Devi Prasad Singh, J. - (1.) CONTROVERSY relates to assessment year 1989 -90. The Assessee company entered into an agreement with Madhya Pradesh Government to print and supply lottery tickets. It was found by the Director of lotteries M.P. Government that the assessee company had breached the terms of the agreement by printing and supplying defective lottery tickets without obtaining any release order to the Sole Selling Agents. In consequences thereof, a show cause notice dated 24.1.1987 was issued to the Assessee for the breach of agreement and consequently forfeiture of Rs. 11,73,350/ -. In response to notice, the assessee company submitted its reply dated 12.3.1987. The reply submitted by the assessee was considered and rejected by the Director Lotteries vide order dated 6.10.1988. Originally by order dated 9.9.1987 the bank guarantee was forfeited and ex parte decision was taken to recover the amount. In consequences thereof, the decision was communicated vide letter dated 24.1.1987. It shall be appropriate to reproduce the operative portion of letter/notice dated 24.1.1987 as under: ...You may therefore, show cause as to why this loss of Rs. 11,73,350/ - be recovered from you by way of forfeiting your pending bills of Rs. 2,80,875 -00/ -, bank Guarantee of Rs. 1 lacs and security of Rs. 5 0,000/ -. Further as to why the balance amount of Rs. 8,02,475/ - be not recovered as arrears of land revenue. If your reply is not received in this office by 15th Feb. 1987 ex parte decision will be taken.
(2.) THOUGH the notice dated 24.1.1987 relates to assessment year 1987 but keeping in view the order dated 1.10.1988 passed by the Madhya Pradesh Government rejecting the petitioner's contention the Assessee claimed deduction in the assessment year 1989 -90. The assessing authority held that liability crystallized on 24.1.1987. Therefore, claim was tenable only in the assessment year 1988 -89. The claim of the Assessee with regard to trading loss for the assessment year 1989 -90 was not allowed. The order of assessing officer was confirmed by CIT (Appeal). On appeal, the appellate tribunal deleted the addition and held that the liability is allowable in the year 1989 -90. On the basis of material on record the tribunal observed that the assessing officer himself taken the accounting period from 15.4.1987 to 31.3.1989. The accounting period for the assessment year 1988 -89 ended on 15.4.1987. Since, the Director of Small Savings and State Lotteries Bhopal had passed the decisive order against the Assessee on 9.8.1987 i.e. after 15.4.1987, the liability did not crystallized before 24.1.1987. Accordingly, the Tribunal directed deletion of 11,73,350/ -, hence the present appeal.
(3.) ON 22.2.2008 following substantial question of law was framed by this Court: 1. Whether the Hon'ble Appellate Tribunal erred in law in holding that the liability was allowable in Assessment Yer 1988 -90 when the order of the Director, Lotteres, Madhya Pradesh Government had been passed on 24.1.1987 and the claim was only maintainable in relation to Assessment year 1988 -99. 2. Whether the Appellate Tribunal was justified in law holding that the loss was relatable to A. Y. 1989 -90 even when the loss occurred in A. Y. 1988 - 89, and in doing so, ignoring the well settled principle that the claim of loss is relatable only in the year (in this case A. Y. 1988 -89) where stock is lost or its value diminished.;