Consistent stock valuation: opening stock cannot be reset to purchase price after prior year market-price valuation for the same goods.

An assessee that valued closing stock at market price in one year and obtained assessment on that basis could not, in the next year, substitute the original purchase price as opening stock for the same goods. The court applied the principle that stock valuation for determining yearly profit must be carried forward consistently, unless the earlier market valuation is shown to have been mistaken. Allowing the purchase price to be adopted again would effectively permit the same loss to be claimed twice across different accounting periods. The assessee's revised opening stock treatment was therefore rejected and the consistency-based valuation principle was affirmed.

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Issues: Whether an assessee who had valued closing stock at market price in the previous year and obtained assessment on that basis could, in the succeeding year, reopen the valuation and substitute the original purchase price as the opening stock value for the same goods.

Analysis: The assessee had adopted the mercantile system of accounting and had valued closing stock at the lower market price in the earlier year, thereby obtaining the benefit of a trading loss. In the succeeding year, the same stock was brought forward at the higher purchase price, which would permit the same depreciation to be deducted again. The Court held that stock once valued for the purpose of ascertaining yearly profit must be carried forward consistently, unless a mistake in the earlier market valuation is shown. Yearly profit or loss must be determined on a true commercial basis, and the same loss cannot be claimed twice in different accounting periods.

Conclusion: The assessee was not entitled to substitute the purchase price for the opening stock in the subsequent year, and the Revenue was right in treating the second year's return as erroneous.

Final Conclusion: The reference was answered against the assessee, and the assessment principle requiring consistent valuation of stock across accounting years was affirmed.

Ratio Decidendi: A trader who has elected to value stock at market price for one assessment year is bound by that valuation in the succeeding year for the same goods unless the earlier valuation was shown to be mistaken.

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