MULCHAND HIRALAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated by the Commissioner of Income-tax by direction of the Court. The assessee carries on business as a shopkeeper where he sells retail groceries and he also carries on business by selling goods on commission, the two businesses, being in fact separate. He has made, however, a return of his entire income, and he claims allowance in respect of two separate items. The first item is composed of two separate sums respectively Rs. 313 and Rs. 700, and the assessee claims to be entitled to deduct the amount of these two items from his assessment in the following circumstances. In the accounting year 1931-32 it would appear that in making up his accounts he confused the accounts in respect of the shop business with the accounts in respect of the commission business in the matter of two items. Certain goods had been sent to him to be sold on commission but the amounts in respect of two of the parcels of goods sent to him for sale on commission were as a matter of fact entered as having been made in respect of the shop business, and he put down in the accounts the two items of goods Rs. 313 and Rs. 700 as being goods purchased by him, and in making up the accounts for that year these were taken upon the assets side of the account and figured in the profit for the year. They should have gone into that account which dealt with the commissioner business, in which case they would not have been put down as coming into the business as assets at all. The result was that for the year 1931-32, if the statement of facts be correct, he had to pay income-tax, on a sum which had been arrived at by accounting these two items as receipt and so he paid income-tax on a sum of Rs. 312 and Rs. 700 which he need not have paid if he had made up his books correctly. After the closing of the account for 1931-32 and the payment of income-tax, he discovered his mistake and now seeks to deduct those sums in the present account for 1932-33, and the ground upon which he claims to be entitled to deduct them is that if he paid tax on them he would be paying tax twice over. THIS argument is not tenable. On a proper application to the Commissioner of Income-tax, the Commissioner of Income-tax would be entitled to find that in respect of the year 1931-32 the assessee had paid more tax than what he should have paid, and in making up the account for 1932-33 (which is the year under consideration) he need not include these sums at all; but he cannot do it both ways. His proper remedy should have been to go to the Commissioner in the matter of the accounting year 1931-32, show to the satisfaction of the Commissioner that in respect of that year he had made a mistake in making up his accounts and get a refund of the income tax in respect of the assessment for 1932-33. The Commissioner was right in our opinion in his finding, and to the question "whether the disallowance of the claim for deductions of two sums, namely, Rs. 313 and Rs. 700 is legal" I would answer it, in agreement with the Commissioner, in the affirmative.