The sufficiency or reliability of the explanation offered by the assessee is a question of fact, and the findings thereon, as recorded by the learned Tribunal, cannot be interfered with by the High Court, as it does not give rise to any substantial question of law.

1. These three appeals arise out of the common judgment of the learned Tribunal dated July 14, 2003. The appeals relate to different assessment years, with respect to the same assessee, and have been filed by the Revenue, involving common question, and, therefore, are being decided by this common order.

2. The necessary facts are that assessment was made for different years, under section 143(3)/250 of the Income-tax Act by the Assessing Officer. We need not go into other aspects of the assessment order, and would better like to mention the facts only about the precise question involved in these appeals, on which these appeals have been admitted being :

"Whether, in the facts and circumstances of the case, the additions made in the income of the assessee by the Assessing Officer on account of difference in the stock valuation as per statement given to the bank and as per the books of account were justified ?"

3. The Assessing Officer found that in the balance-sheet the assessee had shown the closing stock of the goods at a particular amount in different assessment years, while the statement submitted by the assessee to the bank for the purpose of obtaining financial assistance, did also come to the notice of the Assessing Officer, wherein a higher valuation of the stock was given, and, therefore, the Assessing Officer, after making certain calculation, added the different amounts, as income of the assessee from undisclosed sources. In so making these additions, the learned Assessing Officer relied upon a judgment of the Madras High Court, in Coimbatore Spinning and Weaving Co. Ltd. v. CIT reported in (1974) 95 ITR 375. The assessee unsuccessfully assailed the order in appeal before the learned Commissioner Income-tax (Appeals), who negated the contention, though partly allowed the appeal, vide order dated July 18, 2002. The matter was further carried in appeal before the Tribunal. The learned Tribunal considered the matter from different aspects, as contended by the rival parties, with respect to each of the assessment year, and also considered the judgment in Coimbatore Spinning and Weaving Co.'s case (1974) 95 ITR 375 (Mad), so also some five judgments cited on the side of the assessee, and recorded a finding as under :

"A perusal of the facts of the case we find that in the case under consideration for all the assessment years the stock was merely hypothecated to the bank and the goods remaining under the possession and control of the assessee which were not physically verified at the time of hypothecation. Such verification is made by the bank only when the goods are pledged with them. Besides, we find that the Assessing Officer had not been able to point out any discrepancy in the quantity of stock hypothecated to the bank and the quantity of stock as per books of account."

4. Thus, in this regard the appeal was allowed.

5. A perusal of the impugned orders of the Assessing Officer, the Appellate Authority, and the Tribunal, does show, that the explanation furnished by the assessee was, that he had shown inflated figure of the valuation of the stock to the bank for availing of better financial assistance, and the other contention raised was about, as to how the price of the stock is to be calculated, by taking into account the cost of manufacture, etc.

6. Before proceeding further, we feel it better to deal with the cases cited on either side, as in our view, the bare discussion thereof would be enough to decide the appeal.

7. On the side of the Revenue, strongest reliance has been placed on the Coimbatore Spinning and Weaving Co.'s case (1974) 95 ITR 375 (Mad) , rather that judgment only has been relied upon, to contend, that when the stocks are inflated in the statement given in the bank for obtaining overdraft, and loan facilities, such a practise is not recognised in commercial circles, or by court, and even if such a practise exists, the Tribunal is not expected to take judicial notice of such substandard morality.