2016 (2) TMI 307 - HC - Income Tax

Reopening of assessment - valuation of stock questioned - Held that - As during the original scrutiny assessment, the issue of valuation of stock had been examined at length. We may recall that the assessee is engaged in the business of jewelery. During a survey operation conducted on 3.2.2010, unaccounted cash was found and difference in stock in the books and physical verification were revealed. During the assessment proceedings, there was considerable debate about the valuation of the stock in the nature of jewelery. The assessee contended that much of the stock may be old and that therefore, current price cannot be applied. The Assessing Officer estimated the valuation of such on stock on average purchase price. It can thus be seen that the question of valuation of stock was one of the prime aspects, the Assessing Officer examined during the original assessment. That being the situation, any attempt on part of the Assessing Officer now to reopen the assessment on the question of correct methodology for valuation of such stock would only be in the nature of change of opinion and not permissible as reiterated by the Supreme Court in case of Commissioner of Income Tax v. Kelvinator of India Ltd. reported in (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) - Decided in favour of assessee

Summary

Issues:
Challenging a notice seeking to reopen assessment for the assessment year 2010-2011 based on valuation of stock in the jewelry business.

Analysis:

1. Valuation of Stock Issue:
The petitioner challenged a notice to reopen assessment for the year 2010-2011 based on valuation of stock. The Assessing Officer conducted a survey in 2010, noting unaccounted cash and stock differences. The petitioner argued for valuing excess stock at average purchase price due to the nature of the jewelry business. The original assessment accepted this method. However, the Assessing Officer sought to change the valuation method in the reopening notice. The court noted that the valuation of stock was extensively examined during the original assessment, and any attempt to reopen based on a different valuation method would be impermissible as it would amount to a change of opinion, citing the Supreme Court's ruling in Commissioner of Income Tax v. Kelvinator of India Ltd. (2010) 320 ITR 561(SC).

2. Legal Standpoint:
The court emphasized that the Assessing Officer had thoroughly examined the valuation of stock during the original assessment. Shifting the valuation method in the reopening notice was deemed a change of opinion, not permissible under the law. The court highlighted the importance of consistency in assessment procedures and upheld the petitioner's argument that the original valuation method should stand.

3. Conclusion:
The High Court quashed the impugned notice dated 18.3.2015, ruling in favor of the petitioner. The court held that the attempt to reopen the assessment based on a different valuation method for stock in the jewelry business was unjustified and amounted to a change of opinion. The petition was disposed of accordingly, providing relief to the petitioner against the reopening of the assessment for the year 2010-2011.