High Court Of Punjab & Haryana
New Diwan Oil Mills vs. CIT
Section 28(i)
Asst. Year 1983-84
N.K. Sud & Satish Kumar Mittal, JJ.
IT Ref. No. 59 of 1991
15th February, 2005
Counsel Appeared :
D.S. Patwalia, for the Respondent
JUDGMENT
N.K. Sud, J. :
At the instance of the assessee, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short ‘the Tribunal’), has referred the following question of law arising out of its order dt. 27th Sept., 1990 relating to asst. yr. 1983-84 for the opinion of this Court :
“Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in disallowing the claim of loss of Rs. 1,48,950 in the asst. yr. 1983-84 ?”
The assessee had filed its return of income on 27th July, 1983, showing an income of Rs. 1,48,800 along with audited copies of trading and manufacturing account, P&L a/c, balance sheet, etc. Thereafter, on 20th Jan., 1984, a survey under s. 133A of the IT Act was conducted by the Department on the business premises of the assessee and discrepancies of stock were found. The assessee voluntarily disclosed stock to the tune of Rs. 1,00,000 and surrendered it to be included in its total income. However, on 14th March, 1984, it filed a revised return of income showing total income at Rs. 99,830 only. This return included voluntary surrender of Rs. 1 lakh as mentioned above and simultaneously the assessee claimed a loss of Rs. 1,48,950 on account of what it claimed to be a loss on account of goods destroyed by fire on 26th March, 1978, which were lying in the godown of Punjab State Warehousing Corporation, Chandigarh (hereinafter referred to as ‘PSWC’). In this way, despite the surrender of Rs. 1 lakh which should have increased its returned income by Rs. 1 lakh the assessee reduced its returned income as compared to the income disclosed in the original return. It was explained before the ITO that the assessee had not claimed this loss earlier because the matter was in dispute and a civil suit was going on in which the assessee had claimed this loss from the PSWC as first defendant and from the insurance company, with whom the PSWC had got the goods insured, as second defendant. However, the assessee’s suit was dismissed on 31st May, 1982. The assessee had obtained a certified copy of that judgment on 13th Sept., 1982 and, hence, according to the assessee since it was finally decided only in this accounting year the assessee could not recover the loss. The claim was made in the return for this assessment year. The ITO rejected the claim of the assessee.
The main reason given by the ITO was that the assessee had never claimed this loss earlier although, according to the assessee, the fire had taken place on 26th March, 1978 and, hence, according to the ITO it was only an afterthought as result of survey conducted on 20th Jan., 1984 and could not be allowed in the year under consideration. Secondly, according to the ITO, when the assessee made a surrender of Rs. 1 lakh on account of discrepancies noticed in stocks at the time of survey on 20th Jan., 1984, it is presumed that the assessee had already taken the destruction of these stocks into account and even then surrendered an amount of Rs. 1 lakh. In the appeal before the CIT(A), he took the view that since the assessee had proved the loss of stocks by filing the copy of judgment of the Court, and since the assessee had not been able to receive payments either from the PSWC or from the insurance company and since according to the learned CIT(A) it was a trading loss, the assessee was entitled to claim this loss in the year under consideration and, hence, allowed the relief. When the matter came up in appeal before the Tribunal, the Tribunal considered the contentions of both the sides, the authorities cited and came to the conclusion that there is no justification either according to the principles of accountancy or on the basis of law, in not writing off these stocks which were destroyed not claiming this loss in the asst. yr. 1978-79 when the actual loss had taken place. This conclusion was arrived at after considering not only the submissions of the rival parties but the authorities of the various Courts recorded in paras 4 and 5 of the order of the Tribunal. The finding of the Tribunal is prima facie a finding of fact. However, in the absence of any assistance from the assessee, the reference is returned unanswered.
[Citation : 296 ITR 495]
