2009 (12) TMI 28 - HC - Income Tax

High Court Upholds Assessee's Right to Choose Accounting Method in Stock Valuation Appeal

The High Court of Allahabad summarily dismissed the appeal concerning the valuation of closing stock using the Last-In-First-Out (LIFO) method. The court ... Valuation of stock – LIFO method – tribunal upheld the LIFO method employed by the assessee for valuation of closing stock as correct – held that - The Tribunal under appeal has relied upon its earlier order relating to the earlier assessment years wherein the Tribunal has accepted the method of accounting as employed by the assessee as correct. We have been informed that the earlier order of the Tribunal was also subject matter of appeal before this Court but the said appeal has been dismissed. - that it is the choice of the assessee to adopt a particular recognised mode of accounting – revenue appeal dismissed Issues:1. Valuation of closing stock using LIFO method2. Correctness of employing LIFO method for valuation of closing stockAnalysis:Issue 1: Valuation of closing stock using LIFO methodThe appeal under Section 260-A of the Income Tax Act was filed against the order of the Income Tax Appellate Tribunal, Agra Bench, related to the assessment year 1997-98. The main question raised was whether the Tribunal was correct in holding that the Last-In-First-Out (LIFO) method used by the assessee for the valuation of closing stock was appropriate. The appellant contested the Tribunal's decision by citing previous judgments, including the decision of the ITAT, Allahabad Bench, and the Supreme Court's rulings in specific cases. However, the Tribunal justified its decision by referring to its previous orders where the method of accounting employed by the assessee was accepted as correct. The court noted that the earlier appeal on the same matter had been dismissed. The counsel for the assessee relied on the Supreme Court's decision in the case of Sanjeev Woolen Mills, emphasizing that the choice of accounting method lies with the assessee. Consequently, the court found no substantial question of law involved in the appeal and dismissed it summarily.Issue 2: Correctness of employing LIFO method for valuation of closing stockThe second question raised in the appeal was whether the Tribunal was correct in law in holding that the LIFO method for the valuation of closing stock was correctly employed by the assessee. The appellant argued that the Tribunal overlooked crucial aspects, such as the proof that the old stock of silver was unused and that the silver purchased during the year was utilized in the manufacturing process. However, the court reiterated the principle established in the Sanjeev Woolen Mills case, emphasizing the assessee's prerogative in choosing a recognized mode of accounting. Given this, the court maintained its stance that no substantial legal issue was present in the appeal and consequently dismissed it summarily.In conclusion, the High Court of Allahabad dismissed the appeal summarily, emphasizing the assessee's discretion in selecting an accounting method and finding no significant legal questions warranting further consideration.