- (1.) THE question referred to this Court for its decision in compliance with an order under Section 66 (2) of the Indian Income-tax Act is- "whether on the facts and in the circumstances of this case, the assessee was entitled to value his closing stock at market rate?"
(2.) THE assessee is a firm mainly carrying on wholesale cloth business. The accounts produced showed a total turn-over of Rs. 12,81,375/ -. The receipts showed a balance of Rs. 9,263/- in favour of the assessee. After deducting certain expenses the assesses, however, worked out a net loss of Rs. 13,915/ -. In preparing the Profit and Loss Account the assessee had valued his closing stock at the market rate at Bs. 1,64,191/ -. The cost price of the said stock was, however, Rs. 2. 27,913/ -. The Income-tax Officer was of the opinion that the assessee should have valued his closing stock at the cost price as he had been doing in previous years and he added back the difference between Rs. 2,27,913/- and Rs. 1,64,191/-, i. e. , Rs. 63,722/ -. The Appellate Assistant commissioner and the Tribunal agreed with the decision of the Income-tax Officer.
(3.) THE assessee had pleaded that his usual method of accounting was that at the end of the year, for the purpose of the preparation of his Profit and Loss Account, he used to value the closing stock either at cost price or at market price, whichever was lower, and that he had followed the same practice in the year in question. He further pleaded that by reason of the textile control restrictions, which came into force in June 1943, there was an appreciable fall in the market price and he could not expect any relaxation of the controls and the rise in prices, so as to recover what he had paid for the stock.;