Reassessment and stock valuation: opening stock adjustment cannot be claimed for the first time in appeal after revising closing stock only.

In reassessment, real profits cannot be properly determined if both opening and closing stock are undervalued, but an assessee must raise any claim for corresponding opening stock adjustment at the proper stage. Here, the assessee filed a revised return revaluing only the closing stock and did not seek revaluation of the opening stock before the Income-tax Officer or place the necessary material before the appellate authorities in time. The claim could not therefore be raised for the first time in appeal, and the reassessment was confined to the revised figure adopted by the assessee.

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Issues: Whether, in a reassessment for the assessment year 1959-60, the assessee was entitled to insist that the opening stock should also be revalued when the closing stock had been revalued for under-valuation.

Analysis: The applicable principle is that real profits cannot be correctly ascertained if both opening and closing stocks are undervalued and only the closing stock is adjusted. However, the assessee himself filed a revised return in response to the reopening notice and revalued only the closing stock, without seeking corresponding revaluation of the opening stock at the assessment stage. No such contention was raised before the Income-tax Officer, and the necessary material was not placed before the appellate authorities at the proper stage. In these circumstances, the claim for further adjustment was not permitted to be raised for the first time in appeal.

Conclusion: The assessee was not entitled to revaluation of the opening stock for the assessment year 1959-60, and the addition made on account of under-valuation of the closing stock was justified.

Ratio Decidendi: Where an assessee, in a reassessment proceeding, accepts revaluation only of the closing stock in a revised return and does not seek corresponding adjustment of the opening stock at the proper stage, the revenue authorities are justified in confining the reassessment to the revised figure adopted by the assessee.

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