M/s Mathura Prasad Sri Prakash, Kannauj v. IAC, Agra

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO. 413/AGR./1979 ASSTT. YEAR : 1975-76 M/S. MATHURA PRASAD SHRI PRAKASH VS. INCOME-TAX O FFICER MAKRAND NAGAR KANNAUJ. A-WARD FATEHGARH. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI RAJENDRA SHARMA ADVOCATE FOR RESPONDENT : SHRI VINOD KUMAR JR. D.R. ORDER PER H.S. SIDHU J.M. : THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 12.02.1979 OF LEARNED CIT(A) AGRA. 2. THE PRESENT APPEAL CAME UP FOR HEARING BEFORE US AFTER RECALLING THE ORDER DATED 26.04.1980 IN WHICH THIS BENCH HAD DISMISSED THE APPEAL OF THE ASSESSEE. THE FACTS NARRATED BY THE REVENUE AUTHORITY ARE NOT DISPUTED BY BOTH THE PARTIES BUT FOR THE SAKE OF CONVENIENCE THE FACTS RELEVANT TO THE ISSUE IN DISPUTE ARE AS UNDER :- 2 3. THE ASSESSEE IS A REGISTERED FIRM WHICH CARRIED ON THE BUSINESS OF DISTILLATION OF SANDALWOOD OIL ETC. AS IN THE EARLIER YEARS TH E ASSESSEE PARTICIPATED IN THE GOVERNMENT OF TAMILNADUS AUCTION OF SANDALWOOD FIX ED FOR 03.07.1974 TO BE CONDUCTED BY THE DISTRICT FOREST OFFICER TIRUPATTU R (HEREINAFTER REFERRED TO AS THE D.F.O.). THE TERMS AND CONDITIONS UNDER WHICH THE AUCTION WAS HELD WERE GIVEN IN THE AUCTION NOTICE DATED 8 TH MARCH 1974. THE ASSESSEE BID FOR 40 TONNES OF SANDALWOOD FOR THE PRICE OF ` 23 43 900/- PLUS SALE-TAX OF ` 1 17 195/- MADE THE TOTAL COST PRICE OF 40 TONNES OF SANDALWOOD AT ` 24 61 095/-. IMMEDIATELY AFTER THE AUCTION WAS OVER A SALE LIST WAS PREPARED FOR EACH LOT FOR WHICH THE BID WAS MADE BY THE ASSESSEE IN THE AUCTION CONTAINING PRICE OF THE LOT AND THE AMOUNT FOR WHICH THE BID WAS MADE WHICH THE ASSESSEE SIGNED IN TOKEN OF HAVING ADMITTED TO HAVE MADE THE BID AND HAVING ACCEPTED THE CONDITIONS OF THE SALE NOTICE UNDER WHICH THE AUCTION WAS HELD. THIS BID WAS ACCEPTED BY THE D.F. O. BY ORDER DATED 07.07.1974 AND THE ASSESSEE WAS ASKED TO REMIT THE SALES-TAX O F ` 1 17 195/- ALONG WITH THE FIRST INSTALMENT OF THE SALE AMOUNT AS REQUIRED IN CONDITION NO. 25 OF THE PRINTED SALE NOTICE DATED 8 TH MARCH 1974 AND THE INSTALMENTS AS PER CONDITION N O. 9 OF THE SALE NOTICE THAT IS IN OTHER WORDS THE FIRST INS TALMENT OF 25% OF THE SALE AMOUNT WITHIN 15 DAYS OF THE DATE OF RECEIPT OF THE CONFIR MATION ORDER OF SALE ANOTHER 25% ON OR BEFORE 16.08.1974 AND THE BALANCE OF 50% LESS THE EARNEST MONEY DEPOSIT ON OR BEFORE 6 TH SEPTEMBER 1974 OR AGAINST THE DELIVERY WHICHEVER IS EARLIER. THE 3 ASSESSEE MADE REPRESENTATIONS FOR EXTENSION OF TIME FOR PAYMENT OF INSTALLMENTS AND REMOVAL OF 40 TONNES OF SANDALWOOD PURCHASED IN THE AUCTION AND THE SAME WAS ALLOWED TO ARRANGE FOR PAYMENT AND TAKING OF DE LIVERY OF SANDALWOOD FOR WHICH THE BID WAS MADE IN THE AUCTION AFTER PAYMENT OF ALL DUES BY 30.04.1975. HERE IT WOULD BE NECESSARY TO POINT OUT THAT THE AS SESSEES PREVIOUS YEAR ENDED ON 19/4/1975 THAT IS IN OTHER WORDS THE EXTENSION O F TIME GRANTED TO THE ASSESSEE BOTH