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TMI Blog2009 (2) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Bhan, Advocate for the applicant. Ms. Urvashi Dhugga, Advocate for the respondent. JUDGMENT The judgment of the court was delivered by J.S.KHEHAR, J. - The applicant-assessee i.e. M/s New Diwan Oil Mills, Chandigarh filed its return of income on 27.7.1983 disclosing an income of Rs.1,48,800/-. This return was accepted by the revenue on 20.1.1984. The revenue conducts a survey under Section 133-A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The aforesaid survey was conducted on the business premises of the applicant-assessee. During the course of the aforesaid survey, discrepancies of stocks were found. In order to get over the aforesaid discrepancies, the applicant-assessee accepted to disclose the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, for the assessment year 1978-79, till the assessment year 1983-84, the said position remained unchanged. 4. It is not a matter of dispute that the applicant-assessee was carrying on the business of running a solvent plant at Chandigarh. It is not a matter of dispute that the stock in question was stored in the godown of the PSWC. It is also not a matter of dispute that the goods/stock belonging to the applicant-assessee were destroyed on account of a fire while they were stored in the godowns of the PSWC on 26.3.1978. It is therefore, the case of the respondent-revenue that the instant loss had taken place during the financial year 1977-78 (assessment year 1978-79), and as such, in terms of the mandate of Section 71 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the respondent-revenue namely, Commissioner of Income-Tax, Lucknow v. Indian Turpentine Rosin Co. Ltd. (1980) 124 ITR 830. In the case relied upon by the learned counsel for the respondent-revenue, in the previous year relevant to the assessment year 1966-67, the respondent-assessee despatched certain goods to Madras. Necessary entries were recorded in the books of account, wherein, the goods were debited in the purchaser's account and the sale proceeds were credited in the account of the respondent-assessee. The purchaser of the goods did not accept the goods. Thereafter, on the instructions of the respondent-assessee, the goods were sold. The assessee received the sale proceeds in the same assessment year, namely, 1966-67. Inste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d arisen. Since the liability under reference is stated to have accrued during the years 1965-66 to 1967-68, the Assessing Officer rejected the claim of the respondentassessee for a deduction in the assessment year 1971-72. On a reference of the aforesaid issue to this Court, it was held that income chargeable under the head "Profits and gain of business or profession" or "Income from other sources" would have to be computed according to the method of accounting employed by the respondent-assessee. Since the respondent-assessee had admittedly adopted the mercantile system of accounting, it was held that the respondent-assessee could not claim deduction during the assessment year 1971-72. 7. Having considered the judgments relied upon by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant-assessee consistently has been showing these goods in the inventory of the closing stock, stating therein, that these goods were lying with the PSWC. According to the learned counsel for the applicant-assessee, the aforesaid reflection was valid, bonafide and genuine because of the fact that applicant-assessee had never accepted that any loss had been incurred by the applicant-assessee in spite of fire on 26.3.1978 where his stock/goods were destroyed. The reason for the applicant-assessee to entertain the aforesaid belief was, because the responsibility/liability of the destruction of the stock/goods in the fire which took place in the godowns of the PSWC on 26.3.1978, was that of the PSWC itself, as the PSWC was the custodian o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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