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In CIT v. Punjab Rice & General Mills (2004) 137TAX314 the assessing officer made certain addition to the income on account of difference of stock as per bank statement furnished to the bank and as per stock ledger maintained by the assessee. The assessing officer did not pointed out any shortcomings in the stock ledger except for such discrepancy. The P & H High Court deleted the addition by stating that so called discrepancy could not be the sole basis for making addition in the declared income.

It is important to make note that the Supreme Court in SLP (Civil) No. 9244 of 1993 (1993) 204ITR (St.) 45 approved the Gauhati High Court decision to the fact that the assessee is liable to be assessed at higher income having made overvaluation of the stocks as per books maintained for the purpose of securing larger credit from the bank. In Commissioner of Income-tax Vs. Prem Singh & Co. (1987) 163ITR434 the Delhi Tribunal deleted the addition on the ground that there was the practice of filing inflated lists for getting a loan. The High Court held in favour of the assessee for the reason that the stock indicated by the assessee’s account books were accepted by the Tribunal.

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