FOR MAKING PAYMENTS AND TAKING DELIVERY OF THE SANDALWOOD FOR WHICH BID WAS MADE IN THE AUCTION WAS EXTENDED BEYOND THE END OF THE PREVIOUS YEAR UNDER CONSIDERATION HERE. THE ASSESSEE HAS NOT MADE THE PAYMENTS TILL THE END OF APRIL 1975. THE D.F.O. THEREFORE BY LETTER DATED 20.06 .1975 ORDERED THAT THE EARNEST MONEY DEPOSIT OF ` 5 000/- PAID BY THE ASSESSEE FIRM AT THE TIME OF PA RTICIPATING IN THE AUCTION BE FORFEITED TO THE GOVERNMENT AND THE 40 TONNES OF THE SANDALWOOD FOR WHICH BID WAS MADE BY THE ASSESSEE FIRM IN THE AUCTION HELD ON 03.07.1974 BE RESOLD BY AUCTION TO BE HELD IN FUTURE THE CONDITI ONS OF THE RESALE BEING THAT THE ASSESSEE FIRM WILL BE RESPONSIBLE FOR ANY LOSS BUT WILL NOT BE ENTITLED TO ANY PROFIT IF THE PRICE REALISED IN THE SUBSEQUENT AUCTION WAS MO RE THAN WHAT WAS OFFERED BY THE ASSESSEE IN THE AUCTION HELD ON 3/7/1974. THE ASSE SSEE FIRM WAS ALSO DEBARRED FROM PARTICIPATING IN FUTURE AUCTIONS HELD BY THE F OREST DEPARTMENT. THIS WAS FOLLOWED BY LETTER DATED 12/1/1976 FROM THE D.F.O. ADDRESSED TO THE ASSESSEE FIRM WHEREBY IT WAS INTIMATED THAT THE AMOUNT FETCHED IN THE RESALE OF 40 TONNES OF 4 SANDALWOOD IN THE SUBSEQUENT AUCTIONS HELD IN JULY AND DECEMBER 1975 AMOUNTED TO ` 8 53 000/- ONLY AND THEREFORE THE DIFFERENCE BETW EEN THE COST PRICE FOR WHICH THE BID WAS MADE BY THE ASSESSEE TOGETHER WITH CHAR GES ON ACCOUNT OF INTEREST DEMURRAGE ETC. AND THE AMOUNT FETCHED IN THE RESALE WHICH CAME TO ` 17 24 979/- SHOULD BE PAID BY THE ASSESSEE FAILING WHICH NECES SARY ACTION WILL BE TAKEN IN THE CIVIL COURT. THIS AMOUNT WAS REDUCED AS A RESULT O F FURTHER REPRESENTATIONS MADE BY THE ASSESSEE FIRM TO THE GOVERNMENT OF TAMILNADU TO ` 12 84 684/- BUT EVEN THIS REDUCED AMOUNT WAS NOT PAID BY THE ASSESSEE FIRM. 4. THE ASSESSEE FIRM IN ITS ACCOUNT BOOKS MADE TH E FOLLOWING ENTRIES ON 19/4/1975 THAT IS THE END OF THE PREVIOUS YEAR RE LEVANT TO THE ASSESSMENT YEAR UNDER APPEAL HERE :- AUCTION BID + S.T. DR. 24 61 095/- VALUE OF CLOSING STOCK CR. 9 80 206/- ON THIS BASIS A SUM OF ` 14 80 888/- WAS CLAIMED AS A LOSS WHICH SHOULD BE ALLOWED WHILE COMPUTING THE BUSINESS INCOME OF THIS YEAR. THE INCOME-TAX OFFICER HOWEVER ALLOWED ONLY THE SECURITY DEPOSIT OF ` 5 000/- WHICH WAS FORFEITED TO THE GOVERNMENT AND DISALLOWED THE BAL ANCE CLAIM OF LOSS AMOUNTING TO ` 14 75 888/-. THE APPELLATE ASSISTANT COMMISSIONER IN APPEAL UPHELD THIS DISALLOWANCE MADE BY THE INCOME-TAX OFFICER. THE A SSESSEE THEREFORE CAME UP IN THE APPEAL BEFORE THE TRIBUNAL. THE PRESENT APPEAL CAME UP FOR HEARING BEFORE THE 5 BENCH AND THIS BENCH HAD DISMISSED THE APPEAL OF TH E ASSESSEE VIDE ITS ORDER DATED 26.04.2080. THE ASSESSEE MOVE MISCELLANEOUS APPLICA TION NO. 80/ALL./1980 IN ITA NO. 413/ALL./1979 FOR RECTIFYING THE AFORESAID ORDE R WHICH HAS FINALLY BEEN DECIDED AND THE ORDER DATED 26.04.2080 HAS BEEN RECALLED. I N COMPLIANCE OF THE SAME THE PRESENT APPEAL CAME UP FOR HEARING BEFORE THE BENCH ON VARIOUS DATES AND FINALLY HAS BEEN HEARD ON 18.01.2011. