DCIT,CIR-4, KOLKATA, KOLKATA vs. M/S AGR AUTOMOBILES PVT. LTD., KOLKATA

Brief facts of the case are that the assessee company is a dealer of Maruti Suzuki India Ltd. for selling Maruti made cars from its various showrooms located at Varanasi. The assessee also deals in second hand cars which it buys from private persons and sells to private persons. The assessee company declared total income of Rs.38,46,964/- in its return of income. Later, the case was taken up for scrutiny and the AO issued notices to the State Bank of India, Specialized Commercial Branch, Varanasi and taking note of the difference in quantity and value of vehicles purchased and sold to the tune of Rs.12,82,98,524/- was pleased to make the addition. Aggrieved, the assessee preferred appeal before the Ld. CIT(A), who was pleased to accept the explanation given by the assessee and was pleased to delete the same. Aggrieved, the revenue is before us.

We have heard rival submissions and gone through facts and circumstances of the case. We note that the addition has been made by the AO taking note of the discrepancy in value of stock declared to the bank for obtaining higher loan on hypothecation of stock. It was argued before the Ld. CIT(A) that the statement furnished by the assessee before the bank was to avail the higher overdraft facility showing higher closing inventory based on which bank determines the drawing power of the borrower and does not reflect any transactions of sale and purchase with third parties. We note that the assessee was maintaining regular books of account and the books were duly accepted by the AO and other statutory authorities like sales tax and Excise Department and no addition has been made by the AO after rejecting the books and that neither purchases nor sales shown in the regular books were doubted. The AO has not brought on record any material or evidence that the assessee has dealt in goods from outside the books of account. We note that the AO has made the entire addition taking note of the difference between stock shown in the assessee’s Balance Sheet and stock shown in the bank from which assessee was enjoying credit facilities against hypothecation of stock. The AO took stock as shown to bank to be true stock with the assessee and added the difference in stock valuation as the income of assessee. The assessee’s explanation was that stock shown to the bank was inflated to get maximum credit facilities. The AO apart from relying on the stock statement given to bank had brought no other evidence on record to show that assessee in fact possessed a larger quantity of stock, therefore, without bringing any specific instance of transaction relating to sale and purchase of cars outside the books maintained by the assessee or bringing any material to show that assessee actually have more stock than what has been reflected in its Balance Sheet produced before the AO no addition was warranted. In the facts and circumstances of the case, we are of the considered opinion that the Ld. CIT(A) rightly appreciated the issue based on the precedents laid down by the Hon’ble High Courts and Coordinate benches of the Tribunal. Therefore, we are inclined to uphold the impugned order of the Ld. CIT(A) and dismiss the appeal of the revenue.

In the result, appeal of revenue is dismissed.