Law:

Section:

Section 143 of the Income-tax Act, 1961 - Assessment - Additions to income - Assessee hypothecated 1,20,000 kgs. of cotton seeds with bank to take loans, whereas on day of hypothecation it had only 2,457 kgs. of cotton seeds in stock - Assessee explained before ITO that since its limit of overdraft on hypothecation of cotton and unginned cotton was exhausted, to obtain further loan facilities, it had hypothecated cotton seeds weighing about 1,20,000 kgs. as embedded in unginned cotton of which it had a sufficient stock - ITO rejected explanation and made addition of Rs. 94,000 being cost of unaccounted stock of 1,17,543 kgs of cotton seeds - Tribunal found that there was no evidence to indicate that advance on unginned cotton was not available to assessee, and opining that assessee took advantage of stock of unginned cotton to explain away discrepancy in stock of cotton seeds confirmed addition made by ITO - Whether Tribunal was justified in confirming addition made by ITO - Held, on facts, no Facts In the assessment proceedings, the ITO having found that on 25-3-1969 the assessee had hypothecated 1,20,000 kgs. of cotton seeds with the bank whereas the assessee's stock register revealed a stock of 2,457 kgs. only, called upon the assessee to explain the discrepancy. The assessee explained that since its limit of overdraft on hypothecation of cotton and unginned cotton was exhausted, it had, in order to obtain further facilities beyond the limit, hypothecated cotton seeds weighing about 1,20,000 kgs. as embedded in the stock of unginned cotton as on 25-3-1969 weighing about 2,70,059 kgs. which would give a yield of cotton seeds to the extent of 68 per cent weighing about 1,80,000 kgs. In support of his claim, the assessee had also produced the certificate from the agent of the bank to show that the limit granted for advances in the cash credit account of the assessee was exhausted. The ITO rejected the explanation of the assessee and made an addition of Rs. 94,000 being the value of unaccounted stock of 1,17,543 kgs. 1,20,000 kgs. minus 2,457 kgs. of cotton seeds. On appeal, the AAC, accepting the explanation of the assessee, deleted the addition. On second…

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