1972 (12) TMI 34 - HC - Income Tax

Court affirms Tribunal's stock revaluation method in mica mining case. Relief capped per Income-tax Act.

The court upheld the Appellate Tribunal's method of revaluation of closing stock in a case involving a firm engaged in mica mining. The Tribunal's ... High Court, Income Tax Act, Income Tax Authorities Issues Involved:1. Validity of the method of revaluation of closing stock adopted by the Appellate Tribunal.2. Scope of relief in revaluation of stock and whether it should be restricted to the actual addition made by the Income-tax Officer or could exceed the same.Detailed Analysis:Issue 1: Validity of the Method of Revaluation of Closing StockThe primary question was whether the method of revaluation of closing stock adopted by the Appellate Tribunal was valid. The assessee, a firm engaged in mica mining, had valued its closing stock of cut mica and waste rounds at an average rate of Re.1.01 per pound. The Income-tax Officer disputed this valuation, arguing that the true cost of cut mica was not reflected and instead valued the closing stock at Rs. 10,14,819, adding Rs. 4,80,490 to the assessee's valuation.The Tribunal disagreed with both the Income-tax Officer and the assessee, concluding that the final products of crude mica include cut mica, splittings, and waste rounds. The Tribunal valued crude mica processed in the relevant year at 45 paise per pound, adding factory expenses to this cost and dividing the total by the quantity of end products to arrive at a unit cost of Rs. 1.49 for 1959-60 and Rs. 1.89 for 1960-61. The Tribunal's method resulted in an addition of Rs. 10,644 instead of Rs. 99,984.The Tribunal's method was challenged by the department, which argued that the Income-tax Officer's method was more accurate. However, the court upheld the Tribunal's method, stating that the end product of crude mica includes block, films, splittings, and rounds, and the valuation method adopted by the Tribunal was correct and unassailable.Issue 2: Scope of Relief in Revaluation of StockThe second question was whether the relief in revaluation of stock should be restricted to the actual addition made by the Income-tax Officer or could exceed the same. The Tribunal had corrected an arithmetical mistake in its earlier order, leading to a reduction of profit by Rs. 83,169 instead of an addition. However, the Tribunal did not grant this relief, stating that it was beyond the scope of the appeal, which was limited to the addition of Rs. 99,984.The court examined Section 33 of the Income-tax Act, 1922, and concluded that the Tribunal's powers are limited to the subject-matter of the appeal. The Tribunal cannot grant relief beyond what was claimed in the appeal. The court agreed with the Tribunal's view that it was not competent to grant a greater relief than what was asked for by the assessee in its appeal.Conclusion:1. The method of revaluation of closing stock adopted by the Appellate Tribunal was valid.2. The relief in revaluation of stock should be restricted to the actual addition made by the Income-tax Officer and cannot exceed the same.Costs:The parties were directed to bear their own costs, with an advocate's fee of Rs. 250.