- (1.) This is an appeal by an assessee against a judgment and order of the High Court at Bombay delivered on a reference made by the Income-tax Appellate Tribunal. The Bombay High Court refused leave to appeal but the assessee obtained special leave from this Court.
(2.) The appellant deals in silver and shares and a substantial part of his holding is kept in silver bullion and shares. His business is rule and owned by himself. His accounts are maintained according to the mercantile system. It is admitted that under this system stocks can be valued in one of two ways and provided there is no variation in the method from year to year without the sanction of the Income-tax authorities an assessee can choose whichever method he wishes. In this case, the method employed was the cost price method, that is to say, the cost price of the stock was entered at the beginning of the year and not its market value and similarly the cost price was again entered at the close of the year of any stock which was not disposed of during the year. The entries on the one side of the accounts at the beginning of the year thus balance those on the other in respect of these items with the result that so for as they are concerned the books show neither a profit nor a loss on them. This was the method regularly employed and it is admitted on all hands that this was permissible under this system of accounting.
(3.) The accounting year with which we are concerned is the calendar year 1942. The silver bars and shares lying with the appellant at the beginning of the year were valued at cost price.;