Ajay Food Products Vs ITO and Others (Jammu & Kashmir High Court)
The Jammu & Kashmir High Court considered an appeal filed by a partnership concern engaged in the manufacture of soya nuggets from soya beans. The firm had availed a cash credit facility from the State Bank of India by hypothecating stock consisting of raw materials and finished goods and by providing collateral security including factory land, building, and machinery.
On 25.09.2000, the appellant submitted a stock statement to the bank on an estimated basis for the purpose of obtaining a higher cash credit facility. In that statement, the appellant declared inflated stock figures on the assumption that the bank would not verify the stock or its valuation, particularly because immovable property and machinery had been provided as collateral security. The bank accepted the statement as submitted.
During income tax assessment proceedings, the Assessing Officer examined the books of account and called for the hypothecation statements filed with the bank. According to the books of account as on 25.09.2000, the stock position recorded was 20,666 kilograms of Soya DOC valued at ₹3,51,322 and 2,573 kilograms of Soya Nuggets valued at ₹51,460. However, in the stock statement submitted to the bank on the same date, the quantities and values were significantly higher. The appellant declared 60,000 kilograms of DOC valued at ₹10,20,000 and 8,000 kilograms of Soya Nuggets valued at ₹1,60,000.
