Commissioner Of Income Tax vs Uberoi Limited
1991 Latest Caselaw 37 Del

JUDGMENT

B.N. Kirpal, J.

1. In respect of the asst. yr. 1981-82, the petitioner seeks reference of the following question to this Court :

"Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in giving direction that deduction be allowed for the difference in the closing stock of the asst. yr. 1980-81 and the opening stock of the asst. yr. 1981-82 of the Madras branch of the assessed."

2. The accounting year of the respondent is the calendar year. In respect of the asst. yr. 1981-82 the respondent had, as per its profit and loss account, a net loss of Rs. 1,966. The ITO did not accept the correctness of the books of account and sought to apply the provisions of s. 145(1) proviso of the IT Act. The assessed went up in appeal. In appeal, one of the contention raised before the CIT(A) was that the opening stock for the accounting year 1st January, 1980 to 31st December, 1980 in respect of the Madras Branch had been wrongly stated. It was contended that there was a difference between the closing stock of the said branch as on 31st December, 1979 and the opening stock on 1st January, 1980 by a sum of Rs. 77,651. It was, therefore, contended that the opening stock of this branch as on 1st January, 1980 should be increased by the figure of Rs. 77,651. The CIT(A) did not agree with this contention and he observed that ITO and IAC had treated this difference as being sales outside the books of account. He further observed that this accounting error as alleged by the assessed, could not be raised before the Appellate Authorities for the first time.

Further appeal was taken to the Tribunal. The Tribunal observed that it was open to the assessed to point out in appeal the accounting error. It further stated that it was elementary that the closing stock at the end of the last year of accounting becomes the opening stock on the first day of the next accounting year. Therefore, there could be no difference between the two figures. It was further held that there was no scope for sales outside the books of accounts in the shown period intervening between the closing of the working day of the last accounting year and the beginning of the first day of the next accounting year.

3. It is contended by Mr. Gupta that under s. 145(2) once the accounts are rejected, there can be no alteration made in the accounts. He further contends that in effect the Tribunal has reduced the income of the assessed even though the accounts books of the assessed were found not to be reliable. According to the learned counsel, even if there had to be an adjustment made in the opening stock, the said adjustment should have been taken into consideration while determining the addition which had to be made to the trading account of the assessed.

4. The only question which has been sought to be referred pertains to the contention of the assessed with regard to the correcting of the accounting error. It was not contended before the Tribunal, on behalf of the Department, that the accounting error could be corrected and thereafter the profit worked out by making the requisite addition to the trading account. The Department in fact opposed the correction of the accounting error. The Tribunal was right in observing that according to the principle of accounting the opening stock of one year must necessarily be the closing stock of the previous year. It further found as a fact that there was no sale outside the books of account between the period of the closing of the work hours of the previous year and the opening of the year, i.e., between 31st December, 1979 and 1st January, 1980. There is no question which is sought to be referred and even if there may be any merit in the contention of Mr. Gupta that the trading result should have been worked out after taking into account the aforesaid accounting error, in our opinion, the question of law which is now sought to be referred is only limited to the question as to whether the figure of opening stock as on 1st January, 1980 should have been allowed to be corrected or not. The other contention sought to be raised by Mr. Gupta was never contended before the Tribunal as such and in fact no question in that respect has been sought.

5. In our opinion, the aforesaid question is not a question of law and the petition is accordingly dismissed.