistical purpose.