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Issues involved: Appeal against allowing loss on account of change in method of accounting for assessment year 2005-06.
Summary: The appeal by the Revenue was against the direction of the Commissioner of Income-tax (Appeals) for allowing loss on account of a change in the method of accounting. The assessee had changed the method of valuation of closing stock from "cost" to "at cost or market price whichever is lower," resulting in a lower profit being shown. The Assessing Officer disallowed this change, leading to an addition of Rs. 94.06 lakhs. However, the Commissioner of Income-tax (Appeals) deleted this addition, stating that the new method was properly followed and in line with legal principles. Upon hearing the submissions and reviewing the material, it was noted that the change in the method of valuation of closing stock was bona fide and in accordance with the law. The Supreme Court had previously approved such a method of valuation. The Tribunal observed that as long as the change is genuine and consistently followed, there should be no objection. The Tribunal also highlighted previous judgments supporting such changes in valuation methods, emphasizing the importance of consistency. The Tribunal found that the Commissioner of Income-tax (Appeals) was justified in deleting the addition, as there was no evidence to refute that the new method was consistently applied. Therefore, the Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal. The order was pronounced on June 10, 2009.
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