1996 (6) TMI 31

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..... ioner of Income-tax is bad in law and vitiated in exercise of his jurisdiction under section 263, without showing cause and affording proper opportunity on the ground on which the order of the Income-tax Officer is set aside ? (b) Whether, on the facts and in the circumstances of the case and on the face of dissolution deed authorising to value closing stock on cost price, the Tribunal erred in law in holding that the closing stock is to be valued at market rate ? (c) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that even in case of distribution of assets (silver in specie) on cost rate, the valuation is be made at market rate ? " The assessee was a registered firm. The relevant yea .....

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..... ust 24, 1986, before the Commissioner of Income-tax. In the said reply, it was stated that the method of valuation of closing stock of silver was cost price and the same method had been followed by the assessee for the last many years. It was also stated that the assessee had filed the closing stock inventory of silver ornaments before the Income-tax Officer at the time of the assessment in which the assessee had shown the year-wise purchases of silver ornaments remaining in stock. It was also contended that the value of closing stock shown by the assessee was more than the purchase price of stock in hand and as such there was no undervaluation of closing stock. The Commissioner of Income-tax having considered the objection of the assesse .....

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..... the period. Their Lordships further observed : " There can be no manner of doubt that, in taking accounts for purposes of dissolution, the firm and the partners, being commercial men, would value the assets only on a real basis and not at cost or at their other value appearing in the books. The real rights of the partners cannot be mutually adjusted on any other basis. " Shri Goyal, learned counsel for the applicant-assessee, pointed out that as per the agreement between the parties (dissolution deed) it has been made clear as to how the stock, assets, credits, etc., have to be distributed amongst the partners at the time of dissolution. The closing stock of silver, he further submitted, was thus valued at cost rate and distributed a .....

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