Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of Accounting - Valuation of Stock - Assessment year 1954-55 - Where there was difference between stock declared to banks and that shown in books of account and assessee submitted that figures declared to banks were inflated in order to get higher land overdraft facilities - Tribunal is not expected to take judicial notice of such a sub-standard morality on part of assessee as to enable them to go back on their own sworn statements given to banks - Held, yes - Whether, therefore, heavy burden lies on assessee to prove that books of account alone give correct picture and not that declared to banks - Held, yes - Whether where after verification, tribunal took view that stock declared to banks represented true stock position and stock position as shown in books of account could not be relied on, that assessee's explanation was not acceptable that there was excess stocks undisclosed in books of account, and that non-disclosure was only with a view to suppress income, said conclusion would be held unescapable - Held, yes - Whether in such a case Tribunal would justified in taking view that excess stocks should represent income of assessee from undisclosed sources - Held, yes FACTS While completing the assessment the ITO found that the consumption of stores was excessive, that some of the items of purchases of stores could not be verified, that some of the purchases had not been entered in the stock book, and that the marginal notes entered in the store receipt books showed that many items of stores had been diverted to the personal use of the managing agents. He also found that the assessee had obtained loan facilities, from the banks and there was considerable discrepancy between the stock as per the assessee's books of account and the stocks declared to the banks. The assessee explained that the figures submitted to the banks were inflated in order to get higher loan facilities and that the stock position as disclosed by its books was to be taken as correct. The ITO was not, however, satisfied with the said explanation. He took it as indicating the extent to which the assessee would stoop to obtain an advantage.…

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