TMI Blog1992 (10) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to the benefits of partnership. The firm was carrying on business in Calcutta Buckets and cast iron goods and it was at will. Shri Venkoba Rao died on 7-1-1982. Therefore for the accounting period ending 7-1-1982 corresponding to the assessment year 1982-83 a return was filed showing an income of ₹ 1,05,672. The trading account of the assessee for this period showed closing stock of ₹ 2,48,630. This value admittedly was the cost. The ITO was of the view that on the dissolution of the firm by death. the assessee lost the option to value the stock at cost or market value, whichever is less. He noted that the Madras High Court has held in A.L.A. Firm v. CIT (1976) 102 ITR 622 that stock had to be valued at market value. He est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en valued at ₹ 2,48,630 at cost. The proviso to section 145(1) states that if the method employed is such that in the opinion of the ITO the income cannot be properly deduced therefrom, the computation shall be made upon such basis and such manner as the ITO may determine. No doubt, this proviso enables the ITO to recast the trading account. But it has to be first shown that the trading account cast in accordance with the regular method of accounting did not give the true profit. 6. The normal method of accounting with reference to the valuation of the closing stock is to take it at cost. However, custom recognised the privilege of the assessee to value the stock at cost or market value. whichever is less so that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of a death of a partner where the assets of the firm have not been converted into money. As pointed out by the Gujarat High Court in CIT v. Keshavlal Chandulal (1966) 59 ITR 120 (Guj.) at pg. 133 it is not necessary that the partners should sell all the goods and realised the price. They may agree among themselves that it would be more expedient to dispose of the assets amongst themselves rather than to outsiders and that they should do so at a book value which may be less than market rate. Fourthly, in such a case if the revenue were to substitute the market value then that would amount to bringing to tax the surplus which was not there but a notional and unreal surplus. Not only that, it will also mean that the actual surplus wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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