Law: Income Tax Ordinance, 1979

Section: 13(1)(c)

Income Tax Ordinance (XXXI of 1979)-----S. 13(1)(c) Assessee, a registered firm deriving income from cotton ginning business Addition was made by Assessing Officer on account of discrepancy in the stocks shown by the assessee in the account books and the one declared with the Bank Effect Assessee's explanation that it inflated the stocks declared with the Bank in order to avail the higher amount of advances from it was summarily rejected by the Assessing Officer without considering the other explanations and the aspects of the case Action of Assessing Officer was not justified Duty of Assessing Officer in such like cases highlighted Mere declaration of quantities of stocks to the Bank itself would not prove that assessee did, in fact, suppress the purchases. Coinbatore Spinning and Weaving Mills v. C.I.T. 95 ITR 375; I.T.A. NoA338/LB of 1984 85; I.T.A. No.3534/LB of 1984 85; 1987 PTD 262; 95 ITR 357; 1989 PTD 508 and 1989 PTD 508 distinguished. ORDER INAM ELAHI SHEIKH (ACCOUNTANT MEMBER). This departmental appeal, directed against a registered firm deriving income from cotton ginning business arises out of an order recorded by the learned C.I.T.(A), Multan dated 8 3 89 on the following grounds: (1) Yield of cotton lint declared by the assessee considered low as compared to other cases NTN. 04 02-0804502, 04 01 0800740 and assessee also failed to substantiate the same. Accordingly addition @ 7 chttks 2 tolas per maund was made. The worthy C.I.T. (A) has deleted' the same without any material evidence and logic. (2) In trading account assessee had shown purchases of cotton 6,877,588 kg. Where according the stock report (pledging statement) provided by the bank. Assessee purchased and pledged 7,012,700 kg. of cotton with bank authorities. Even after opportunity A.R. failed to explain the difference. So addition under section 13(1)(c) made with the prior approval of I.A.C. The worthy C.I.T.(A) relying on different cases has deleted the addition with the view that mere declaration of stock to bank does not prove physical existence of such stock. But the fact is that bank verifies the stock physically, does not pay even single penny if it is less than the declared…

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