G MANAVALA NAIDU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE first question relates to the assessment year 1943-44, the previous year for which ended on March 31, 1943. THE second question relates to the year of account ending with March 31, 1944, the corresponding assessment year being 1944-45 On the findings of the Tribunal we can see no justification for the disallowance ordered by the Tribunal. THE Income-tax Officer disallowed the claim as a whole in each year on the ground that no shortage had been proved. THE Assistant Commissioner allowed the claim as a whole in both the years, because he was satisfied that the assessee sustained loss by the shortage in garments. THE position taken by both, whichever view was right, was at least logical. THE Tribunal took something like an intermediate position and, as we pointed out earlier, there seems to be no logical basis for disallowing any portion of the claim With reference to the assessment year 1943-44 the Tribunal pointed out that even the assessee admitted that the loss in garments for which a claim was made was sustained not only in the year ending with March 31, 1943, but also in the previous years.

(2.) BUT the Tribunal apparently also found that it was only in that year that there was a demand made by the military authorities to make good the value of the garments short delivered, that is, garments lost by the assessee. The assessee maintained his accounts on the mercantile basis. Even if the loss had been spread over a number of years, till the loss was ascertained, there could be no possibility of his showing them in his accounts. The Tribunal apparently accepted the case of the assessee that it was only when the military authorities demanded the recovery of Rs. 15, 845 in the year of account ending with March 31, 1943, that the loss was ascertained. Thus with reference to that year the position was that, though when precisely each garment or each set of garments was lost could not be fixed with precision, the loss was ascertained only in the year of account and it was only in the year of account that the assessee had to make good the value of the lost garments to the military authorities. It should be remembered that the material for making garments had been supplied by the military authorities at a price fixed by them, a price which was higher than the ordinary market value. The Department accepted the contention of the assessee, that the assessee could not trade in those garments. Therefore, if there was a short delivery to the military authorities, that was virtual proof that, as far as the assessee was concerned, these pieces themselves were lost.

(3.) ON the material placed before the Tribunal, the Tribunal should have allowed the whole claim that is, as we said, on the finding recorded by the Tribunal, there was no justification for reducing the claim made by the assessee We answer each of the questions in the negative and in favour of the assessee. In our opinion, the entire claim ought to have been allowed in each of the years. The assessee will get the costs of the reference. Counsel's fee Rs. 250 Questions answered in the negative.