9911796707
TMI Blog1983 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods on the basis of listed selling price less expenses to the extent of 36% but during the assessment year under appeal it adopted a new method of valuation of finished goods, that is to say, the listed selling price less 30% to 32% for expenses and further reduction by 20% for unrealised profits. The explanation of the assessee for adoption of the new method of valuation of finished goods did not find favour with the ITO. He, therefore, rejected the trading results disclosed and after applying the earlier method of valuation of stock followed by the assessee made the following trading additions for each of the assessment years under appeal. Asst. Yr. Amount . Rs. 1972-73 3,68,711 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and hearing of the last appeal it was submitted before the CIT (A) on behalf of the assessee that it started manufacturing of ball bearings since March 1963. The company had been valuing the finished goods at listed selling price less expenses upto and including the asst. yr. 1971-72. During the asst. yr. 1972-73 the opening stock of the finished goods had been valued at listed selling price less 26% for expenses. The closing stock of the finished goods had been valued at listed selling price less 30% for expenses and 20%. For all the subsequent years finished goods had been valued at listed selling price less expenses and 20%. This continued upto the asst. yr. 1976-77. The listed selling price included estimated selling expenses and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or market value whichever is lower. Whichever basis of valuation in adopted, it must be adhered to consistently. Casual departure from the regular basis of valuation cannot be permitted. Similarly, arbitrary valuation of stock regardless of the cost or market value has to be rejected as an improper method of accounting even if it is adopted by the assessee uniformly year after year [Chhaoni Lall Pragdas vs. CIT (1957) 3 ITR 597 (All)]. The assessee may value its stock either at cost or at market rate but he is not entitled to value it below both. In cases of under valuation the ITO has power to reject that part of the assessee's method and proceed to compute the income on the basis of a proper valuation under the proviso to sub-s. (1) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held that the mode of valuation of closing stock can be changed by the assessee provided such changed method is followed regularly. In the present case, the appellant has not followed this changed method regularly. Further, as discussed above, in calculating the cost figure for the stock deduction for the margin of profit only should be made. I am, therefore, of the view that the ITO is correct in computing the profit on the basis of valuation of finished goods as adopted by the assessee upto the asst. yr. 1971-72." 5. The assessee has carried the matter in further appeals before us, and the ld. Counsel for the assessee contended that it is settled law that the assessee has a right to value the closing stock at cost price or market pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of closing stock must be deemed to be part of the method of accounting. Since profits for income-tax purposes are to be computed in conformity with the ordinary principle of commercial accounting, it is essential that there should be a definite method of valuation of stock which should be carried through from year to year. As has been held by the Calcutta High Court in the case of Champalal Baid vs. CIT (1967) 65 ITR 670 (Cal) if an assessee does not regulary adopt any consistent method of valuation of stock, department is entitled to reject the same. Following the principle laid down by the Calcutta High Court in the above case which is binding on us and considering the fact of the change effected by the assessee in regard to the val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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