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TMI Blog2005 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... hod of valuing stocks under the principles of accountancy? (2) Whether, on the facts and circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the additions of Rs. 83,192 and Rs. 2,336 made by the IAC(I), Karnal, on account of undervaluation of closing stock of gold and silver, respectively? The assessee is a registered partnership firm engaged in the business of manufacture and sale of gold ornaments. For the assessment year 1981-82, it filed a return on August 27, 1981, declaring an income of Rs. 30,280. The Inspecting Assistant Commissioner (Investigation), Karnal, completed the assessment on January 29, 1983. He made additions of Rs. 83,192 and Rs. 2,336 on account of alleged undervaluation of the closing stock of gold and silver, respectively. The appeal filed by the assessee against the order of assessment was allowed by the Commissioner of Income-tax (Appeals) vide his order dated January 31, 1984. He relied on the order passed by the Tribunal in I.T.A. No. 556/(Chand) of 1977-78-ITO v. Gopi Chand Kishori Lal and deleted the additions made by the Inspecting Assistant Commissioner. Feeling a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. In the said case, it was observed by their Lordships that: '... The method or the process of valuing the unsold stocks and work-in-progress adopted by the assessee in the manner done in the year in question had been consistently and regularly followed by the assessee and accepted by the Revenue for over a large number of years. There was the evidence on behalf of the assessee that the method followed was a regular method having regard to the nature and type of business carried on by the particular assessee.' Under the circumstances, there could not be any disturbance by the Revenue. As a matter of fact, the issue is squarely covered in the earlier decision and as per the consistent view of this Bench that since it is a common dispute arising in the case of jewellers, we have dealt with the two cases cited by the learned senior Departmental Representative also which, according to us, support the contentions those of the assessee on the basis of consistent adoption of method of closing stock valuation." Shri Rajesh Bindal, learned counsel for the Revenue, fairly admitted that the assessee had continuously followed the same method of valuation of the stock and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price; (3) A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation; (4) The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within recognised limits; (5) Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation; (6) Under section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income-tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income-tax Officer may determine." In CIT v. Fazilka Co-operative Sugar Mills Ltd. [2002] 255 ITR 411 a Division Bench of this court considered the question similar to the one referred by the Tribunal in the present case. The facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per gm. which clearly indicated that the pattern of closing stock valuation by the assessee was in conformity with the other jewellers and particularly the case on which reliance was sought to be placed. It is really surprising that though the Income-tax Officer adopted the market sale price towards the close of the year in the case of Sant Ram Mangat Ram to enhance the closing stock valuation of the assessee's stocks, closing stock valuation in that case was given a clean go-by and which was the same as in the case of the assessee. After closely perusing the facts of the case and hearing the parties, in our opinion, the Income-tax Officer clearly misdirected himself in adopting the value of the closing stock in the assessee's case at market rate and the assessee's method of valuation was in conformity with the earlier years pattern of closing stocks as also in conformity with the other jewellers. Therefore, the Appellate Assistant Commissioner's approach in the case has been correct that there was no undervaluation of stock at all. On such view of the matter, we dismiss the Revenue's appeal. While deciding this appeal, we have closely perused the orders of the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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