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TMI Blog2017 (2) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of the immediately succeeding financial year. The assessment order dated 30-11-2010 passed u/s 143(3) of the Act for assessment year 2008-09 in the case of instant assessee wherein no addition has been made by Revenue on account of method of valuation of inventory is placed on record in file. Revenue has not been able to bring on record that how by following FIFO method of valuation of inventory based on cost, the profits of the assessee could not be computed correctly so as that it infringes on Section 145/145A of the Act. Appeal filed by the assessee is allowed. - I .T.A. No.2232/Mum/2015 - - - Dated:- 31-1-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Vipul Shah For The Revenue : Shri Saurabhkumar Rai,DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 2232/Mum/2015, is directed against the appellate order dated 19-02-2015 passed by the learned Commissioner of Income Tax (Appeals)- 17, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2007-08, the appellate proceedings before the learned CIT(A) arising from the assessment order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 29.10.2012 along with questionnaire and in response, the assessee submitted as under:- The assessee has maintaining the stock on FIFO basis i.e. First in First Out Basis. As per FIFO basis of valuation of inventories, at the time of sale, the stock which was acquired first gets reduced from the existing stock. Accordingly, the stock acquired last will form part of closing stock. We would like to inform you that the assessee had valued the closing stock at the rate of ₹ 119.69/-. But according to the reasons for reopening the case , it should be valued at ₹ 154.5/-. We would like to inform that the assessee had purchased goods at an average rate of ₹ 177/- for the first 8 months of the financial year i.e. , from April to November. Then for the next three months i.e. , December to February the assessee had purchased goods at an average rate of ₹ 113/-. Therefore to conclude the above, the assessee had initially purchased 3,14,241 mtrs of goods at average cost of ₹ 177/- and for the later quarter the assessee had purchased 2,33,882/- mtrs of cloth at the average cost of ₹ 113/-. The closing stock as per books of accounts is 1,09,751 mtrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of India. The assessee having submitted the monthly summary of the fabric purchased and sold during the year and all other details in support of the claim of closing stock valuation which is absolutely clear as the provisions of section 145A of the Act relating to method of stock valuation. The assessee submitted the entire summary and had also filed copy of purchase bills in support of the claim of closing stock valuation. The assessee also submitted that once FIFO method of valuation of inventory is applied , then inventory cannot be valued based on average cost method. The ld. CIT(A), however, considering the submissions of the assessee and the facts of the case, rejected the contentions of the assessee and observed that the stock is to be valued at cost or market price whichever is lower based on the arithmetic on the one hand and prudence on the other is also to be followed for computing income of the assessee. In support, the ld. CIT(A) relied upon the decision of Hon ble Supreme Court in the case of Chainrup Sampatram v. CIT (1953) 24 ITR 481 (SC) and Investment Limited v. CIT (1970) 77 ITR 533 (SC). It was observed by learned CIT(A) that the assessee is contending that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d become opening stock of the next year and the tax effect is neutral. It is also held in that order that the tax-payer had been consistently following the said method of valuation of inventories which is accepted by Revenue. The ld. Counsel submitted that in the immediately succeeding year i.e. assessment year 2008-09, the A.O. had framed an assessment order dated 30-11-2010 u/s 143(3) of the Act in the case of the assessee itself whereby he accepted the method of valuation of stock followed by the assessee, said assessment order is placed in file. 7. The ld. D.R., on the other hand, submitted that the method of valuation of inventory followed by the assessee is FIFO method, hence, the authorities below had rightly brought to tax the differential amount to tax as the assessee is required to follow cost or market price whichever is less method for valuation of inventory. 8. In the rejoinder, the ld. counsel for the assessee submitted that all details were submitted before the authorities below and it is wrong to say that quantitative details and other supporting details were not provided to the authorities below. He referred to the ld. CIT(A) s order para No. 1.2.1 and 1.2.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has been following FIFO method for valuation of its stocks in all earlier and subsequent years and no addition has ever been made. The assessment order was passed u/s 143(3) for A.Y. 2009-10 accepting FIFO method of stock valuation. It is further noted that assessee had submitted copies of bills and other evidences to justify valuation based upon FIFO method. Further, nothing wrong could be pointed out by the Ld. DR in the detailed and well reasoned findings of Ld. CIT(A). Further, it is noted by us that closing stock of the impugned year had become opening stock of the next year. Thus, viewed from this angle also, overall tax effect taking both the years into account will be tax-neutral. Under these circumstances, we do not find any necessity to make interference in the order of Ld. CIT(A), therefore, this ground is rejected. The Revenue has also accepted the method followed by the instant assessee consistently for past several years and also for succeeding year and per-se no such contrarian stand of the Revenue was brought on record except for the impugned assessment year by learned DR or authorities below to disprove this contention of the assessee , and also mor ..... 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