G.S. Singhvi, J.
1. In this appeal under section 260A of the Income-tax Act, 1961 (for short, 'the Act'), the Revenue has sought determination of the following questions of law :
'1. Whether the learned Tribunal was correct in upholding the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 8,95,630, which was made on account of difference of 4,975.77 quintals of stock of rice and paddy as per bank statement furnished to the bank and as per stock register maintained by the assessee, which accepting the explanation of the asses-see and ignoring the deposition of bank official who explained the system of pledge and hypothecation of stock and while ignoring the discrepancies found by the Assessing Officer ?
2. Whether the learned Income-tax Appellate Tribunal was justified in dismissing the appeal filed by the Revenue without considering the facts of the case especially when it was an admitted fact that there existed difference in stock as per bank statement furnished to the bank and the stock register maintained by the assessee ?'
2. The respondent-assessee is running a rice mill. It filed a return on October 30, 1989, for the assessment year 1989-90 declaring the assessable income at Rs. 47,450. The Assessing Officer framed the assessment under section 143(3) of the Act by making an addition of Rs. 8,95,639 on account of difference in the value of paddy shown in the bank statement and books of account. On appeal, the Commissioner of Income-tax (Appeals), Jalandhar, (for short, 'the CIT(A)') deleted the additions.
3. The Revenue challenged the appellate order before the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, 'the Tribunal'), in I.T.A. No. 538/ASR of 1992. After hearing the representatives of the Department and the assessee and examining the record, the Tribunal confirmed the order passed by the Commissioner of Income-tax (Appeals).
4. Dr. N. L. Sharda argued that the Commissioner of Income-tax (Appeals) committed a serious illegality by deleting the additions made by the Assessing Officer despite the fact that the entries contained in the bank statement and the books of account regarding the value of the paddy were at a variance and the explanation given by the assessee was wholly unsatisfactory. He relied on order dated January 22, 2003, passed by this court in C.W.P. No. 1055 of 1985 (Devgon Rice and General Mills v. CIT ) and the order dated September 6, 1993, passed by the Supreme Court in S.L.P. (Civil) No. 9244 of 1993 (see [1993] 204 ITR 45), and submitted that the questions framed by the Revenue require determination by this court.
5. We have thoughtfully considered the submissions of learned counsel. In our opinion, the questions of which determination has been sought by the Revenue cannot be treated as substantial questions of law within the meaning of section 260A of the Act. The finding recorded by the Commissioner of Income-tax (Appeals) which was confirmed by the Tribunal was that there was no significant discrepancy in the stock maintained by the assessee and the bank statement does not suffer from any patent legal infirmity because the assessee had furnished satisfactory explanation. The Commissioner of Income-tax (Appeals) discussed this aspect of the matter in detail and accepted the plea of the assessee by recording the following observations :
'As the appellant-firm had furnished certain figures of the stocks available to the bank and these figures differ from the stock register, it is for the appellant-firm to prove which one is correct. The appellant-firm had referred to certain facts to show that the figures as per the stock register are correct. The statements given to the bank regarding the goods hypothecated to the bank are of interest only to the bank and the concerned clients, whereas the position of the stock as reflected in the stock register is relevant to many other authorities. These are checked and verified by some Government agencies like civil supplies department, sales tax authorities, etc. As mentioned in the assessment order the Assessing Officer did examine the books of account and no discrepancy was noticed. The only discrepancy pointed out is that stocks mentioned in the bank statement differ from the stock available as per stock register. Now the issue is whether the stock statements given to the bank are more reliable than the books of account which have been test checked by the Assessing Officer and have relied upon otherwise.
