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TMI Blog2007 (4) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing questions of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") for opinion to this court : R. A. No. 644/Alld/1987 "1. Whether, on the facts and in the circumstances of the case and on correct interpretation of the effect of the order dated April 23, 1977, as had been passed under section 132(5), the Tribunal was legally correct in holding that the goods that had been retained there-under, continued to bear the character of stock-in-trade in the hands of the assessee and were therefore liable to be valued, for the purposes of computing the taxable income of the assessee, on the same basis as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts giving rise to the present reference are as follows: 4. The assessee had originally filed a return for the assessment year 1978- 79 showing an income of Rs. 19,921 which was revised by another return of loss of Rs. 4,010. The assessee submitted that the revised return was necessary as certain business assets were seized by the Department and continued to be in possession of the Department and while filing the original return, the assessee treated such seized assets as its own properties and included the same in the closing stock. It was submitted that on reconsideration, the assessee thought that the seized assets no longer formed part of the trading stock and should be excluded by reverse entries in the accounts. According to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond year, that is, the assessment year 1979-80, the Income-tax Officer did not accept similar contentions raised by the assessee in view of the above reasoning. 7. The assessee took up the matter before the Appellate Assistant Commissioner reiterating the same issues and arguments. The assessee stressed the point that it was no longer the owner of those seized materials. The Appellate Assistant Commissioner agreed with the assessee and noted that the Income-tax Officer had completely overlooked the fact that the silver ornaments which were included in the stock inventory stood appropriated against tax liability created by an order under section 132(5), dated April 23, 1977. He observed that the order under section 132(5) was given earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision in the statute and as long as the enquiry is pending, the officer who seized the articles will be in the position of a bailee and once the proceedings are over, that officer will no longer be a bailee and he has the obligation to return the articles to the person from whom it was seized. The decision of the hon'ble Supreme Court in the case of State of Gujarat v. Memon Mahomed Haji Hasam, AIR 1967 SC 1885 and 1889, was also taken into consideration. 9. The Appellate Tribunal also observed that the order under section 132(5) has necessarily to be passed summarily to ascertain tax liability of the person concerned. The Appellate Tribunal also considered the decision of the hon'ble Supreme Court in the case of Pooran Mal v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance-sheet and the profit and loss account as before. If it was stock-in-trade the same position continues till it is sold and its value is adjusted against the pending demand. 14. Thus, the view of the Tribunal that the goods retained under section 132(5) of the Act continues to bear the character of stock-in-trade in the hands of the assessee and was, therefore, liable to be valued for the purposes of computing the taxable income of the assessee on the same basis as was applicable to the other stock-in-trade is perfectly correct and in accordance with law. 15. So far as the question regarding appreciation in the value of seized articles which were stock-in-trade of the assessee we find that the assessee was valuing the stock-in-tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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