Document Fragment View

Matching Fragments

It is also necessary for us to narrate the foundational facts on the basis whereof the respondent-revenue has based its claim that the aforestated loss having accrued in the year 1978, set off on the basis thereof, could be claimed by the applicant-assessee only during the assessment year 1978-79. The claim of the applicant-assessee, on the other hand is, that the loss under reference was never acknowledged. The stock in question continued to be consistently reflected in the closing stock of the applicant- assessee, wherein, it was shown as lying with the Punjab State Warehousing Corporation, Chandigarh (hereinafter referred to as "PSWC") throughout. As per inventory of the closing stock filed with the return of income, for the assessment year 1978-79, till the assessment year 1983-84, the said position remained unchanged.

It is not a matter of dispute that the applicant-assessee was carrying on the business of running a solvent plant at Chandigarh. It is not a matter of dispute that the stock in question was stored in the godown of the PSWC. It is also not a matter of dispute that the goods/stock belonging to the applicant-assessee were destroyed on account of a fire while they were stored in the godowns of the PSWC on 26.3.1978. It is therefore, the case of the respondent-revenue that the instant loss had taken place during the financial year 1977-78 (assessment year 1978-79), and as such, in terms of the mandate of Section 71 of the Act, the same could have been set off as loss, only during the said assessment year i.e. 1978-79.

As against the aforesaid claim of the respondent-revenue, the case of the applicant-assessee is, that applicant-assessee filed a civil suit on 15.11.1978, wherein, the applicant-assessee had impleaded the PSWC as defendant No.1, and the General Insurance Company (with whom the goods stored in the godowns of the PSWC were insured) as defendant No.2. Since the goods/stock in question had been burnt in the godown of the PSWC, the applicant-assessee claimed reimbursement of the same, from aforesaid defendant Nos.1 and 2. The civil suit filed by the applicant-assessee was however dismissed on 31.5.1982. It is therefore, the case of the applicant- assessee, that the applicant-assessee realized, that the aforesaid claim was not reimbursable from the PSWC, and as such, accepted the same as the loss suffered by the applicant-assessee itself, for the first time. Since the aforesaid loss in the hands of the applicant-assessee became clear, only on dismissal of the civil suit filed by the applicant-assessee, the same must be deemed to have crystalized only during the financial year 1982-83 (assessment year 1983-84). It is therefore, that the applicant-assessee filed a revised return seeking set off of the aforesaid loss of goods/stock, in the revised return filed on 14.3.1984.

In the facts and circumstances of this case, the determination of date when the loss was incurred will have to be derived from the admitted facts. It is not a matter of dispute that the fire which resulted in destruction of the stock of the applicant-assessee took place on 26.3.1978. The aforesaid fire destroyed the stock/goods of the applicant-assessee lying with the PSWC. Despite the destruction of the stock/goods during the financial year 1977-78 (assessment year 1978-79), the applicant-assessee consistently has been showing these goods in the inventory of the closing stock, stating therein, that these goods were lying with the PSWC. According to the learned counsel for the applicant-assessee, the aforesaid reflection was valid, bonafide and genuine because of the fact that applicant-assessee had never accepted that any loss had been incurred by the applicant-assessee in spite of fire on 26.3.1978 where his stock/goods were destroyed. The reason for the applicant-assessee to entertain the aforesaid belief was, because the responsibility/liability of the destruction of the stock/goods in the fire which took place in the godowns of the PSWC on 26.3.1978, was that of the PSWC itself, as the PSWC was the custodian of the stock/goods while they were stored in the godowns of the PSWC. It is therefore, that the applicant- assessee even filed a civil suit on 15.11.1978 claiming compensation for the said goods/stock. It is only when the claim raised by the applicant-assessee for reimbursement of the loss on account of the fire at the godowns of PSWC failed, that the applicant-assessee accepted for the first time that the aforesaid loss was not reimbursable, and as such, accepted the same as loss in the hands of the applicant-assessee. The applicant-assessee therefore, submitted a revised return of income on 14.3.1984 claiming a deduction on account of the loss of the aforesaid stock/goods.