Law: Income Tax Act, 1922

Section: 13

[Indian income tax act, 1922 (XI of 1922)].........Section 13 Rejection of accounts Method of accounting valuation of stock articles with a failing market valuation at less than cost price higher valuation for securing overdraft from Bank articles sold at profit method of accounting, whether unreliable for deducing profits Held no. The assessee company which dealt in spare parts of cars the import of which was banned treated parts of its stock as obsolete and part as slow moving and valued them notionally at 100% and 50% less than the cost price respectively. The articles were valued at higher prices for purposes of obtaining overdrafts from banks. Some of the articles were sold at a price higher than the cost price. The income tax tribunal added back a sum of Rs. 45,483 in the value of the closing stock. On the question whether the tribunal was right in rejecting the method of accounting and enhancing the value of the closing stock. Held, that the method of valuation adopted by the assessee was a recognised method. The fact that occasionally a solitary item was sold for a price highest than the cost price would not detract from the nature of the system. The figures furnished by the assessee to the banks for obtaining overdraft were not concerned with the actual stock valuation for determining the trade results for purposes of ascertaining the profits derived from the business. It was not shown that the method was improper or patently false. The methad could not therefore be rejected. Section 13 was not applicable and the Tribunal was not justified in sustaining the revision in the valuation of closing stock by enhancing it by Rs. 45,488. Cases referred to: Commissioner of Income Tax v. Chari and Ram [(1949) 17 I.T.R. 1] ; Commissioner of Income Tax v. A. Krishnaswami Mudaliar [(1964) 53 I.T.R. 122 (S.C.). JUDGMENT [The judgment of the court was delivered by CHANDRA REDDY C.J.] -The question we are culled upon to decide under Section 66(2) of the Indian Income Tm Act is framed in the following terms: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in sustaining the revision in the valuation of closing stock by enhancing…

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