2011 (12) TMI 243

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....ssed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short 'the Tribunal'). The questions are identical and for facility of reference, the facts are taken ITR No. 358-359 of 1995. In the said case, the Tribunal has referred the following substantial question of law for the consideration of this Court:   "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in sustaining the addition of Rs.1,13,765/- made by the Assessing Officer on account of suppressed valuation of the closing stock, whereas the assessee was consistently following a particular method of accounting in the past for the purposes of the valuation of the stock?" The assessee earned its income from manufactu....

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....ured goods. However, the learned Tribunal in further appeal by the Revenue set aside the said deletion relying upon the judgment of Hon'ble Supreme Court in Commissioner of Income Tax Vs. Britsh Paints India Ltd. (1991) 188 ITR 44.   The Hon'ble Supreme Court in the aforesaid judgment has held that any system of accounting which excludes, for the valuation of stock-intrade, all costs other than the cost of raw-materials for the goods-in-process and finished products, is likely to result in a distorted picture of the true state of the business for the purpose of computing the chargeable income. It observed as under:   "21. Any system of accounting which excludes, for the valuation of the stock-in-trade, all costs other than t....