Block assessment cannot rewrite closing stock valuation without seized material; consistent average cost method was accepted.

In block assessment, closing stock cannot be revalued by substituting the assessee's consistently accepted average cost method with FIFO unless seized material shows that the disclosed valuation is unreliable. The Tribunal noted that the assessee had regularly followed the average cost method, which had been accepted in earlier assessments, and that the addition arose only from the Assessing Officer's preference for FIFO to arrive at a higher closing stock value. In the absence of incriminating material found during search, there was no basis to disturb the regular valuation method or sustain the addition, which was deleted.

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Issues: Whether the addition made on account of alleged under-valuation of closing stock by substituting the assessee's regular average cost method with the FIFO method in block assessment could be sustained in the absence of incriminating material found during search.

Analysis: The assessee had consistently followed the average cost method for valuing stock, and that method had been accepted in earlier assessments. The addition was made only because the Assessing Officer preferred the FIFO method and worked out a higher valuation of closing stock. The Tribunal noted that block assessment is to be based on seized material and that no incriminating evidence was found showing that the method of stock valuation itself was or that the disclosed stock valuation could be disturbed on the basis adopted by the Assessing Officer. Following the coordinate bench decision in the assessee's sister concern, it held that there was no basis to reject the regular method of valuation or to make the addition.

Conclusion: The addition for alleged under-valuation of stock was not sustainable and was rightly deleted, as the Revenue's challenge failed.

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