Judgement

Appeal (No. 43 of 1929) from an order of the High Court at Bombay (February 28, 1928) upon a reference to the Court under s. 66, sub-s.2, of the Indian Income-tax Act, 1922.

The respondent company, which carried on business as merchants and manufacturers, made a return of their income for the year ending December 31, 1925 (being the date to which their accounts were made up annually) for the purpose of assessment to income-tax and super-tax for the financial year 1926-7, annexing the companys printed profit and loss account for the period. In this account the stock in hand at the end of the period, called the closing stock, was valued at a figure stated therein as " below cost." On this return the company was assessed at Rs.2.49.142, and the tax so assessed was paid. The income-tax officer afterwards found that the closing stock was greatly undervalued in the account. Accordingly he revalued it at its proper value, with the result that the assessment for the year was raised to Rs.7.66.450. The company appealed to the Assistant Commissioner, contending that if the closing stock was valued at its proper value the opening stock should be so valued also. It was stated that it