Puranchand Patel vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

By this application u/s 256(2) of the income tax Act, 1961 (hereinafter referred to as "the Act"), the assessee has prayed that the Tribunal be directed to refer the following questions to this court:

(i) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the claim of loss of stock-in-trade valued at Rs. 81,000 was rightly rejected and the petitioner-firm was not entitled to deduct the loss suffered by it due to seizure by the police and sale thereof by the court?

(ii) Whether, on the facts and circumstances of the case, the Tribunal was justified in upholding the value of stocks of the assessee at Rs. 1,24,600?

The material facts giving rise to this application briefly are as follows: For the assessment year 1975-76, the assessee filed the return disclosing a total income of Rs. 1,54,543. Thereafter, the assessee filed a revised return disclosing the total income at Rs. 73,543. The assessee contended that the decrease in the income as shown in the revised return was on account of the fact that the closing stock of sal seeds originally shown at Rs. 81,000, had been seized by the police and had been sold in auction and hence there was a loss of stock-in-trade. The income tax Officer did not uphold the contention of the assessee and held that since the sal seeds had been sold for Rs. 1,24,600, the closing stock was liable to be valued at that amount. The assessee thereupon preferred an appeal before the Commissioner of income tax (Appeals). The Commissioner held that the question as to whether the assessee was of was not the owner of stolen property was sub judice and, therefore, no loss had so far been sustained by the assessee. In this view of the matter, the appeal preferred by the assessee was dismissed. The assessee then filed further appeal before the Tribunal. The Tribunal held that the assessee could not claim loss of sal seeds as contended by it. The Tribunal further held that there could be no better measure of the market value than the sale price actually realised. In this view of the matter, the Tribunal affirmed the order passed by the Commissioner of income tax (Appeals). Aggrieved by the order passed by the Tribunal, the assessee sought reference, but as the application filed by the assessee in that behalf was rejected, the assessee has filed this application.

Having heard learned counsel for the parties, we have come to the conclusion that so far as the question of value of stock is concerned, that is a pure question of fact. As regards the claim of the assessee for loss of stock-in-trade, the following question of law does arise out of the order passed by the Tribunal:

Whether on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the claim made by the assessee of loss of stock-in-trade?

The application is, therefore, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of this application.