RAJAGOPALAN, J. - The first question relates to the assessment year 1943-44, the previous year for which ended on March 31, 1943. The second question relates to the year of account ending with March 31, 1944, the corresponding assessment year being 1944-45.
On the findings of the Tribunal we can see no justification for the disallowance ordered by the Tribunal. The Income-tax Officer disallowed the claim as a whole in each year on the ground that no shortage had been proved. The Assistant Commissioner allowed the claim as a whole in both the years, because he was satisfied that the assessee sustained loss by the shortage in garments. The position taken by both, whichever view was right, was at least logical. The Tribunal took something like an intermediate position and, as we pointed out earlier, there seems to be no logical basis for disallowing any portion of the claim.
With reference to the assessment year 1943-44 the Tribunal pointed out that even the assessee admitted that the loss in garments for which a claim was made was sustained not only in the year ending with March 31, 1943, but also in the previous years. But the Tribunal apparently also found that it was only in that year that there was a demand made by the military authorities to make good the value of the garments short delivered, that is, garments lost by the assessee. The assessee maintained his accounts on the mercantile basis. Even if the loss had been spread over a number of years, till the loss was ascertained, there could be no possibility of his showing them in his accounts. The Tribunal apparently accepted the case of the assessee that it was only when the military authorities demanded the recovery of Rs. 15,845 in the year of account ending with March 31, 1943, that the loss was ascertained. This with reference to that year the position was that, though when precisely each garment or each set of garments was lost could not be fixed with precision, the loss was ascertained only in the year of account and it was only in the year of account that the assessee had to make good the value of the lost garments to the military authorities. It should be remembered that the material for making garments had been supplied by the military authorities at a price fixed by them, a price which was higher than the ordinary market value. The Department accepted the contention of the assessee, that the assessee could not trade in those garments. Therefore, if there was a short delivery to the military authorities, that was virtual a proof that, as far as the assessee was concerned, these pieces themselves were lost. Hence the caption 'lost garments' under which the claim for loss sustained in the course of the business was made.
With reference to the assessment year 1943-44, the fact that some of the garments might have been lost in the previous years and even the fact that the assessee admitted that possibly only about one-half of the claim represented the value of the garments lost in the relevant year of account made no difference to the claim of the assessee. The loss was ascertained in that year and it was only with reference to that year that he could claim that loss. Once the loss was established, the whole of the claim had to be allowed. That was the view taken by the Assistant Commissioner and, in our opinion, he was right.
With reference to the second year of account, on the findings of the Tribunal, there seems to be no justification for any deduction from the claim made by the assessee. The Tribunal did not find, for instance, that the assessee had been paid in full by the military authorities. Nor did the Tribunal find that the assessee had not established the loss he claimed. It those two factors were beyond dispute, then the fact that in the case of others a claim had been allowed on the basis of a percentage of 1.75 was really irrelevant. On the material placed before the Tribunal, the Tribunal should have allowed the whole claim; that is, as we said, on the finding recorded by the Tribunal, there was no justification for reducing the claim made by the assessee.
We answer each of the questions in the negative and in favour of the assessee. In our opinion, the entire claim ought to have been allowed in each of the years. The assessee will get the costs of the reference. Counsels fee Rs. 250.
Question answered in the negative.