B. P. Jeevan Reddy CJ.

1. Under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that it was premature for the assessee to put forward its claim of business loss in the accounting period relevant to the assessment year 1975-76 ?"

2. The assessee is a partnership firm. The assessment year concerned is 1975-76. The previous year relevant to the assessment year commenced on (sic) 27, 1973, and ended on April 30, 1974.

The assessee was carrying on a business in cloth on commission basis. There were twelve partners including one Badri Nath who was the working partner. The assessee's case was :

Sri Sidh Nath Singh was an employee of the firm. His duties included delivery of cheques to banks and other persons in the course of the assessee's business. Certain blank cheques, endorsed "account payee" were kept with the cashier ; Sidh Nath Singh used to take them whenever necessary, make appropriate entries and deliver them to the appropriate persons. One such cheque taken by him was misutilised by him. On the counterfoil of the cheque h