2012 (9) TMI 848

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t. The said batch concerns Assessment Years 1992-93, 1993-94, 1994-95, 1996-97 and 1997-98. 2. The following question arises for determination in these civil appeals : "Whether on the facts and in the circumstances of the case, ITAT was right in holding that closing stock of incentive sugar has to be valued at levy price and not at cost price?" 3. For the sake of brevity, we have reproduced hereinbelow the facts of Civil Appeal arising out of SLP(C) No. 9263/2009. Assessee is a company engaged in the business of manufacture and sale of sugar. Assessee filed its return of income for assessment year 1997-98. In its return of income, confined to its Karnataka unit, assessee valued the closing stock of incentive sugar (free sugar) at l....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....n was permitted to be sold at market price ("Incentive Sugar" for short). However, the Scheme provided that excess amount realized by the manufacturer over the levy price by sale of incentive sugar would be utilized only for repayment of loans taken from the banks/ financial institutions for establishing the new unit(s). In regard to utilization of excess realization towards repayment of loans, the sugar mills were directed to file certificate of chartered accountant subject to which further release orders would be issued by the Directorate of Sugar. This Scheme came up for consideration before this Court in the case of CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 in which this Court held that the excess amount real....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ock is a very important aspect of ascertainment of true profits. An improper valuation could result in rejection of books of account though all that is needed for rectifying it, is to make an addition or necessary adjustment based on proper valuation. Valuation of stock, whatever be the method, should be consistently followed. Method of valuation is generally at cost or the market value whichever of the two, is lower. However, it is open to the AO to probe the accounts, so as to arrive at the real income [see : Chainrup Sampatram v. CIT [1953] 24 ITR 481 (SC)]. Profits of the business could only be ascertained by comparison of assets and liabilities of the business at the opening and closing of the accounting year. The method that an assess....