Bona fide stock valuation change requires regular follow-through; repeated shifts without business reason can be rejected.

A change in closing stock valuation is permissible only if it is bona fide and intended to be followed regularly under the method of accounting recognised by section 145 of the Income-tax Act, 1961. Where the assessee altered the valuation method more than once within a short period, including through revised returns filed after closure of accounts, and offered no cogent business reason, the repeated shifts indicated an attempt to reduce taxable income rather than a genuine accounting change. On those facts, the change was not accepted as regularly followed, and the assessing officer was justified in rejecting the revised method and making the addition.

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Issues: Whether the assessee's change in the method of valuation of closing stock was bona fide and regularly followed so as to be permissible under the method of accounting prescribed by law.

Analysis: The assessee had changed its method of valuing closing stock more than once within a short span, including a change during the year under appeal and another change in the following year through revised returns filed after closure of accounts. The change was not supported by any cogent business reason. The requirement under section 145 of the Income-tax Act, 1961 is that income must be computed according to the method of accounting regularly employed by the assessee, and a departure from the existing method is permissible only when the new method is bona fide and intended to be followed regularly thereafter. On the facts found, the repeated shifts in valuation method indicated an attempt to reduce taxable income and not a genuine change in accounting practice.

Conclusion: The change in the method of stock valuation was not bona fide or regularly followed, and the assessing officer was justified in rejecting it and making the addition.

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