1952 (7) TMI 15 - HC - Income Tax

Court confirms stock valuation, abandonment of objection upheld, Rs. 2,000 shortage addition affirmed. Parties bear costs.

The court confirmed the valuation method of the closing stock chosen by the assessee, upheld the statement regarding the abandonment of objection before ... - Issues Involved:1. Valuation of closing stock.2. Abandonment of objection before the Appellate Assistant Commissioner.3. Addition of Rs. 2,000 on account of shortage in tins.Issue-Wise Detailed Analysis:1. Valuation of Closing Stock:- Question (1)(a): The court addressed whether the closing stock should be valued at the average cost price for the year or at its actual cost price when the actual price is known or easily ascertainable. The court emphasized that the principle of valuing stock at cost or market price, whichever is lower, is well-established for both commercial and revenue purposes. The court noted that the assessee valued the closing stock at the average price of aggregate purchases, while the Department limited it to the average of purchases made at the end of the year. The court concluded that the method of valuation chosen by the assessee, which was the average cost price of the entire stock purchased during the year, was appropriate and could not be interfered with by the Department. The court stated, 'The method of accounting chosen by the assessee for valuing the stock at average cost during the period covered by the account which was less than the market price cannot be interfered with.'- Question (1)(b): The court confirmed that the method of valuation of stock followed by the assessee company was correct on the facts and circumstances of the case. The court highlighted that the choice of the method of valuation is left to the assessee, provided it is employed regularly. Since it was the first year of the company's account, the assessee was free to adopt its method of valuation. The court stated, 'The answer to question (1)(b) follows and it is that the method of valuation of the stock adopted by the assessee company is correct on the facts and circumstances of this case.'2. Abandonment of Objection Before the Appellate Assistant Commissioner:- Question (2)(a): The court addressed whether the Tribunal could disregard the statement in the Appellate Assistant Commissioner's order that the assessee's agent had abandoned a particular objection. The court concluded that it was not open to the Tribunal to disregard the statement in the Appellate Assistant Commissioner's order. The court referenced T.V. Krishna Iyer v. C.S. Lakshmanan Pillai, stating, 'The answer to question (2)(a) is obvious and it is that it is not open to the Tribunal to disregard the statement in the Appellate Assistant Commissioner's order.'3. Addition of Rs. 2,000 on Account of Shortage in Tins:- Questions (2)(b), (2)(c), and (2)(d): The court addressed whether the addition of Rs. 2,000 on account of shortage in tins was arbitrary, whether the question could be reopened, and whether the addition was correct. The court concluded that the addition was not arbitrary, the question could not be reopened, and the addition was correct. The court noted that the representative of the company had stated that he did not wish to press the objection regarding the estimate of Rs. 2,000, and there was no affidavit denying this statement. The court stated, 'The answer to question (2)(b) and (2)(c) is in the negative and the answer to question (2)(d) is in the affirmative.'Conclusion:The court answered the questions referred to it, confirming the method of valuation of the closing stock adopted by the assessee, upholding the statement in the Appellate Assistant Commissioner's order regarding the abandonment of the objection, and affirming the addition of Rs. 2,000 on account of shortage in tins. The court directed the parties to bear their respective costs of the reference. The judgment was concurred by both judges.