Counsel of the appellant-firm has given reasons for not relying upon the stock statements as given to the bank. The same statements had been given over a long period of time which is not possible. There is no bifurcation of rice and paddy and the entire stocks have been valued on a constant rate which again casts a doubt on the accuracy of these statements. Another important feature in this case is that as far as the value of stock is concerned this is more as per stock register. The position of stocks as per stock register as given to the bank does not appear to be correct, here the entire stock has been valued at Rs. 180 per quintal irrespective of the fact whether it is of paddy or rice. A reference to the closing stock at the end of the year shows the value of such rice varied from Rs. 335 to Rs. 400 per quintal. Even otherwise when the value of the closing stock has been shown at Rs. 20,67,119 as on March 31, 1989, the stock as on March 27, 1989, should have also been valued by applying the same rate. Accordingly, it is obvious that there is no over statement as far as the value of the stock is concerned even in the bank statement. The only discrepancy which remains is of quantity. Here again the appellant has given an explanation for treating the goods sent on consignment weighing 2,180 quintals as part of the closing stock. A detailed chart has been filed showing that goods have been sent on consignment and sale proceeds had not been received in respect of these goods. Thus, after excluding this consignment 2,180 quintals the remaining discrepancy even as per calculation of the Assessing Officer would be 2,795 quintals. For this the appellant has given a reasonable explanation that since the stock was being shown only of paddy in the bank statement and were being valued at a lower rate the quantity might have been inflated. Thus, the appellant-firm has been able to furnish a reasonable explanation regarding the difference in quantity in the bank statement furnished to the bank, in such circumstances when it is clear that statements had been furnished to the bank in an ad hoc manner much reliance should not be placed on these statements. Regarding the reliability of the books of account the Supreme Court had an occasion to consider this issue in the case of Indore Malwa United Mills Ltd. v. State of Madhya Pradesh : [1966]60ITR41(SC) . The Supreme Court held that it was the duty of the authority to come to one definite conclusion or the other in regard to the reliability of these accounts. It was not open for them to choose some of the registers and ignore others. Thus, the principle is clear. The Department cannot merely rely on the bank statements for stock purposes and on the books of account for all other purposes. The Delhi High Court has also made some pronouncements in the case of Prem Singh and Co. : [1987]163ITR434(Delhi) . In view of this discussion I am of the view that without pointing out any discrepancy in the books of account including stock register maintained by the appellant-firm the Assessing Officer was not justified in placing reliance on the bank statement especially in view of the explanation given by the appellant.'
6. The Tribunal relied on the order passed by it in I.T.A. No. 227 ASR of 1994 (ITO v. Devi Dayal Rice Mills, decided on November 12, 2001), and the judgments of the Delhi High Court in CIT v. Prem Singh and Co. : [1987]163ITR434(Delhi) of the Allahabad High Court in CIT v. Vighyan Chemicals Industries : [1993]200ITR137(All) CIT v. Gopal Rice Mills : [1995]211ITR492(All) and of the Madras High Court in CIT v. N. Swamy : [2000]241ITR363(Mad) and upheld the order of the Commissioner of Income-tax (Appeals).
7. We approve the reasons recorded by the Commissioner of Income-tax (Appeals) and also agree with the Tribunal that he did not commit any illegality by deleting the additions made by the Assessing Officer.
8. The decision of the Supreme Court on which reliance has been placed by Dr. Sharda is clearly distinguishable. In that case, the Gauhati High Court had, on a consideration of the material before it, came to the conclusion that the assessee had made over valuation of the stock for the purpose of securing larger credit from the bank and held that it was liable to be assessed at a higher income. This view was approved by the Supreme Court while dismissing the S.L.P. filed by the assessee. Likewise, in the case of Devgon Rice and General Mills v. CIT one of us (G.S. Singhvi J.) held that there was a discrepancy in the stock maintained by the assessee and it had over-valued the stock for the purpose of securing higher credit from the bank. In the present case, no material was produced by the Department to show that the assessee had deliberately over-valued the stock for the purpose of securing higher credit from the bank. Therefore, the so-called discrepancy in the bank statement and the account books could not be made the basis for making additions in the declared income of the assessee.
9. In view of the above conclusion, we hold that no substantial question of law arises in this appeal and the same is liable to be dismissed summarily.Ordered accordingly.