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS IN BUSINESS OF DISTILLATION OF SANDALW OOD OIL. FOR MANUFACTURING OF SANDALWOOD OIL SANDALWOOD IS THE RAW MATERIAL WHI CH THE ASSESSEE PURCHASED IN AUCTION HELD BY THE GOVERNMENT OF TAMILNADU. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE PURCHASED 40 TONNES OF SANDALWOOD IN AUCTI ON FOR ` 23 43 900/- EXCLUDING SALES-TAX BY AUCTION HELD BY DISTRICT FOREST OFFICE R TAMILNADU ON 03.07.1974 WHICH HAS BEEN CONFIRMED ON 07.07.1974. HE FURTHER STATED THAT THE ASSESSEE HAS TO MAKE THE PAYMENT OF FIRST AND SECOND INSTALLMENT ON 27.07.1974 AND 16.08.1974 RESPECTIVELY AND THE BALANCE ON 06.09.1974 BUT ON THE REQUEST OF THE ASSESSEE THE DISTRICT FOREST OFFICER EXTENDED TIME FOR THREE TIM ES FOR PAYMENT OF AUCTION MONEY UPTO 29.11.1974 31.12.1974 AND 30.04.1975. BUT TH E ASSESSEE COULD NOT MAKE THE PAYMENT OF ANY INSTALLMENT. HE FURTHER STATED THAT THE ASSESSEES METHOD OF ACCOUNTING WAS MERCANTILE. HE SUBMITTED THAT THE M OMENT THE BID MADE BY THE 6 ASSESSEE IN AUCTION HELD ON 03.07.1974 WAS ACCEPTED BY THE DISTRICT FOREST OFFICER VIDE LETTER DATED 07.07.1974 I.E. DURING THE PREV IOUS YEAR THE ASSESSEE INCURRED THE LIABILITY OF PAYMENT FOR THE AMOUNT OF BID IN A UCTION TOGETHER WITH SALES-TAX THEREON WHICH WAS INCURRED IN THE COURSE OF CARRYIN G ON THE BUSINESS AND WAS INCIDENTAL TO THE BUSINESS ITSELF WHICH WAS LEGALL Y ENFORCEABLE AND ADMISSIBLE AS BUSINESS DEDUCTION. THEREFORE THE AMOUNT OF ` 14 80 888/- CLAIMED BY THE ASSESSEE AS A DEDUCTION IN THE COMPUTATION OF BUSIN ESS INCOME WAS A BUSINESS LOSS WHICH OUGHT TO HAVE BEEN ALLOWED BY THE REVENUE AUT HORITIES AND THE SAME HAS WRONGLY BEEN REJECTED. HE ARGUED THAT ACCORDING TO CONDITION NO. 9 OF THE TERMS OF THE AUCTION AS SPECIFIED IN THE AUCTION SALE NOTICE DATED 03.03.1974 THE INSTALLMENT ON ACCOUNT OF THE PURCHASE OF SANDALWOOD WERE DUE T O THE EXTENT OF 25% WITHIN 15 DAYS OF THE RECEIPT OF THE CONFIRMATION OF SALE BY THE DISTRICT FOREST OFFICER WHICH WAS BY LETTER DATED 16.08.1974 AND THE BALANCE OF 5 0% LESS THE EARNEST MONEY DEPOSIT ON OR BEFORE 6 TH SEPTEMBER 1974 OR AGAINST THE DELIVERY WHICHEVER WAS EARLIER AND ALL OF THESE DATES FELL DURING THE PREV IOUS YEAR RELEVANT TO THIS ASSESSMENT YEAR. ACCORDING TO HIM ANY BREACH OF CON TRACT DUE TO THE ASSESSEE NOT PAYING THE INSTALLMENTS IN ACCORDANCE WITH THE TERM S AND CONDITIONS OF THE AUCTION SALE TOOK PLACE DURING THE PREVIOUS YEAR RELEVANT T O THIS ASSESSMENT YEAR AND THE ESTIMATED DAMAGES ON ACCOUNT OF THIS BREACH WAS AN ADMISSIBLE DEDUCTION IN WORKING OUT THE BUSINESS INCOME FOR THIS YEAR. 7 6. