COMMISSIONER OF INCOME-TAX Vs. BAIJ NATH

JUDGEMENT

(1.) THIS is a petition under Section 256 (2) of the I. T. Act, 1961.

(2.) BRIEFLY, the facts are that the assessee carries on a business in woollen shawls. His case relates to the assessment year 1970-71. During the course of assessment proceedings, it came to the notice of the Income-tax Officer (ITO) that the assessee was enjoying overdraft facility from the Hindustan Commercial Bank Ltd. , Majith Mandi, Amritsar (hereinafter referred to as "the Bank)". The maximum overdraft during the previous year was Rs. 2,56,831 as on October 20, 1969. The overdraft facility was enjoyed by him against the hypothecation of goods only and he had not furnished any other security to the bank. On inquiries made by the ITO, the bank informed him that as per statement of stock furnished by the assessee, the stock hypothecated with the bank as on September 27, 1969, amounted to Rs. 3,04,400. The position of the stock remained the same till October 20, 1969, when the maximum overdraft of Rs. 2,56,831 was obtained by the assessee. He was asked by the ITO to explain the position of availability of stock as on October 20, 1969. In reply, the assessee made a statement that he did not maintain copies of the statement of goods hypothecated with the bank. He, however, worked out his stock position in his own way which came to Rs. 2,97,295. In that, an amount of Rs. 43,457 was shown as the value of goods rejected by the customers and received by the assessee. However, he did not furnish the names of the parties from whom goods had been received back. The ITO observed that there was no authentic basis for the assessee's contention regarding stock position and, consequently, estimated the total value of stock at Rs. 1,40,000 as on October 20, 1969, and, therefore, made an addition of Rs. 1,64,400 as the value of unexplained stock hypothecated with the bank.

(3.) THE assessee went up in appeal before the Appellate Assistant Commissioner (AAC) who held that the valuation shown to the bank was not exact and that the ITO was justified in holding the value of stock of hypothecated goods at Rs. 3,04,400 as on October 20, 1969. He, however, after recording fresh evidence at the instance of the assessee, calculated the value of the assessee's unexplained stock roughly at Rs. 64,400 and, consequently, sustained the addition of the said amount only on this account as against the addition of Rs. 1,64,400 made by the ITO.