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Issues involved:
The legal issues involved in the judgment are related to the valuation of stock for income tax assessment, specifically focusing on the change in the method of stock valuation by the assessee and its impact on taxable income. The key questions revolve around the justification of the change in valuation method and whether it was done with a bona fide intention or with the aim of reducing tax liability. I.T.A. No. 351 of 1999: In this case, the assessee changed its method of stock valuation during the assessment year 1975-76, resulting in a reduction of taxable income by Rs.2,93,56,000. The Assessing Officer added this amount back to the income, citing the decision in McDowell and Co. Ltd. case. However, the Commissioner of Income-tax (Appeals) allowed the appeal, noting that the change was accepted in subsequent years and was in line with accepted accounting methods. The Tribunal, through a Third Member, upheld the Commissioner's decision, emphasizing the absence of mala fide intention in the method change. Tax Appeals Nos. 758 to 761 of 1999: These appeals are based on the same issue as I.T.A. No. 351 of 1999, concerning the change in stock valuation method by the assessee. The Revenue contended that the change was an attempt to reduce taxable income unjustly, referencing the McDowell and Co. Ltd. case and the need for consistent practice. The assessee argued that the change was made in good faith to align with industry standards, supported by various judgments. The Court analyzed the facts and legal precedents, concluding that the change in stock valuation method was bona fide and in line with industry practices. Citing decisions from various High Courts, including the Calcutta High Court and the Delhi High Court, the Court emphasized that a genuine change in valuation method should be accepted by the Revenue. The Court found no reason to deviate from established legal principles and dismissed the appeals, affirming the decisions in favor of the assessee. Therefore, the Court rejected I.T.A. No. 351 of 1999 and dismissed Tax Appeals Nos. 758 to 761 of 1999, with no order as to costs.
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