Opening stock must follow the prior year's closing stock valuation, preventing repeated trading loss claims under mercantile accounting.

For income-tax computation, opening stock in a succeeding year must ordinarily be taken at the value fixed for the corresponding closing stock in the preceding year. Where an assessee has valued closing stock at market price in one year and been assessed on that basis, it cannot revalue the same opening stock at purchase cost in the next year merely to alter trading profit or loss. The principle prevents the same loss from being claimed more than once and preserves consistency in mercantile accounting. The earlier accepted valuation remains binding unless a mistake in that valuation is shown.

---

---

Issues: Whether an assessee who has valued closing stock at market price in one year and has been assessed on that basis can, in the succeeding year, revalue the same opening stock at purchase cost for computing profit or loss.

Analysis: The valuation adopted for closing stock in the earlier year fixed the basis on which that stock carried into the next year must be taken, unless a mistake in the market valuation is shown. Allowing the assessee to revert to the original purchase price for the same goods would permit the same loss to be claimed repeatedly across years and would distort the computation of yearly trading results under the mercantile system.

Conclusion: The assessee was bound by the market value previously adopted and could not revalue the opening stock at purchase cost in the succeeding year. The question was answered against the assessee and in favour of the Revenue.

Final Conclusion: The ruling affirms that stock once valued and accepted for a tax year cannot be re-opened at a different figure in the next year merely to alter the computation of trading profit or loss.

Ratio Decidendi: For income-tax purposes, the opening stock of a succeeding year must ordinarily be taken at the value fixed for the corresponding closing stock in the preceding year, so that the same trading loss is not claimed more than once.

---