Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock - Assessment year 1982-83 - Assessee-firm was reconstituted due to death of a partner - During assessment proceedings, Assessing Officer made an addition to closing stock of erstwhile firm which was accepted by assessee - However, while assessing opening stock of new firm, amount of said addition was not included - Whether enhanced value of closing stock of erstwhile firm had become final and as such, same had to be taken as opening stock of new firm - Held, yes Mrs. Chitra Venkataraman for the Applicant. V. Ramakrishnan for the Respondent. JUDGMENT V.S. Sirpurkar, J. - The question that is referred is as under : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the value of the stock at which the assessee-firm which was formed on the dissolution of an erstwhile firm took over the stock and adopted in its accounts as opening stock should be increased by Rs. 40,800 to bring it on par with the amount of valuation of the closing stock of the dissolved firm ?" 2. The facts are that the assessee which was a partnership firm was assessed for the assessment year 1982-83 for which the accounting year was from December 1, 1982, to April 12, 1982 (sic). The assessee had declared a total income of Rs. 36,817 in its return filed on February 26, 1983, and the Assessing Officer completed the assessment under section 143(3) of a total income of Rs. 35,850 by his assessment order dated January 30, 1985, in the status of an unregistered firm. It had so happened that one of the partners had expired on January 31, 1982, and, therefore, the firm itself had been dissolved. Thereafter the new firm was formed with the wife of the erstwhile expired partner having been taken up as a partner of the firm. When the closing stock of the erstwhile firm was assessed, the sum of Rs. 40,800 was added to it. This was while assessing the value of the closing stock as on January 31, 1982, when a partner died and the firm got dissolved. However, when the firm was assessed thereafter, this enhanced value of Rs. 40,800 was ignored. Inasmuch as while…

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