The Commissioner of Income Tax vs Patel Proteins (P) Ltd.

Mr. K.S. Jhaveri, J.(Oral) - By way of Tax Appeal No.278/2008, the Appellant - Department has challenged the judgment and order dated 18.05.2007 of the Income Tax Appellate Tribunal, Rajkot Bench in ITA No.203/Rjt/2006 for A.Y. 2002-2003 and vide Tax Appeal No.711/2009, the Appellant - Department has challenged the judgment and order dated 04.06.2008 of the Income Tax Appellate Tribunal, Rajkot Bench in ITA No.191/Rjt./2007 for A.Y. 2003-2004.

While admitting Tax Appeal No.278/2008 on 22.04.2008, the following substantial questions of law were framed by the Court for consideration :-

"A. Whether on the facts and circumstances of the case the Appellate Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility?

B. Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT (A) in deletion of the addition of Rs.1,27,015/- on account of estimated GP on unaccounted sales."

While admitting Tax Appeal No.711/2009, the following substantial question of law was framed by the Court for consideration :-

"A. Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) deleting the addition of Rs.1,22,99,706 on account of difference between stock as per books of accounts and stock statement furnished to bank?"

Learned Counsel for the appellant has drawn the attention of this Court to the decision in the case of Commissioner of Income Tax Rajkot v. Patel Proteins Pvt. Ltd. in Tax Appeal No.1371/2008 dated 12.12.2014 (who is also the same assessee in this Tax Appeal) and relevant paragraph of the said decision reads as under :-

"7. Having heard learned advocates appearing on behalf of the parties and the question posed for consideration before us reproduced herein above and considering the decisions of this Court, the question which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving further elaborate reasons for the same as in the case of Riddhi Steel and Tubes (Supra) it is held by this Court that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. Accordingly, the question is answered in the affirmative i.e. against the appellant revenue and in favour of the assessee. We hold that the Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account for availing higher credit facility."

Considering the ratio laid down in the above decision and in the facts of the present case, we are of the view that the issues raised in the above Tax Appeals need to be answered in favour of the assessee and against the Department.