Caselaw in relation to stock difference

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CA Namrata Shetty (Querist)
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19 December 2009 There is a difference in closing stock as shown in the books and as per the statement issued by the bank.Eg.Stock statement as per bank is Rs. 10 lakhs and as per books of accounts Rs. 6 lakhs. Can the A.O. during assessment add back the difference of Rs. 4lakh?I require caselaw in relation to the same (whether favourable or unfavourable)

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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19 December 2009 If day-to-day quantitywise stock have been maintained then no question can be raised on reliability of books of account by the AO.

There are certain case laws also.

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 December 2009 Value declared to bank for overdraft purposes cannot be relied upon, for making additions - The figures furnished to the bank for purposes of obtaining an overdraft are not concerned with the actual stock valuation for determining the trade results for purposes of ascertaining the profits and gains derived from business. Where an assessee was consistently valuing the opening and closing stocks by making suitable deductions towards the declining demand in the market and the method was accepted by the ITO as patently correct, the ITO could not make any addition towards undervaluation of stock on the ground that in an overdraft application the assessee had declared higher value to the bank - India Motor Parts & Accessories (P.) Ltd. v. CIT [1966] 60 ITR 531 (Mad.).

CA Namrata Shetty

CA Namrata Shetty (Querist)
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21 December 2009 Thank you.

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