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TMI Blog1993 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... that the value of the closing stock for the year ending March 31, 1968, was carried forward as the value of the opening stock on April 1, 1968. The assessee, however, decided to change its method of valuation by valuing the stock at cost price only excluding the overheads. The assessee accordingly valued its closing stock for the assessment year in question, i.e., as on March 31, 1969, at cost price. The Income-tax Officer increased the gross profit rate in view of the difference in the method of valuation of opening stock and closing stock. The assessee took the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner recalculated the valuation of the closing stock by adding overheads to cost and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings was the question ever raised as to whether it was permissible for the assessee to revalue its stock by not including in the cost price overhead expenses. The Tribunal has not dealt with this aspect, viz., the manner in which the closing stock has been valued in the present case. Therefore, the decision of the Supreme Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44, is not attracted to the question before us for consideration. The decision of the Tribunal is on the footing that since the closing stock was valued by adopting a certain method, the same method should be adopted in valuing the opening stock. In other words, the change in the method of valuation, according to the Tribunal, should commence with val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a higher or a lower valuation. In such cases the new valuation is applied at the end of the year without amendment of the opening valuation. " (underlining ours). The same principle has been adopted by the Karnataka High Court in CIT v. Corporation Bank Ltd. [1988] 174 ITR 616. It has said headnote): "The two principles applicable with regard to the valuation of stock are that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and that the closing stock must be the value of the opening stock in the succeeding year. It is, thus, clear that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question, which was the first year when the change of method was brought about, a prejudice or detriment might be caused to the revenue, because the opening stock was valued at total cost while closing stock was valued at, direct cost. " It said (headnote): " If the assessee is called upon to apply the new method of valuation to the opening stock of the accounting year as well, the value of the closing stock of the year previous to the accounting year will also have to get altered which will result in a modification of the assessment of that previous year." The same reasoning has been adopted by the Andhra Pradesh High Court in the case of CIT v. Mopeds India Ltd. [1988] 173 ITR 347. Before the Andhra Pradesh High Court also, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the change takes place. But if the change is brought about bona fide and is in accordance with the normally accepted accounting practice, there is no reason why such a change should not be permitted. Undoubtedly, the proviso to section 145 of the Income-tax Act, 1961, lays down that: "Provided that in any case where the accounts are correct and complete to the satisfaction of the Assessing Officer but the method employed is such that, in the opinion of Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing Officer may determine." This is not such a case. The only question is whether the opening stock is also required to be revalued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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