Ajay Food Products Vs ITO (Jammu & Kashmir High Court)
The Jammu & Kashmir High Court dismissed the appeal challenging an addition made by the Income Tax Department based on discrepancies between stock statements submitted to a bank and the stock recorded in the books of accounts. The assessee, engaged in manufacturing soya nuggets, had furnished inflated stock figures to the bank to obtain a higher cash credit facility, claiming the figures were only estimates and not reflective of actual stock. However, the Assessing Officer found substantial differences in both quantity and value between the stock shown to the bank and the books of account, leading to an addition of ₹7,77,218, later reduced to ₹7,00,000 by the CIT(A). The Tribunal upheld the addition. The High Court held that since the assessee had certified the bank statement as true and consistent with its books, the Assessing Officer was justified in relying on it. The Court also termed the practice of inflating stock to obtain higher credit as “commercial immorality” and upheld the addition.
Facts of the Case
The assessee, a partnership firm manufacturing soya nuggets, had a cash credit facility from the State Bank of India against hypothecation of stock.
On 25.09.2000, the assessee submitted a stock statement to the bank showing substantially higher stock than what was recorded in the books.
