TMI Blog1992 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... o the business by admitting fresh grounds/ evidence which were never raised before the lower authorities ? 2. Whether, on the facts and in the circumstances of the case, the assessee is entitled to a deduction of Rs. 3,96,874 as loss incidental to the business in the computation of the taxable income ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of Rs. 60,085 made by the Income-tax Officer in respect of under valuation of the closing stock ? " Briefly stated, the facts as found by the Tribunal are that the previous year of the assessee ended on June 30, 1964, relevant to the assessment year 1965-66. The main dispute relates to the assessee's case for the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner held that the aforesaid loss had not been worked out on any consistent method either in respect of the period when the loss had arisen or the amount of loss was computed. He further observed that since the provision for the loss of Rs. 4,07,707 was not being allowed, the adjustment in the opening stock of Rs. 2,35,562 was required to be upheld. Accordingly, the addition of Rs. 1,72,145 was confirmed by the Appellate Assistant Commissioner. The assessee then filed an appeal before the Tribunal and contended that, due to certain mistakes, its earlier stand before the Income-tax Officer and the Appellate Assistant Commissioner required modification. It was submitted that, out of 35,776 bags of sugar earmarked for export, the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted the addition of Rs. 60,085. It is after the aforesaid decision that a reference application under section 256(1) was filed but without success. Thereafter, the Department filed an application under section 256(2) and the aforesaid three questions were directed to be referred. As regards question No. 1, it cannot be denied that the Income-tax Appellate Tribunal has discretion to allow additional grounds to be urged before it. This is evident from the provisions of rule 11 and rule 29 of the Income-tax (Appellate Tribunal) Rules. According to rule 11, a new ground of appeal could be raised by an appellant with leave of the Tribunal and, rule 29 gives the power to the Tribunal to admit additional evidence. The Tribunal has given tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as loss which is incidental to the business. The finding of fact by the Tribunal that there was actual loss of Rs. 3,96,874 has not been challenged by way of a reference. This being so, the second question also has to be answered in favour of the assessee. As regards question No. 3, the finding of fact arrived at by the Tribunal is that the assessee was following a regular method of accounting. While referring to the Supreme Court decision in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44, it has been stated by Mr. Rajendra that the principle of valuation of stock was that it should be valuation at cost or market value whichever is lower on the closing date. He further submitted that any different principle like the one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. This was a method which was regularly employed since the year 1959, and, in respect of the earlier assessment years, the Appellate Assistant Commissioner had held that : "The spirit behind the method of valuation has been to limit the probability of normal fluctuation in the estimated price of stock which could have been taken on the last date of the accounting period. The method adopted by the appellant is, in fact, nearer to the reality of the fact and as such could be treated as a correct and perfect method of valuation. The aforesaid observations of the Appellate Assistant Commissioner were accepted by the Tribunal and, therefore, the positive finding of fact was that the correct and true profit could be ascertained from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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