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE PROPERTY IN GOODS PURCHASED IN THE AUCTION HELD ON 03.07.1974 PASSED TO THE ASSESSEE WHEN THE ASSESSEES BID MADE AT THE AUCTION WAS ACCEPTED AND CONFIRMED BY THE DFO BY LETTER DATED 07.07.1974 I.E. DURING THE PREVIOUS YEAR. THIS CLEARLY SHOWS THAT THE INTENTION OF THE GOVERNMENT ACCORDING TO THE SALE N OTICE WAS THAT IMMEDIATELY AFTER THE BID CONFIRMED BY THE ASSESSEE AFTER THE A UCTION WAS ACCEPTED BY THE DISTRICT FOREST OFFICER THE SALE WAS COMPLETE AND THE PROPERTY IN THE GOODS PASSED FROM THE GOVERNMENT TO THE ASSESSEE. FINALLY HE AR GUED THAT ON ANNOUNCEMENT BY THE AUCTIONEER WITH THE FALL OF HAMMER OF ASSESSEE S BID AND WITH ACCEPTANCE BY THE D.F.O. BOTH OF WHICH HAPPENED DURING THE PREVIOUS YEAR THE PROPERTY IN THE GOODS PASSED TO THE ASSESSEE I.E. IN OTHER WORDS THE A SSESSEE BECAME THE OWNER OF THE GOODS AND THE GOODS BECAME THE PART OF ASSESSEES S TOCK-IN-TRADE AND THEREFORE THE ASSESSEE WAS ENTITLED TO VALUE THEM AT THE END OF THE YEAR ACCORDING TO WELL- KNOWN PRINCIPLE OF ACCOUNTANCY AT THE COST OR MARKE T PRICE WHICHEVER WAS LOWER AND IF ON THE BASIS OF VALUATION THUS MADE THERE WAS A RESULTANT LOSS THE REVENUE AUTHORITIES WERE BOUND TO ALLOW THE LOSS. HE REQUE STED THAT THE ASSESSEES CLAIM OF LOSS OF ` 14 80 888/- WAS ADMISSIBLE AND THE REVENUE AUTHORIT IES HAS WRONGLY DISALLOWED THE SAME. HE REQUESTED THAT THE APPEAL FILED BY THE ASSESSEE MAY BE ALLOWED BY CANCELING THE IMPUGNED ORDER. 8 7. ON THE CONTRARY THE LEARNED D.R. RELIED UPON TH E ORDER PASSED BY THE REVENUE AUTHORITY AND STATED THAT THE PROPERTY IN G OODS DOES NOT PASS FROM THE SELLER TO THE BUYER BECAUSE THE ASSESSEE HAS NOT M ADE THE PAYMENT OF PURCHASE PRICE OF THE GOODS PURCHASED IN THE AUCTION. THE P ROPERTY HAS NOT BEEN PASSED TO THE ASSESSEE BECAUSE THE ASSESSEE HAS NOT COMPLETED THE NECESSARY FORMALITIES LIKE NECESSARY PAYMENTS. HE FURTHER STATED THAT NO PAYM ENT FOR THE GOODS WAS MADE AT ALL BY THE ASSESSEE INSPITE OF THE TIME EXTENDED BY THE COMPETENT AUTHORITY. WHEN THE ASSESSEE DID NOT MAKE THE PAYMENT FOR THE GOODS FOR WHICH HE MADE BID IN AUCTION THE SALE WAS RESCINDED IN VIEW OF THE PROV ISIONS OF SUB-SECTION (4) OF SECTION 54 OF THE SALE OF GOODS ACT 1930 EXCEPT FO R THE RIGHT OF THE GOVERNMENT TO RECOVER DAMAGES FROM THE ASSESSEE FOR BREACH OF CONTRACT. IN THE PRESENT CASE ALSO AUCTION WAS HELD ON 03.07.1974 AND THE ASSESS EE FAILED TO MAKE PAYMENT FOR THE GOODS AND THE GOODS REMAINED WITH THE GOVERNMEN T AND THE GOVERNMENT HAS RIGHT TO RECOVER THE DAMAGES FOR BREACH OF CONTRACT . 8. LD. D.R. ALSO STATED THAT THE CONTRACT WAS NOT E XECUTED BY PAYMENT AND DELIVERY OF GOODS THE CLAIM OF LOSS ON THE BASIS O F THE CONTRACT PRICE OF THE UNDELIVERED GOODS AND THEIR MARKET PRICE AT THE END OF THE YEAR WAS ONLY AN APPREHENDED FUTURE LOSS WHICH WAS NOT ADMISSIBLE DE DUCTION. THE LEARNED DR REQUESTED THAT THE REVENUE AUTHORITY HAS RIGHTLY DI SALLOWED THE DEDUCTION IN 9 DISPUTE AND HE REQUESTED THAT THE IMPUGNED ORDER MA Y BE UPHELD BY DISMISSING THE APPEAL FILED BY THE ASSESSEE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS AVAILABLE WITH US ESPECIALLY THE IMPUGNED ORDER PASSED BY TH E LEARNED FIRST