TULZAPURAKAR, J. - (1.)THIS is a reference under S. 66(1) of the Indian IT Act, 1922, at the instance of the assessee in which the following question has been referred to us for our determination :
"Whether, on the facts and in the circumstances of the case, the IT authorities were justified in making an addition of Rs. 11,174 on account of under valuation of the closing stock for the asst. yr. 1959 60 ?"

(2.)THE question relates to the asst. year 1959 60, the corresponding year being S. Y. 2014. The assessee is an individual doing business in hardware. He started the business in S. Y. 2011, and he was assessed for the asst. yrs. 1956 57, 1957 58 and 1958 59 in respect of the income from his said business. The assessment for the year 1959 60 was completed on 29th of July, 1961, on a sum of Rs. 26,554. It appears that in the course of the assessment proceedings for the asst. yr. 1960 61, the ITO found that the assessee had valued his stock neither at the cost nor at the market price, nor at "cost or market price whichever was lower". For that assessment year an addition of a sum of Rs. 28,239 was made to the closing stock and an addition of Rs. 10,485 to the opening stock to that the net addition made for that year was of Rs. 17,754. Obviously, the opening stock for the asst. year 1960 61 was necessarily the closing stock for the asst. year 1959 60, which in the original assessment was taken at the figure of Rs. 52,920.Since the ITO took the view that the said closing stock for the asst. year 1959 60 had been under valued, income had escaped assessment and, therefore, he issued a notice under S. 34(1)(b) and reopened the assessment and added Rs. 11,174 by way of adjustment of under valuation of the closing stock. It may be stated that in pursuance of the notice issued under S. 34 the assessee himself had submitted a return showing this addition and the ITO actually made assessment on the basis of that return.
The assessee appealed to the AAC and contended that the ITO should have made a corresponding adjustment on account of under valuation of the opening stock for the accounting year S. Y. 2014, relevant to the asst. year 1959 60, when he made the adjustment for under valuation in the closing stock for the said year. The AAC rejected the contention mainly in view of the fact that the assessee himself had disclosed in his revised return the amount of under valuation which, at no stage, was disputed before the ITO. The assessee carried the matter to the Tribunal and it was contended that while adjusting the under valuation of the closing stock in S. Y. 2014, relevant to the asst. year 1959 60, the IT authorities should have gone a step further and re valued the opening stock as well. The Tribunal, however, rejected the contention of the assessee on two grounds. It first took the view that in tracing the under valuation to its original source there would be a difficculty of the bar of limitation prescribed by S. 34 and, secondly, it held that in the revised return, which was filed by the assessee before the ITO pursuant to the notice under S. 34 of the Act, the assessee had merely revalued the closing stock and he himself had filed such a revised return which had been accepted by the taxing authorities. In other words, the Tribunal held that the assessee could be said to have accepted the arrangement by revaluing the closing stock of the asst. year 1959 60 as fair and reasonable and, therefore, there was no reason to interface with the arrangement that had been accepted by the assessee himself. At the instance of the assessee the question set out at the commencement of this judgment has, therefore, been referred to us for our opinion.

(3.)MR . Patil for the assessee has contended before us that since the closing stock for the asst. yr. 1959 60 had been revalued by the ITO in the reassessment proceedings under S. 34 for the same year even the opening stock should have been revalued in order to arrive at a correct figure of profits made by the assessee during the said assessment year and in the absence of making necessary adjustment in the under valuation of the opening stock in the revised return that was filed by the assessee, just or proper gross profits and net profits for the said year could not have been arrived at and, therefore, the assessee's claim in this behalf should have been accepted by the taxing authorities as well as by the Tribunal. In support of his contention he relied upon a decision of the Privy Council in the case of CIT vs. Ahmedabad New Cotton Mills Co. Ltd. AIR 1930 PC 56, and pointed out that the bar of limitation, which was regarded by the Tribunal as an insuperable difficulty, did not arise at all in the instant case inasmuch as the reassessment that was made by the ITO was for the asst. year 1959 60,and it was in respect of the opening stock of that very assessment year that an adjustment on account of under valuation of the opening stock was sought by the assessee. It is not possible to accept this contention of Mr. Patil for the reasons we shall presently indicate.