VOLTAMP TRANSFOMERS LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-Tax Appellate Tribunal, Ahmedabad Bench "b" has referred the following questions under Section 256 (2) of the Income-Tax Act, 1961 (the Act), at the instance of the assessee :

(2.) THE Assessment Year is 1984-85, the relevant accounting period being year ended on 30th June, 1983. The assessee, a limited Company, is manufacturer of power transformers normally supplied to the State Electricity Boards and large companies. Punjab State Electricity Board (PSEB) placed an order for 12 transformers of 33/11 KV class. The assessee company manufactured one transformer and called upon PSEB to take delivery after inspection. The delivery was taken in December, 1982 after some correspondence was exchanged between the parties. In the mean time two more units were manufactured by the assessee, but PSEB did not undertake inspection nor did respond to the request for accepting delivery of the two transformers. It appears that after exchange of correspondence between the parties PSEB cancelled the order placed with the assessee company. The assessee, therefore, moved the Indian Transformers Manufacturers Association for intervention in the matter and simultaneously filed writ petition before the High Court seeking direction to PSEB. During the pendency of the aforesaid proceedings as the accounting period ended on 30. 6. 1983 the assessee company finalised its accounts which were approved by the Board of Directors on 5. 12. 1983. While finalizing the accounts the assessee Company valued the two units of transformers lying with the assessee Company in stock by adopting the market value on the basis of one quotation received from one M/s. Manish Electricals at a sum of Rs. 4,99,999/ -.

(3.) THE Assessing Officer vide assessment order dated 28. 12. 1987 did not accept the value put on the closing stock by the assessee and adopted the figure of Rs. 16,40,000/- as against Rs. 5 lacs adopted by the assessee. Thus, the addition of Rs. 11,40,000/- came to be made by the Assessing Officer. The basis for the figure of Rs. 16,40,000/- adopted by the Assessing Officer is, according to the Assessing Officer, the sale price of the two transformers which were sold subsequently to PSEB at the tendered price.