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TMI Blog1956 (4) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer found that this method of valuing the stocks was not proper and accordingly he valued the opening and closing stocks according to the market rates prevailing at the time. The Income-tax Officer added ₹ 2,661 to the profits disclosed by the profit and loss account of the assessee for determining his income from this source. This decision was affirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. In his application under section 66(1) the applicant contended that there was no specific finding that the assessee's income could not be properly deducted from the method of accounting regularly employed by him and the addition, therefore, was not justified in law. The Income-tax Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that this amount of ₹ 6,518 represented the assessee's income. The Income-tax Appellate Tribunal took the view on a request for a reference being made to this Court that no question of law arose and that the material on which the finding was based was amply set out in the order passed. In our opinion, so far as the sum of ₹ 6,518 is concerned, no question of law, in fact, arises. On the facts and in the circumstances of the case it is not possible to say that there was no material on which the Tribunal could uphold the addition of this amount to determine the assessee's total income. The refusal by the Tribunal to refer the question relating to this matter was, therefore, justified. Relating to the other q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem to find the taxable profits for the year in the absence of a correct re-valuation of the opening stocks. This case, in our opinion, is no authority for the proposition that if the assessee chooses to value his stocks both at the commencement of the year and at the close of the year, not at the cost price nor at the market value prevailing at the time when the stocks are taken but at an arbitrary rate, the valuation has to be accepted simply because the Income-tax Officer omitted to make a mention that this was not a proper method of accounting. The next case referred to us is a decision of the Supreme Court in Chainrup Sampatram v. Commissioner of Income-tax, West Bengal [1953] 24 I.T.R. 481. The assessee in this case was a bullion d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions which would help the assessee in this case. The pronouncement does not go to the length of enunciating that the valuation of stocks may be made arbitrarily regardless of well accepted principles of accountancy, namely of valuing them either at cost or at the market price prevailing at the time when the stocks are taken. The third and the last case relied upon by learned counsel is Commissioner of Income-tax and Excess Profits Tax, Madras v. Messrs. Chari and Ram, Madura [1949] 17 I.T.R. 1. In this case the assessee had valued some items of the stock at cost price and some other items at the market price prevailing at the time when the stock was taken. This system of valuing the stock had been uniformly adopted by the assessee and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee can be properly deducted from this method of accounting. In fact, we feel that it is no method of accounting at all. The accounts of a business must represent the correct state of affairs. Goods appearing in the stock must either be valued at the price paid by the assessee on acquiring them or if that be not practicable or the assessee for convenience does not desire to do so, they must be valued at the rate prevailing at the time when the stocks are taken. We are unable to see how by putting an arbitrary value on the stocks the assessee may claim that he is showing in his accounts the correct state of affairs. The value of the stocks would be obviously wrong. The value of the opening and closing stocks are essential factor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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