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TMI Blog2012 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... . Parthasarathi for the Respondent. JUDGMENT 1. The respondent/assessee in the above appeals are one and the same and the assessment year pertains to 1999 to 2005. The assessee in the accounts and in the returns filed has not included the excise duty paid on the closing stock to indicate the valuation of the closing stock. 2. The contention of the assessee is that the excise duty paid need not be included in the valuation of the closing stock and non-inclusion would be a revenue neutral and would have no impact upon the tax payable. 3. Per contra, Sri K.V. Aravind, learned Advocate for the appellant strenuously submitted that the purport of the provision of Section 145A of the IT Act does not concern with the tax effect, but it prescribes the method and procedure of accounting, which assessee has to follow in terms of Sec. 145A of the Act. 4. The provision of Section 145A of the IT Act came to be incorporated by the Finance Act w.e.f. 1.4.1999. For the assessment year is concerned, Section 145A of the I.T. Act, reads as follows: 145A. Method of accounting in certain cases.- Notwithstanding anything to the contrary contained in section 145.- (a) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC). 17. The object of stock valuation is the correct determination of the profits and loss resulting from a year's trading. It is the true result of the trading activity of that year that must be disclosed by the books. ...... the profits are the profits realised in the course of the year. What seems an exception is recognised where a trader purchased and still holds goods or stocks which have fallen in value. No loss has been realised. Loss may not occur. Nevertheless, at the close of the year he is permitted to treat these goods or stocks as of their market value. [Whimster and Co. v. IRC (1917-26) 12 Tax Cases 813, 827]. As stated by Patanjali Sastri C.J. in Chainrup Sampatram v. CIT [1953] 24 ITR 481 (SC) at 485-486 :TC2R.124: It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the chargeable income. Such a system may produce a comparatively lower valuation of the opinion stock and the closing stock, thus showing a comparatively low difference between the two. In a period of rising turnover and rising prices, the system adopted by the assessee, as found by the Tribunal, is apt to diminish the assessment of the taxable profit of a year. The profit of one year is likely to be shifted to another year which is an incorrect method of computing profits and gains for the purpose of assessment. Each year being a self - contained unit, and the taxes of a particular year being payable with reference to the income of that year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deduced therefrom. It is, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income.' 7. It is submitted that the ratio laid down by the Supreme Court in the said decision was prior to incorporation of Section 145A of the Act. The assessees were bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, he is obliged u/s 145-A to value the goods which should include the excise duty paid or incurred. 13. The Bombay High Court, in the case of CIT v. Loknete Balasahab Desai S.S.K. Ltd. [2011] 339 ITR 288 in paras 9 to 12 has interpreted Section 145A and made the following observations:- 9. The expression 'incurred by the assessee' in S.145A(b) is followed by the words 'to bring the goods to the place of its location and condition as on the date of valuation'. Thus, the expression 'incurred by the assessee' relates to the liability determined as tax, duty, cess or fee payable in bringing the goods to the place of its location and condition of the goods. Explanation to S.145A(b) makes it further clear that the income chargeable under the head 'profits and gains of business' shall be adjusted by the amount paid as tax, duty, cess or fee. Therefore, the expression 'incurred' in S.145A(b) must be construed to mean the liability actually incurred by the assessee. 10. Where the excisable goods are manufactured and are lying in stock on the last day of the accounting year, whether the manufacturer has incurred liability to pay excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect in respect of the disputed issues exceeds the monetary limit specified in para 3. No appeal shall be filed in respect of assessment year or years in which the tax effect is less than the monetary limit specified in para 3. In other words, henceforth, appeals can be filed only with reference to the tax effect in the relevant assessment year. However, in case of a composite order of any High Court or appellate authority, which involves more than one assessment year and common issues in more than one assessment year, appeal shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed of the year(s) in which the tax effect exceeds the monetary limit prescribed. In case where a composite order/judgment involves more than one assessee, each assessee shall be dealt with separately. 17. In case of an assessee, where common order is passed in respect of more than one assessment year, which involves common issues even if in one of the assessment years the tax effect is more than ₹ 10 lakhs, irrespective of the fact that in respect of other assessment years which is part of the common order, the tax effect is less than ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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