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TMI Blog2004 (11) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... or the AY 1982-83 and any change in the valuation of the closing stock of the AY 1982-83 will have no effect on the value of the opening stock of the AY 1982-83. Thus, the Tribunal was not justified in applying the tanning charges of Rs. 47 per hide only in respect of 170 hides and making adjustment of 17,238 hides being the opening stock of that year X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to have been tanned only to the extent of 3%. On enquiry this was found to be incorrect. He found that 3,751 finished hides were sold in October, 1981, 3,890 finished hides were sold in November and so on. Taking into account the fact that 4 to 5 months were required for completion of the entire tanning, he held that most of the hides included in 17,408 were at the finishing stages and, therefore, the value of the tanning material used on them was much higher than that estimated by the respondent. After applying an average method taking into account the period of tanning, he had held that the value of the material used on 17,408 hides could be estimated at Rs. 9,66,935. He substituted this amount for Rs. 52,224 resulting in an addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounting year could be taken at the cost or market price, whichever is lower. In the case of Ramswarup Bengalimal v. CIT [1954] 25 ITR 17 this court has held that two principles have now become well settled: (1) that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and (2) that the value of closing stock must be the value of opening stock in the succeeding year, that is, an assessee cannot close his accounts and value his stock at a particular figure and the next morning on the first day of the next year he cannot value it at a different figure. This principle was also recognized by the Supreme Court in Chainrup Sampatram v. CIT [1953] 24 ITR 481 wherein the apex court has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,20,279. The result of the order of the Income-tax Officer is that the stock which was valued at Rs. 5,09,874 at the cost of the earlier year came to have a lower value of Rs. 4,20,279 the very next day on the October 1, 1947, at the beginning of the succeeding previous year which means that by the course adopted by the Income-tax Officer, the principle laid down that the value of the closing stock must be the value of the opening stock in the succeeding year was violated. This court has held that the course adopted by the Income-tax Officer was not permissible in law. This court has further held that there is no rule that the opening stock and the closing stock of the same accounting year must necessarily be valued at one and the same basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the closing stock of the preceding year must be the value of the opening stock of the next year. The change, therefore, has to be effected by adopting the new method for valuing the closing stock which will, in its turn, become the value of the opening stock of the next year and if, instead, a procedure is adopted for changing the value of the opening stock, it will lead to a chain reaction of changes in the sense that the closing value of the stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. It has further held that the value of the opening stock of that year is not to be revised. Applying the principles laid down in the aforesaid cases to the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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