RAMSWARUP BENGALIMAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to this Court for its decision in compliance with an order under Section 66 (2) of the Indian Income-tax Act is--

(2.) THE assessee is a firm mainly carrying on wholesale cloth business. THE accounts produced showed a total turn-over of Rs. 12,81,375/-. THE receipts showed a balance of Rs. 9,263/- in favour of the assessee. After deducting certain expenses the assesses, however, worked out a net loss of Rs. 13,915/-. In preparing the Profit and Loss Account the assessee had valued his closing stock at the market rate at Bs. 1,64,191/-. THE cost price of the said stock was, however, Rs. 2.27,913/-. THE Income-tax Officer was of the opinion that the assessee should have valued his closing stock at the cost price as he had been doing in previous years and he added back the difference between Rs. 2,27,913/- and Rs. 1,64,191/-, i.e., Rs. 63,722/-. THE Appellate Assistant Commissioner and the Tribunal agreed with the decision of the Income-tax Officer.

(3.) WE may mention that though the assessee may not have succeeded in proving his case that he had valued his closing stock at the lower of the two figures -- the cost price and the market price -- the Department has not established that in any year the assessee had valued his stock at cost price though the market price might have been lower. The burden of proving that there has been a change in the method of accounting was on the Department and, in the absence of any evidence that the assessee had in any year valued his stock at cost price, even though the market price might have been lower, it cannot be said that the method of accounting followed by the assessee was to value his stock at cost price even though the market price might have been less.