Judgment

SARKARIA, J.: - This appeal directed against the judgment, dated 24-6-l970 of the High Court of Gujarat raises a question in regard to the interpretation of Section 35 of the Indian Income-tax Act, 1922 (for short, called the Act).

2. The assessee is a Limited Company which manufactures textiles in its Mill. For the assessment year 1959-60, the assessee showed in its books the value of its closing stock at Rs. 5,89,439/-. The Income-tax Officer in the course of the assessment, detected that there was some discrepancy between the value of the stock of cotton shown in the books of the assessee and the records of the State Bank of India with which it had hypothecated that stock. The assessee tried to explain away this discrepancy by saying that it had given an incorrect figure of its stock to the Bank with a view to obtain higher amount of over-draft. The Income-tax Officer rejected this explanation and added Rs. 2,14,682/- to the value of the stock so that according to his assessment, the closing stock for the assessment year 1959-60 worked out to Rs. 8,04,121/-. Having failed in first appea1 before the Appellate Assistant Commissioner, the assessee preferred a second appeal