Closing stock valuation binds the next year: accepted market value must carry forward unless the earlier valuation was mistaken.

An assessee who had elected and been assessed on a market-value basis for closing stock in one year could not, in the succeeding year, reopen the same stock at historical purchase cost for trading profit computation. On mercantile principles, the opening stock had to be carried forward at the value already fixed and accepted in the prior year, unless that valuation was shown to be mistaken. Allowing a shift back to purchase cost would duplicate the same loss and distort the true trading result. The Revenue's method of computation was therefore upheld, and the assessee's substitution of purchase price was rejected.

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Issues: Whether an assessee who had valued closing stock at market price in the previous year could, in the succeeding year, revalue the same stock at purchase cost for the purpose of computing trading profit or loss.

Analysis: The assessee had elected in the earlier year to adopt market value for closing stock and had been assessed on that basis. In the succeeding year, the same stock could not be reopened at a higher purchase figure merely because it represented historical cost. On mercantile principles, the opening stock for the later year must be taken at the value fixed and accepted in the earlier year's accounts, unless mistake in that valuation is shown. Permitting a return to purchase cost would allow the same loss to be claimed more than once and would distort the computation of the year's true trading result.

Conclusion: The assessee was bound by the previous year's market valuation of the stock and was not entitled to substitute purchase price in the succeeding year; the adjustment made by the Revenue was in principle and the answer was against the assessee.

Final Conclusion: The reference was answered by holding that the opening stock had to be taken at the earlier accepted market value, so the Revenue's method of computation stood confirmed.

Ratio Decidendi: Where an assessee has elected and been accepted to value closing stock at market price in one year, the same stock must be brought forward at that value in the next year for computing true trading profits, unless the earlier valuation is shown to be mistaken.

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