APPELLATE AUTHORITY. WE HAVE THOROUGHLY PERUSED THE RELEVANT PROVISIONS OF THE SALE OF GOODS ACT AS WELL AS THE TERMS & CONDITIONS GIVEN I N THE AUCTION NOTICE DATED 08.03.1974 WHICH ARE REPRODUCED AS UNDER : SECTION 19 OF THE SALE OF GOODS ACT : (1) WHERE THERE IS A CONTRACT FOR THE SALE OF SPEC IFIC OR ASCERTAINED GOODS THE PROPERTY IN THEM IS TRANSFERRED TO THE BUYER AT SUCH TIME AS THE PARTIES TO THE CONTRACT INTEND IT TO BE TRANSFERRED . (2) FOR THE PURPOSE OF ASCERTAINING THE INTENTION O F THE PARTIES REGARD SHALL BE HAD TO THE TERMS OF THE CONTRACT THE COND UCT OF THE PARTIES AND THE CIRCUMSTANCES OF THE CASE. (3) UNLESS A DIFFERENT INTENTION APPEARS THE RULES CONTAINED IN SECTION 20 TO 24 ARE RULED FOR ASCERTAINING THE INTENTION OF T HE PARTIES AS TO THE TIME AT WHICH THE PROPERTY IN THE GOODS IS TO PASS TO THE BUYER. SECTION 22 OF THE SALE OF GOODS ACT : SPECIFIC GOODS IN A DELIVERABLE STATE WHEN THE SE LLER HAS TO DO ANYTHING THERETO IN ORDER TO ASCERTAIN PRICE WHER E THERE IS A CONTRACT FOR THE SALE OF SPECIFIC GOODS IN A DELIVE RABLE STATE BUT THE SELLER IS BOUND TO WEIGH MEASURE TEST OR DO SOME OTHER ACT OR THING WITH REFERENCE TO THE GOODS FOR THE PURPOSE OF ASCE RTAINING THE PRICE 10 THE PROPERTY DOES NOT PASS UNTIL SUCH ACT OR THING IS DONE AND THE BUYER HAS NOTICE THEREOF. TERMS & CONDITIONS GIVEN IN THE AUCTION NOTICE: THE FOLLOWING QUANTITIES MORE OR LESS OF CLEANED SANDALWOOD (ROOTS BILLETS CHIPS AND SAW DUST) WILL BE OFFERED FOR SA LE BY PUBLIC AUCTION AT 9.00 A.M. ON WEDNESDAY THE 3 RD JULY 1974 AT THE FOREST SANDALWOOD SALE DEPOT AT TIRUPATUR ON THE SOUTHERN RAILWAY. THE SALE WIL L BE CONDUCTED BY THE DISTRICT FOREST OFFICER TIRUPATTUR DIVISION TAIRU PATTUR NORTH ARCOT DISTRICT (TAMIL NADU). CLASSWISE DETAILS OF FINAL CLEANED SANDALWOOD TO BE OFFERED FOR SALE. SERIAL CLASS NAME OF APPROXIMATE NUMBER NUMBER CLASS QUANTITY (1) (2) (3) (4) TONNES. KGS. 1. V GHATBADLA 30.000 2. VI BAGARDAD 3.000 3. VII ROOTS FIRST CLASS 10.000 4. VIII ROOTS SECOND CLASS 27.000 5. IX ROOTS THIRD CLASS 40.000 6. X JAIPOKAL FIRST CLASS 180.000 7. XI JAIPOKAL SECOND CLASS 40.000 8. XII AJANBAGAR 25.000 9. XIII CHERIA 5.000 10. XIV AINCHLTA 2.000 11. XVI MILVACHITLA 23.000 12. XVII BASOLABUKNI 104.000 13. XVII SAW DUST 1.000 14. CHARRED WOOD (ROOTS BILLETS AND CHIPS) 10.000 ---------- 500.000 15. XIX SANDAL SAPWOOD TREE AND 400.000 CHIP ----------- TOTAL 900.000 NOTES- (1) THE QUANTITY IS LIKELY TO BE CHANGED. 11 (2) A DETAILED LIST SHOWING THE ACTUAL QUANTITIES IN EACH CLASS THAT WILL BE OFFERED FOR SALE AND LOTWISE PARTICULARS WI LL BE GIVEN TO EACH BIDDER BEFORE THE COMMENCEMENT OF THE SALES. (2) THE WOOD HAS BEEN CLASSIFIED ACCORDING TO THE C LASSES NOTED ABOVE. INTENDING PURCHASERS ARE ADVISED TO INSPECT IN ADVA NCE THE LOTS PUT UP FOR SALE BUT THEY MUST ACCEPT THE CLASSIFICATION MADE IN THE DEPOT AS FINAL. (3) THE VARIOUS CLASSES HAVE BEEN STORED IN THE SAN DALWOOD GODOWN IN LOTS