Sarkaria, J. - (1.) This appeal directed against the judgment, dated 24-6-l970 of the High Court of Gujarat raises a question in regard to the interpretation of Section 35 of the Indian Income Tax Act, 1922 (for short, called the Act).
(2.) The assessee is a Limited Company which manufactures textiles in its Mill. For the assessment year 1959-60, the assessee showed in its books the value of its closing stock at Rs. 5,89,439/-. The Income-tax Officer in the course of the assessment, detected that there was some discrepancy between the value of the stock of cotton shown in the books of the assessee and the records of the State Bank of India' with which it had hypothecated that stock. The assessee tried to explain away this discrepancy by saying that it had given an incorrect figure of its stock to the Bank with a view to obtain higher amount of over-draft. The Income-tax Officer rejected this explanation and added Rs. 2,14,682/- to the value of the stock so that according to his assessment, the closing stock for the assessment year 1959-60 worked out to Rs. 8,04,121/-. Having failed in first appea1 before the Appellate Assistant Commissioner, the assessee preferred a second appeal to the Tribunal.
(3.) Pending the appea1 before the Tribunal, the Income-tax Officer took up the assessment of its income for the next assessment year, i.e., 1960-61. The assessee contended that the opening stock for the assessment year 1960-1961 should be taken as Rs. 8.04.121/-. The Income-tax Officer rejected this contention and took up the opening stock for that assessment year at Rs. 5,89,439/- without making the addition of Rs. 2,14,682/-. Against this order of the Income-tax Officer, the assessee went in appea1 before the Appellate Assistant Commissioner who, on 30-6-1965, accepted the same despite opposition from the Income-tax Officer who had personally appeared there to defend his order and held that the opening stock for the assessment year, 1960-1961 be taken at Rs. 8,04,121/-. Neither party appealed against this order before the Tribunal.;