Law:

Section:

Section 256, read with section 68, of the Income-tax Act, 1961 - Reference - Question of fact - Assessee-firm obtained overdraft facilities from bank against hypothecation of certain stock of raw materials as well as products - ITO found discrepancy in certificate of bank showing stock hypothecated and stock shown by assessee in account books - Assessee submitted in its explanation that head office had transferred certain stock to branch office which was sold by branch office till date of hypothecation but statement of account was not sent by branch office to head office immediately and hence head office hypothecated said stocks to bank - Bank also corroborated in a letter that stock was merely hypothecated to it but remained in control of assessee and system was based on credibility of borrower - ITO held that assessee kept stock outside books and assessed income from undisclosed sources - Whether decision of Tribunal deleting aforesaid addition made by ITO, was based on findings of fact and no question of law arose - Held, yes Facts The head office of the assessee-firm had obtained overdraft from a bank against hypothecation of certain stocks of raw materials as well as its products. The ITO found some discrepancy in the stock certificate of the bank showing the stock hypothecated and the stock shown in the books of account by the assessee. The assessee submitted explanation to the ITO that its head office had transferred the stock to its branch office, which was sold by the branch office till the date of hypothecation, but the statement of account was not sent by the branch office to the head office and, therefore, the latter remained under the impression that the stock transferred to branch office remained intact and, therefore, the head office hypothecated the same to the bank In respect of certain other raw materials the assessee claimed that the raw materials had been damaged and hence shown at nil value in its books, but it was hypothecated to the bank for availing the overdraft facility. The bank manager corroborated in a letter that the stock was merely hypothecated with the bank and it remained in the possession and control of the assessee and the…

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