OF 10 15 AND 20 TONNES FOR CONVENIENCE BUT THE LOTS SO EXPOSED WILL NOT CONSTITUTE AN ACTUAL LOT FOR WHICH BIDS WILL BE ACC EPTED. EACH CLASS OF WOOD WILL BE OFFERED FOR SALE SEPARATELY IN LOTS 5 OR 10 TONNES OR LESS IF CONVENIENT SUCH LOTS MERELY CONSISTING OF A CERTAIN QUANTITY O F THE CLASS OF WOOD THEN BEING SOLD. BIDS WILL BE PER TONNE OF EACH CLASS O F WOOD. BIDS SHALL BE IN MULTIPLES OF ` 10 (TEN) PER TONNE FOR EACH CLASS OF WOOD. (4) THE SALE IS SUBJECT TO CONFIRMATION BY THE DIST RICT FOREST OFFICER THIRUPATUR DIVISION OR THE CONSERVATOR OF FORESTS SALEM CIRCL E SALEM AS THE CASE MAY BE WHO RESERVES TO HIMSELF THE RIGHT TO REJECT ANY BID INCLUDING THE HIGHEST BID WITHOUT ASSIGNING ANY REASON FOR SO DOING. (8) EACH PURCHASER SHALL IMMEDIATELY A LOT IS KNOC KED DOWN TO HIM SIGN HIS NAME AT THE FOOT OF THE SALE LIST IN THE COLUMN PRO VIDED FOR THE PURPOSE AND SUCH SIGNATURE WILL BE HELD AS AN ADMISSION ON HIS PART OF HIS HAVING PURCHASED THAT PARTICULAR A LOT AND OF HAVING ACCEP TED THE CONDITIONS OF THE SALE NOTICE. (9) IMMEDIATELY THE SALE IS OVER EACH PURCHASER I F HIS OFFER FOR ANY PARTICULAR LOT HAS BEEN KNOCKED DOWN BY THE DISTRICT FOREST OF FICER OR THE CONSERVATOR OF FORESTS WILL BE FURNISHED WITH A MEMORANDUM SHO WING THE TOTAL AMOUNT DUE FROM HIM. HE SHALL REMIT 25 PER CENT OF THIS AM OUNT INTO ANY OF THE GOVERNMENT TREASURIES IN THE DISTRICT OF NORTH ARCO T OR THE STATE BANK OF INDIA AT TIRUPATTUR OR THE RESERVE BANK OF INDIA AT MADRAS (WITHIN FIFTEEN DAYS FROM THE DATE OF RECEIPT OF THE CONFIRMATION O RDERS OF THE SALE) AND ANOTHER 25 PER CENT ON OR BEFORE 16 TH AUGUST 1974 AND THE BALANCE OF 50 PER CENT LESS THE EARNEST MONEY DEPOSIT REFERRED IN CON DITION 5 SUPRA BEING PAID ON OR BEFORE 6 TH SEPTEMBER 1974 OR AGAINST DELIVERY WHICHEVER IS EA RLIER. SHOULD ANY PURCHASER FAIL TO MAKE THE NECESSARY REM ITTANCE BY THE DATE THE MONEY ALREADY REMITTED WILL LAPSE TO GOVERNMENT AND THE DISTRICT FOREST 12 OFFICER WILL BE AT LIBERTY TO RE-SELL THE WOOD IN Q UESTION AT THE RISK OF THE PURCHASER WHO SHALL BE LIABLE FOR ANY LOSS BUT SHA LL NOT PARTICIPATE IN ANY PROFIT WHICH MAY ARISE BY THE RE-SALE. THE DISTRICT FOREST OFFICER WILL ALSO BE AT LIBERTY TO CHARGE INTEREST OF 6 PER CENT PER A NNUM ON OVERDUE INSTALLMENTS. IN CALCULATING OVERDUE PERIOD OF AND BELOW FIFTEEN DAYS BUT BELOW ONE MONTH AS MONTH AND FURTHER THE DATE ON WH ICH THE PURCHASER RECEIVED THE SALE CONFIRMATION ORDER AND THE DATE O N WHICH THE PAYMENTS DUE FALL ON HOLIDAYS SHALL BE EXCLUDED FROM THESE PERIO D. (9-A). IN THE CASE OF DIRECT REMITTANCES BY THE PUR CHASER INTO ANY BRANCH OF THE STATE BANK OF INDIA THROUGH A CHALLAN IN RESPECT OF ANY INSTALLMENT THE DATE OF SUCH REMITTANCE SHALL BE TAKEN INTO ACCOUNT FOR LEVY OF ANY INTEREST PAYABLE ON OVER DUE INSTALLMENTS. IN THE CASE OF TE LEGRAPHIC TRANSFER ORDER THE DATE OF THE DEPOSIT OF THE AMOUNT BY THE PURCHA SE OR HIS BANKERS IN ANY BRANCH OF STATE BANK