COMMISSIONER OF INCOME TAX Vs. GOPAL RICE MILLS

JUDGEMENT

(1.) The Revenue has made the present application under Section 262(2) of the Income-tax Act, 1961, and sought reference of the following question :

(2.) The present application relates to the assessment year 1978-79. The brief facts of the case are that the assessee is a registered firm and was engaged in the business of running a rice mill. The assessee had an overdraft facility with Bareilly Corporation Bank, Bisalpur, District Pilibhit. The original assessment in this case was completed on March 25, 1986, by making an addition of Rs. 3,78,270 as unexplained investment in 4,203 quintals of paddy as on November 8, 1977. The Appellate Commissioner deleted the addition, and the Revenue went in second appeal to the Income-tax Tribunal. The matter was restored to the assessing authority by the Tribunal to cross-examine one Sri Ram Pal and to go through all other relevant evidence and then come to a finding. The assessing authority, accordingly, recorded statements of Sri Ram Pal and three other persons, who acted as branch managers of the bank during different periods and concluded that the bank officers had visited the rice mill from time to time and had inspected the stock of paddy and rice hypothecated to the bank. The statement of Sri Ram Pal that the stock was inflated in order to avail of higher credit facilities to help the firm was rejected by the assessing authority. The stock of paddy was shown as 4,459 quintals in the statement sent to the bank, which was the actual stock hypothecated. On the other hand, it was found that the stock of paddy recorded in the levy register was only 2,569 quintals and on November 8, 1977, 2,322 quintals of paddy was under lock and key of the bank. Thus, the actual stock of paddy with the assessee on November 8, 1977, was 6,772 quintals, whereas the stock of paddy recorded in the levy register was only 2,569 quintals. Therefore, the difference of 4,203 quintals in the stock accounts of paddy was outside the stock register and the addition of Rs. 3,78,270 was again made.

(3.) The assessee again preferred an appeal. The appellate authority concluded that the inspection made by the officers of the Regional Food Controller was more thorough and constituted better evidence than the inspection, if any, made by the bank officers. Relying on the same, the appellate authority deleted the same to the tune of Rs. 3,78,270. The said addition was also maintained by the Tribunal.