COMMISSIONER OF INCOME TAX Vs. N SWAMY

JUDGEMENT

(1.) THE question referred to us at the instance of the Revenue which concerns the assessment year 1977-78 is : "Whether the Appellate Tribunal was justified in deleting the addition of Rs. 26,000 which had been added in the computation of total income from some 'undisclosed sources' representing the value of the excess stock hypothecated to the bank under "open loan account' ?"

(2.) THE assessee had shown the value of the stock in its books of account. THE Income-tax Officer thought that the figures relating to the value of the stocks in the book could not be regarded as the correct value of the stocks as the assessee had given a declaration to the bank from which it had obtained overdraft facilities and in its declaration valued the stock at a figure higher than that in the books of the assessee. THE Income-tax Officer computed the difference between the value as recorded in the books and that found in the declaration to the bank and treated the same as income from undisclosed sources. THE assessee had contended that the value of the stocks as stated by him in the declaration given to the bank was inflated, that he had not suppressed that value of the stock, and that there was no income from undisclosed sources. THE Appellate Assistant Commissioner to whom the assessee appealed, reduced the amount of the addition from Rs. 34,070 to Rs. 26,000. When the matter was taken up by the assessee to the Tribunal, the learned Members of the Bench who heard the matter were unable to agree, the Accountant Member holding that there was suppression while the Judicial Member held that it had not been established that there was undisclosed income from out of which the stocks declared to the bank in excess of the stocks shown in the account books could be said to have been acquired. THE matter having thereafter been placed before the Third Member, Vice-President of the Tribunal, he concurred with the Judicial Member and held that the loan taken by the assessee from the bank was not on key loan account, and that no verification was made by the bank officials of the stock disclosed by the assessee, that there was no material to show that the assessee had undisclosed income, that the assessee had in fact, admitted to gross profits in that year which was 31/2 times higher than the gross profits from the earlier years which would lead to the reasonable inference that the assessee was not making any attempt to deflate the profits. THE Judicial Member as also the Vice-President of the Tribunal held that the facts of the present case were distinguishable from those considered by the High Court in the case of Coimbatore Spinning and Weaving Co. Ltd. v. CIT .

(3.) THE question referred to us is, therefore, answered in favour of the assessee and against the Revenue. THEre will be no order as to costs.