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TMI Blog2017 (2) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... record to doubt the bonafides of the valuation. In the event of likelihood of the stocks realising a higher amount than the value shown, the same would be reflected in the subsequent year in the income or profit of the assessee, the Revenue’s contention is without any merit. Nor do we find any reason to subscribe and uphold the AO’s adverse observations that the change in method of valuation was without basis. In fact the observations of the CAG in this case led to the change and adoption of AS-2, which was not previously resorted to. - Decided against revenue - ITA 783/2016 & CM No. 41564/2016, ITA 785/2016 & CM No. 41566/2016, ITA 815/2016, ITA 816/2016 & CM No. 43356/2016 - - - Dated:- 8-2-2017 - HON'BLE MR. JUSTICE S. RAVIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment rejected the valuation and he made a corresponding addition. Whilst the AO acknowledged that accounting standard changed could be resorted to; in the present case the assessee had urged that it followed AS-2, in his opinion the valuation made i.e. at 5% of the original cost, was not on a scientific basis. He, therefore, rejected it. 3. The CIT(A) confirmed the AO s order. On appeal, the ITAT accepted the assessee s contention and held inter alia as follows: ... 9.1 On perusal and careful consideration of the matter, we are of the view that, having regard to the procedure of valuation adopted by the assessee, genuineness and bona fide of the claim cannot be doubted. The observation of CAG reproduced at page 96 of the Paper Book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the income shall be computed on the system of accounting regularly followed by the assessee. However, the provision u/s 145 cannot be interpreted to mean that once a system of accounting is adopted, it can never be changed. It has not been pointed out with reference to any provision that a change is impermissible or barred even when it is warranted by an existing situation.... 4. The ITAT also took note of the judgment of the Bombay High Court in CIT vs India Rare Earth Ltd. (2015) 375 ITR 276. In that decision the Bombay High Court had interpreted Section 145A in the following terms: ....8. In our view, the objection raised by the assessee on account of the method of accounting is not justifiable, inasmuch as Section 145A deals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame are accordingly dismissed. There will be no order as to costs.... 5. This Court is of the opinion that the Revenue s contentions are unmerited. The assessee was all along reflecting the full value of the stock; for the year i.e. AY 2004-05 the CAG had made an observation that Slow-Moving Stock had to be realistically valued. This resulted in a fresh valuation by an engineering expert. Based upon this exercise the valuation was reduced to ` 47.76 crores. 6. Having regard to these circumstances, the Revenue s contention that the acceptance of 5% as the basis for valuing the Slow Moving Stock being unscientific, is baseless in our opinion. Once the engineering expert examined all the heads of stock and valued them, to the best of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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