POORANCHAND PATEL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(2) of the Income-tax Act, 1961, made at the instance of the assessee: for calling for a reference from the Tribunal and in pursuance of the directions of this court, the following question of law has been referred by the Tribunal for answer of this court :

(2.) THE assessee is a registered firm. THE year of assessment involved is 1975-76, previous year ending on March 31, 1975. THE assessee-firm filed a return of income on July 16, 1975, showing a total income of Rs. 1,54,543. Nearly three years later, a revised return was filed on June 27, 1978, showing total income at Rs. 73,543 and thereby reducing Rs. 81,000 on account of value of stock of sal seeds. THE assessee was in possession of stock of sal seeds said to have been collected on the strength of a contract with the forest department, which expired on June 23, 1973. On June 23, 1973, the managing director of the M. P. State Tribal Co-operative Development Federation made a complaint to the forest department that sal seeds were collected by some persons from the area leased out to the said federation. Consequently, the police seized the stock of sal seeds of the assessee on suspicion of its being stolen property. THE assessee was unsuccessful before the High Court in the writ petition for the release of the sal seeds seized by the police. THE High Court directed that since the sal seeds were a perishable commodity, it should be sold by auction and the sale proceeds should be deposited with the court until the decision of the criminal case against the assessee. THE said stock was sold for a sum of Rs. 1,24,600 and the amount was deposited in the court. According to the assessee, there was total loss of stock-in-trade, and its purchase price was Rs. 81,000. THErefore, the assessee claimed deduction in a sum of Rs. 81,000 from the income of the, other business. THE Income-tax Officer did not accept the plea of the assessee and, on the other hand, held that till the decision of the criminal case, the amount was to be deposited in the court on behalf of the assessee. THE Income-tax Officer took the value of the closing stock at Rs. 1,24,600 and added a sum of Rs. 12,500 towards the income of the assessee.