OF INDIA SHALL BE RECKONED AS THE DATE OF REMITTANCE. DELIVERIES OF SANDALWOOD HOWEVER WILL BE MADE ONL Y ON RECEIPT OF INTIMATION FROM THE STATE BANK BRANCH OR TREASURY I N MADRAS STATE OF ACTUAL ADJUSTMENT OF THE AMOUNT TO THE CREDIT OF THE DEPAR TMENT. (10). AFTER 50 PER CENT OF THE ENTIRE SALE VALUE HA S BEEN PAID TO THE CREDIT OF THE FOREST DEPARTMENT DELIVERY OF THE SANDALWOOD SHALL BE MADE TO THE PURCHASER PROVIDED THAT UNTIL FULL PAYMENT HAS BEEN MADE A QUANTITY OF WOOD EQUIVALENT OF 25 PER CENT OF THE FULL SALE VALUE SH ALL REMAIN UNREMOVED BUT PAID FOR. THE DELIVERY WILL BE BY FULL LOTS AT A TIME AND NO LOT WILL BE DELIVERED BY PORTIONS. (11). ON THE PURCHASERS PRESENTING CHALLAN AS PROOF THAT 50 PER CENT OF ENTIRE SALE VALUE HAS BEEN PAID THE FACT OF REMITTANCE WILL BE VERIFIED WITH THE BANK BY ASKING FOR THE TRIPLICATE COPIES OF CHALLANS OR BAN K ADVICE. ON RECEIPT OF WHICH A PROPORTION OF THE WOOD PURCHASED WILL BE WE IGHED IN HIS OR HIS AGENTS PRESENCE AND THE QUANTITY HANDED OVER TO HI M AS PROVIDED FOR IN CONDITION 10 SUPRA. IF HOWEVER PROOF IS PRODUCED THAT THE ENTIRE SALE VALUE HAS BEEN PAID THE WHOLE SANDALWOOD PURCHASED WILL B E WEIGHED AND HANDED OVER AFTER DUE VERIFICATION OF THE FACT OF REMITTAN CE AS ABOVE. THE PURCHASER MUST TAKE DELIVERY OF AND REMOVE THE WHOLE OF THE W OOD SOLD TO HIM ON OR BEFORE 2 ND OCTOBER 1974. IF HE FAILS TO TAKE DELIVERY OF THE WOOD AFTER ALL THE AMOUNTS DUE ON SUCH WOOD ARE PAID WITHIN THE VOIDAH THE WOOD WILL BE KEPT 13 IN DOUBLE LOCK OR IN SINGLE LOCK AS THE CASE MAY B E UNTIL SUCH TIME AS AGREES TO TAKEN DELIVER THEREOF AND HE SHALL BE LIABLE TO PAY DEMURRAGE OF RS.20/- PER TONNE PER DAY FOR EACH DAY THE WOOD IS SO KEPT IN DOUBLE LOCK OR IN SINGLE LOCK BEYOND 2 ND OCTOBER 1974. IF THE QUANTITY IN ANY CLASS DURING DELIVERIES RESULTS IN A DEFICIT ON ACCOUNT OF DRIAGE OVER THE RECORDED QUANTITY AT THE TIME OF SALES FRESH STOCKS WILL BE ADDED AND DELIVERED TO MAKE GOOD THE DEFICIT SO ACCRUED. IF HOWEVER FRESH STOCKS ARE NOT AVAILABL E THE VALUE OF THE DEFICIT AT THE PURCHASE RATES WILL BE REFUNDED TO THE PURCHASE R. (13). NO FURTHER CLEANING OR CLASSIFICATION OF SAND ALWOOD WILL BE UNDERTAKEN BY THE FOREST DEPARTMENT NOR WILL PURCHASERS BE ALLOWE D TO CLEAN ANY WOOD PREVIOUS TO WEIGHMENT. THE CLASSIFICATION CLEANING AND WEIGHT AS DETERMINED BY THE FOREST DEPARTMENT MUST BE ACCEPTE D. (15). NO SANDALWOOD SHALL BE REMOVED FROM THE DEPOT TILL A LICENSE TO REMOVE IT SIGNED BY THE OFFICE OF HE FOREST DEPARTMENT WHO DE LIVERED THE WOOD SHALL HAVE BEEN OBTAINED AND TILL EVERY PIECE OF SANDALWO OD THAT CAN BE STAMPED BEARS THE DEPARTMENT SALE HAMMER MARKS. (17). THE WOOD PURCHASED BY EACH PURCHASER SHALL BE IN THE DEPOT AT THE PURCHASERS RISK FROM THE DATE OF RECEIPT OF THE C ONFIRMATION ORDER FOR THE PURCHASER UNTIL IT IS REMOVED. (25). THE PURCHASER SHOULD PAY TO THE FOREST DEPART MENT IN ONE LUMP SUM A SALES TAX AT THE RATES IN FORCE AT THE TIME OF CONFIRMATI ON OF THE SALE ON THE FULL PURCHASE AMOUNT ALONGWITH THE FIRST INSTALLMENT OF THE SALE AMOUNT. (30). THE PERSON/FIRM IN WHOSE NAME THE SALE IS CON FIRMED IS FORBIDDEN TO RESELL THE WOOD IN TURN OR TO MAKE NEGOTIATIONS WITH ANY O THER PERSON FOR SUCH A SALE TILL ALL DUE ARE PAID TO GOVERNMENT AND WOOD TAKEN DELIVERY OF AND REMOVED FROM THE SANDALWOOD DEPOT PREMISES. 