Closing stock valuation dispute upheld where inconsistent method claims failed to dislodge FIFO-based addition.

Undervaluation of closing stock was upheld because the assessee gave inconsistent explanations on the valuation method, alternating between FIFO and weighted average cost. The tax audit report did not clearly substantiate consistent adoption of weighted average cost, and the assessee produced no material to dislodge the Assessing Officer's FIFO-based valuation, which was treated as a permissible stock valuation method. The addition therefore remained valid and the assessee's challenge failed.

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Issues: Whether the addition made on account of undervaluation of closing stock was justified when the assessee claimed to follow the weighted average cost method.

Analysis: The assessee took inconsistent stands on the method of valuing closing stock, at one stage asserting FIFO and at another weighted average cost. The tax audit report did not clearly support the assessee's claim, and the method adopted by the Assessing Officer under FIFO was a permissible method of stock valuation. The assessee failed to produce material to show consistent adoption of weighted average cost method or to dislodge the valuation made by the Assessing Officer.

Conclusion: The addition on account of undervaluation of closing stock was upheld and the assessee's challenge failed.

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