1974 (8) TMI 18 - HC - Income Tax

Summary

Issues: Determination of income tax addition due to under-valuation of closing stock for assessment year 1959-60.

Analysis:
The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the addition of Rs. 11,174 on account of under-valuation of the closing stock for the assessment year 1959-60. The assessee, engaged in hardware business, had his assessment reopened by the Income-tax Officer under section 34(1)(b) due to undervaluation of closing stock. The assessee contended that the opening stock should also be revalued to determine accurate profits. The Appellate Assistant Commissioner and Tribunal rejected this contention, citing the acceptance of the revised return by the assessee, which only revalued the closing stock. The Tribunal highlighted the limitation issue and the acceptance of the arrangement by the assessee. The assessee relied on the Privy Council's decision in Commissioner of Income-tax v. Ahmedabad New Cotton Mills Co. Ltd. to support the argument that both opening and closing stocks should be revalued when undervalued. However, the court held that the taxing authorities were justified in making the addition due to the assessee's failure to provide necessary material for revaluing the opening stock. The court emphasized that the assessee's conduct and acceptance of the revised return precluded the late contention for revaluation of opening stock. The judgment ultimately favored the taxing authorities, upholding the addition of Rs. 11,174 on account of under-valuation of the closing stock for the assessment year 1959-60.

In conclusion, the judgment addressed the issue of under-valuation of closing stock for the assessment year 1959-60 and the subsequent addition to income tax. It analyzed the assessee's contention for revaluing the opening stock alongside the closing stock to determine accurate profits. The court emphasized the importance of the assessee's conduct in accepting the revised return and not providing necessary material for revaluation of the opening stock. The judgment aligned with the taxing authorities, upholding the addition on account of under-valuation of the closing stock.