14 10. KEEPING IN VIEW THE PROVISIONS OF SECTION 19 AN D SECTION 22 OF THE SALE OF GOODS ACT AND THE TERMS & CONDITIONS OF THE AUCTION NOTICE DATED 08.03.1974 REPRODUCED ABOVE WE ARE OF THE CONSIDERED OPINION THAT IT CANNOT BE SAID THAT THE PROPERTY IN THE GOODS IS PASSED TO THE ASSESSEE PUR CHASER ON THE FALL OF HAMMER IN VIEW OF THE EXPRESS AND UNEQUIVOCAL RULE ENACTED IN SECTION 22 OF THE SALE OF GOODS ACT. 11. WE HAVE ALSO GONE THROUGH CLAUSES 1 2 & 3 OF T HE CONTRACT WHICH SHOW THAT THE CONTRACT WAS FOR THE SALE OF SPECIFIC GOODS IN A DELIVERABLE STATE WHICH WERE REQUIRED TO BE WEIGHED FOR THE PURPOSE OF ASCERTAIN ING THE PRICE AND SINCE THERE WAS NOTHING TO THE CONTRARY SHOWING A DIFFERENT INT ENTION THE PROPERTY IN THE GOODS DID NOT PASS TO THE ASSESSEE UNTIL WEIGHMENT WAS DO NE. ACCORDING TO THE FACTS OF THE CASE SINCE NO PAYMENT WAS MADE WITHIN THE PREV IOUS YEAR AND DELIVERY OF THE GOODS WAS NOT TAKEN THE PROPERTY IN THE GOODS HAS NOT PASSED TO THE ASSESSEE AND SINCE THE POWER OF DISPOSITION OF THE GOODS WAS ALS O PROHIBITED BY THE EXPRESS TERMS OF CLAUSE 30 OF THE CONTRACT THE GOODS NEVER BECAME THE STOCK-IN-TRADE OF THE ASSESSEE. THEREFORE THE QUESTION OF VALUATION OF G OODS AS CLOSING STOCK OF THE ASSESSEE DID NOT ARISE AND THE CLAIM BASED ON VALUA TION RESULTING IN THE REDUCTION OF TRUE PROFIT ASSESSABLE IN THE YEAR UNDER CONSIDERAT ION COULD NOT BE ACCEPTED. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE WE ARE OF THE CONSIDERED OPINION THAT SINCE THE EVENT OF DETERMIN ATION OF CONTRACT DID NOT TAKE 15 PLACE WITHIN THE PREVIOUS YEAR THE ISSUE DOES NOT ASSUME IMPORTANCE IN THE YEAR UNDER CONSIDERATION. THEREFORE WE HOLD THAT THE CL AIM OF THE ASSESSEE AMOUNTING TO ` 14 80 888/- ON ACCOUNT OF VALUATION OF GOODS ARE NO T SUSTAINABLE IN THE EYE OF LAW. THEREFORE THE LEARNED FIRST APPELLATE AUTHORI TY HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. WE AGREE WITH THE FINDING GI VEN BY THE LEARNED FIRST APPELLATE AUTHORITY ON THE ISSUE IN DISPUTE WHO HAS PASSED A WELL REASONED ORDER AFTER DISCUSSION ON THE ISSUE IN DISPUTE IN DETAIL. THERE FORE NO INTERFERENCE IS CALLED IN THE WELL REASONED ORDER PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY. 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. (THE ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY 2011) SD/- SD/- (P.K. BANSAL) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH FEBRUARY 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT CONCERNED 5. DR ITAT AGRA 6. GUARD FILE ASSISTANT REGISTRAR