Stock Valuation: arbitrary uniform pricing invalidates accounts, permitting revaluation and tax adjustments under the proviso to section 13.

Arbitrary uniform valuation of inventory that does not reflect cost or prevailing market value renders accounts unreliable for profit determination; an assessing officer may revalue opening and closing stocks on a proper basis and apply the proviso to section 13 to compute taxable profits, and the absence of an express statement that profits cannot be deduced is immaterial where the revaluation basis is shown. Similarly, additions based on unexplained bank credits lacking evidential support do not raise a question of law warranting a tribunal reference; refusal to state a case is justified where the factual material supports the finding.

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Issues: (i) Whether the Income-tax Appellate Tribunal was wrong in refusing to refer the question whether Rs. 6,518 credited in the assessee's accounts represented the assessee's income; (ii) Whether the Income-tax Officer could revalue opening and closing stocks and apply the proviso to section 13 of the Income-tax Act where the assessee valued stocks at an arbitrary uniform rate, and whether the Tribunal erred in refusing a reference on that question.

Issue (i): Whether there was any question of law in the Tribunal's refusal to refer the matter of the Rs. 6,518 addition.

Analysis: The material relied upon by the Income-tax Officer and affirmed on appeal showed that the depositor was not produced, the explanation for the entry was unsupported, and subsequent transactions gave rise to an inference that the amount was not proved to belong to the named depositor. The Tribunal recorded that the factual material on which the finding was based was set out in its order.

Conclusion: No question of law arises; the Tribunal's refusal to refer was justified. The decision on the Rs. 6,518 addition is in favour of the respondent.

Issue (ii): Whether the assessee's arbitrary uniform valuation of gold and silver stocks (at fixed rates) could be accepted so that the proviso to section 13 would not be invoked, and whether the Tribunal erred in refusing a reference.

Analysis: Accepted accountancy principles require stocks to be valued at cost or at market value prevailing when stocks are taken. Arbitrary uniform valuation which does not reflect cost or market value renders the accounts unacceptable for determining profits. The Income-tax Officer revalued the stocks on a proper basis and made additions showing the basis of taxable profits. The absence of an express statement that profits could not be properly deduced from the method of accounting is immaterial where the order shows the basis for revaluation and application of the proviso to section 13.

Conclusion: No question of law arises; the Tribunal was not wrong in refusing a reference on stock valuation. The decision on stock revaluation and application of the proviso to section 13 is in favour of the respondent.

Final Conclusion: Both substantive challenges to the additions were examined and rejected; the application under section 66(2) is dismissed and the Tribunal's refusal to state a case is upheld.

Ratio Decidendi: Where an assessee's method of valuing stocks is arbitrary and not based on cost or prevailing market value, the assessing officer may revalue opening and closing stocks and determine taxable profits under the proviso to section 13; a tribunal's refusal to refer a question to the High Court is justified where no question of law is shown to arise from the factual material.

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