1986 (8) TMI 446 - AT - Income Tax

Summary

Issues:
1. Whether the assessee's claim of trading loss of Rs. 1,06,004.70 due to sinking of a ship should be allowed.
2. Whether rectification under section 154 of the Income-tax Act is permissible in this case.

Analysis:

Issue 1:
The appeal was filed by the assessee against the order of the Commissioner (Appeals) for the assessment year 1978-79, challenging the disallowance of trading loss of Rs. 1,06,004.70 incurred due to the sinking of a ship carrying goods. The assessee initially did not claim this amount as a business or trading loss in the return but later sought rectification under section 154, which was rejected by the ITO. The Tribunal also refused to entertain the additional ground raised by the assessee regarding the trading loss. The department contended that since the Tribunal had rejected the additional ground, rectification under section 154 was not permissible. However, the Tribunal held that the loss of stock-in-trade is a trading loss and is an allowable deduction as per relevant case laws and the Income-tax Act. The Tribunal directed the ITO to look into the assessee's claim of trading loss and allow it, stating that there was a mistake of law apparent from the record.

Issue 2:
The Commissioner (Appeals) dismissed the appeal observing that the assessee did not treat the value of lost goods as a permanent loss during the accounting year and had not written it off as a loss in their accounts. The Commissioner opined that determining whether the loss was incurred required detailed investigation, and rectification under section 154 was not justified. However, the Tribunal disagreed, citing relevant case laws and circulars emphasizing the duty of the assessing officer to assist the taxpayer in claiming entitled reliefs. The Tribunal noted that the sinking of the ship and the loss to the assessee were supported by correspondence with the insurance company before the end of the accounting year. Therefore, the Tribunal allowed the appeal, directing the ITO to rectify the mistake and allow the trading loss claimed by the assessee.

In conclusion, the Tribunal allowed the appeal, directing the ITO to rectify the mistake and allow the trading loss claimed by the assessee due to the sinking of the ship carrying goods. The Tribunal emphasized the duty of the assessing officer to assist taxpayers in claiming entitled reliefs and held that there was a mistake of law apparent from the record, justifying rectification under section 154 of the Income-tax Act.