2008 (8) TMI 192

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..... enue
DEEPAK GUPTA and V. K. AHUJA JJ. Vinay Kuthiala for the appellant. M. M. Khanna with Ms. Pushpa Attri for the respondent. JUDGMENT The judgment of the court was delivered by DEEPAK GUPTA J. - This appeal by the Revenue has been admitted on the following questions of law: "(i) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the change in the method of valuation of closing stock by the assessee from FIFO method to average cost method was justified? (ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 17,33,319 made on account of change in the method of valuation of c .....

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..... ncome-tax Appellate Tribunal (for short "the ITAT") in appeal. The Income-tax Appellate Tribunal accepted the plea of the assessee and came to the conclusion that it was the right of the assessee to change the method of valuation of the stock due to practical difficulties faced by it. Both the methods were well accepted methods and both the methods were recognized by the Institute of Chartered Accountants of India. The Income-tax Appellate Tribunal accepted the explanation of the assessee that it faced practical difficulty in segregating the stock because the stocks were kept in more than 250 different locations throughout the State of H. P. The appeal was allowed and now the Revenue has challenged this order in this appeal before this cour .....

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..... ] 201 ITR 674, clearly held that the assessee has the right to change the method of valuating the stock. It was further held that the Income-tax Officer cannot reject the change only on the ground that the statutory auditor had not agreed to the said system. 7. Similarly, the Bombay High Court in Melmould Corporation v. CIT [1993] 202 ITR 789, held that under section 145 of the Income-tax Act, 1961, the assessee can adopt a method of valuation which is to be followed by it regularly. It also laid down that the assessee can change the method of valuation. Whenever there is a change in the method of valuation, there may be some distortion or discrepancy in the calculations of profits in the year in which the change takes place. But if the ch .....

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