Upadhya, J. - (1.) THIS is an application under Section 66 (2), Income-tax Act against the refusal by the Income-tax Appellate Tribunal to state a case for the opinion of this Court.
(2.) THE assessee-applicant owns a 'sarrafa' business and deals in gold and silver. His account showed the value of opening and closing stocks at a uniform fixed rate by adopting Rs. 50 per hundred tolas of silver and Rs. 70 for each hundred tolas (sic--each tola?) of gold. THE income-tax Officer found that this method of valuing the stocks was not proper and accordingly he valued the opening and closing stocks according to the market rates prevailing at the time. THE Income-tax Officer added Rs. 2,661 to the profits disclosed by the profit and loss account of the assessee for determining his income from this source. This decision was affirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. In his application under Section 66(1) the applicant contended that there was no specific finding that the assessee's income could not be properly deduced from the method of accounting regularly employed by him and the addition, therefore, was not justified in law. THE Income-tax Appellate Tribunal refused to make a reference on the question proposed relating to this contention. The other item of dispute is an addition of Rs. 6,518 in determining the assessee's total income. This amount was credited in the assessee's accounts in the name of Baijnath Ram Sewak who is the father-in-law of one of the members of the assessee. The Income-tax Officer called for an explanation as to the nature and source of this money and required the assessee to prove that it belonged to the person in whose name it was entered. The depositor is shown as one Lala Baijnath, but he was not produced before the Income-tax Officer. The explanation given was that this amount had been advanced by Lala Baijnath for the purchase of grains, but the Income-tax Officer found that no such purchase was in fact, effected. The Income-tax Officer further found that the assessee had transferred a sum of Rs. 10,000 to the Kalpi grain shop in which he was a partner after receiving this deposit, and the inference that appears to have been drawn is that the assessee required money for remittance to his Kalpi grain shop and introduced this amount in the name of Lala Baijnath. The explanation given did not satisfy the Income-tax Officer and he found that the assessee failed to prove that the amount belonged to Lala Baijnath. In the circumstances the addition was upheld by the Appellate Assistant Commissioner and by the Tribunal, it is contended that there was no material to warrant a finding that this amount of Rs. 6,518 represented the assessee's income. The Income-tax Appellate Tribunal took the view on a request for a reference being made to this Court that no question of law arose and that the material on which the finding was based was amply set out in the order passed. In our opinion, so far as the sum of Rs. 6,518 is concerned, no question of law, in fact, arises. On the facts and in the circumstances of, the case it is not possible to say that there was no material on which the Tribunal could upheld the addition of this amount to determine the assessee's total income. The refusal by the Tribunal to refer the question relating to this matter was, therefore, justified.
(3.) RELATING to the other question of stock valuation and the applicability of the proviso to Section 13, I.T. Act, learned counsel for the applicant contends that though the Income-tax Officer found as a fact that the stocks had not been properly valued, they did not record a finding that the income, profits and gains of the assessee could not be properly deduced for that reason. It is contended that the system followed by the assessee was uniform and if he valued the opening stock by estimating the value of silver at Rs. 50 per hundred tolas and that of gold at Rs. 70 per tola he did the same when valuing the closing stock. This, it is contended, could not affect the profit and in the absence of the finding that such Valuation of the stocks made the accounts unacceptable, the assessment could not be maintained. Learned counsel has cited several authorities. The first case cited is 'Commissioner of Income-tax, Bombay v. Ahmedabad New Cotton Mills Co. Ltd.', AIR 1930 PC 56 (A). In this case the rule that was laid down was that when the opening and closing stocks of a business are both undervalued the real profits of the company of a particular year cannot be ascertained by merely raiding the valuation of the closing stocks without taking into consideration the similar under-valuation of the opening stocks. The Income-tax authorities in that case had re-valued the closing stocks which in their opinion were undervalued. Their Lordships took the view that this could not enable them to find the taxable profits for the year in the absence of a correct re-valuation of the opening stocks. This case, in our opinion, is no authority for the proposition that if the assessee choses to value his stocks both at the commencement of the year and that at the close of the year, not at the cost price nor at the market value prevailing at the time when the stocks are taken but at an arbitrary rate, the valuation has to be accepted simply because the Income-tax Officer omitted to make a mention that this was not a proper method of accounting. ;