2003 (6) TMI 441

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....ith. The Assessing Officer during the scrutiny of account found that the value of the closing stock was worked out by applying average rate of opening stock and purchases of the year. According to the Assessing Officer, this method was not correct and gave untrue picture of profits earned in the period under consideration. He applied average rate of purchases and enhanced the value of closing stock by Rs. 2,68,357. The detail of working is available in the assessment order and is as under : "The value of closing stock in different accounts works out as under : Particulars Amount Weight in grams Rate Gold ornaments Jarau 1489132 6377.440 2335 Ornaments Plain 5145869 15134.910 3400 Silver Utensils ....

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....R 44, the learned Counsel stated that principles of valuation of closing stock have been summarised therein and what transpires from the principles laid down by the Apex Court is that an assessee is at liberty to value its stock at cost of market price whichever is lower, and in case he has been following a method regularly which has been accepted by the revenue it should not be departed from by either party unless it is supported by good reasons. The learned counsel further stated that there are two major trading accounts i.e. gold ornaments (jarau) and gold ornaments (plain), and the sales are below the quantity in the opening stock. It was further stated that if the view of the learned Assessing Officer is allowed to prevail the appellan....

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....g. The Assessing Officer adopted average purchase rates to value the closing stock and correctly computed assessee's income. Assessing Officer's action was justified on the basis of decision of Hon'ble Supreme Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44. 5. The learned counsel for the assessee Sh. Bajaj, on the other hand, argued that "weighted average cost" method was recognized by the "accounting standards" issued by Institute of Chartered Accountants of India. He referred to following comments from the accounting standards : "F. Selection of cost formula - AS-2 requires the use of 'FIFO' or 'Weighted Average Cost' methods for determining the value of inventory. The method/formula used should provide fair....