According to this thread, it wasn't U-120 that was lost this way it was the U-1206 (KL Karl-Adolf Schlitt).



Here is the story of the killer toilet:

"Every U-boat, except midget craft, had a toilet, with the larger types even having two, but one of them was usually used as a larder and therefore could not accommodate the crew until they had passed the contents through the other one. All U-boats had a so-called 'upper deck toilet' as men just urinated over the side. Of course, this luxury could not be used when the boat was submerged and once deeper than about 25m the interior toilet had to be closed as well because the water pressure outside the boat was too great to pump the contents out. This was hardly an imposition at the beginning of the war, but longer dives became the order of the day as the anti-U-boat measures became more ferocious, with boats in the Mediterranean and in American waters regularly remaining submerged for periods of 24 hours or so and special, high-pressure thunder boxes had to be installed. After all a functional 'head' could make all the difference between total and partial concentration.

The operation of this high-pressure toilet proved to be so difficult that men with a technical aptitude were specially trained to learn the intricacies of the new weapon. There was a delicate naval term for these men, and the term 'Toilet Graduate' will probably suffice in English. At least one boat, U1206 (KL Karl-Adolf Schlitt), was lost as a direct result of mishandling this complicated 'thunder box'. Kptlt Schlitt tried the system for himself but the LI sent a toilet graduate to help, and somehow with two minds on the same job, the levers were pulled in the wrong order and the commander's offering plus a thick jet of salt water was squirted into their faces. Seeing what had happened, the LI took the boat up to relieve the pressure, but some of the inflowing water drained into the batteries below to produce poisonous chlorine gases (chlorine is produced when salt from sea water reacts with acid in the batteries) and eventually, after an attack from aircraft, the boat had to be abandoned."

Source: Showell, Jak P. Mallmann. U-Boats Under the Swastika. Annapolis, MD: Naval Institute Press, 1987. ISBN: 0-87021-970-7. Copyright: Jak P. Mallmann Showell, 1987.