
    Sprague Tire & Rubber Co., Petitioner, v. Commissioner of Internal Revenue, Respondent.
    Docket No. 4717.
    Promulgated April 16, 1928.
    
      F. S. Gaines, Esq., for the petitioner.
    
      Arthur II. Murray, Esq., for the respondent.
   OPINION.

Lansdon:

The evidence is adverse to the determination of the respondent in this proceeding. The head bookkeeper of the petitioner testified that the physical inventory as of December 31, 1919, was taken by count and weight under his immediate and personal supervision and that he priced, computed, extended and totaled the values of all items at cost or market, whichever was lower. Such total was reported in the petitioner’s income and profits-tax return for the taxable year. Since it is established that the inventory sheets of such physical inventory have been lost and that every possible effort has been made to produce them, the testimony of the man under whose supervision the inventory was made and who computed the values of the several categories of materials is accepted as persuasive of the correctness of the amount claimed. By reason of some misifihderstanding between the bookkeeper and the firm of accountants which audited the accounts and business and made up the income and profits-tax return of the petitioner for the taxable year, no adjusting entries to reconcile the perpetual and physical inventories were ever made. This was bad bookkeeping but can not be made the basis for additional tax liability.

Judgment will be entered for the petitioner.  