TaxTMI 
TaxTMI 
2013 (4) TMI 602
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....of rejection of the change in the method of valuation of closing stock. 1.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in observing that there was no bona fide need/coherent reason to change the method of valuation of closing stock, thereby conforming the action of the Assessing Officer in rejecting the change." 2. The facts are that according to the assessment order, the Assessing Officer noticed that as per Annexure-III of the assessee's Tax Audit Report, the assessee's auditors had mentioned, inter alia, as follows:- iv) The stock of Raw Materials, Loss for the year is over- Components and Work in stated by Rs.306.53 Progress, which were hitherto Lacs. valued at cost, have been valued at lower of cos....
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....order, the Ld. CIT (A) confirmed the findings of the Assessing Officer on this issue, holding as follows:- "...... The assessee has been following the earlier method since the very inception of the company. Change in method of accounting is not prohibited. However, it is settled law that the change must be due to valid reasons and should be for legitimate business needs of the assessee. The only reason forwarded by the assessee is that the Guidelines of the Institute of Chartered Accountants recommends such change. The Guidelines of the Institute are mandatory for its members. However, they do not override the Income-tax Act. I am of the opinion that the assessee has not been able to bring on record sufficient and adequate reasons for th....
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.... compliance with the accounting standards issued by the ICAI. The said sub-section was introduced by the Companies (Amendment) Act, 1999, w.r.e.f. 31.10.1998; that changed method resulted in lower valuation to the extent of Rs. 3,06,53,000/-; that the Assessing Officer has added Rs. 3,06,53,000/- being the diminution in the value of closing stock, as a consequence of change in the method of valuation thereof, on the ground that the assessee has increased its losses; that the CIT (A) observed that merely because the method is prescribed by the AS issued by the ICAI, cannot ipso facto be the reason for change in method of valuation of inventory; that in the following cases, the Courts have held that bona fide change in the method adopted by t....
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....Parry (India) Ltd. vs. DCIT', 46 ITD 387 (Mad) ii) 'Jackson Engineers (P) Ltd. vs. ITO', 31 ITD 79 (Del) iii) 'Gujarat Machinery Manufacturing Ltd. vs. ITO', 42 ITD 35 (Ahd) iv) 'DCIT vs. ITC Hotels Ltd.', (2004) 1 SOT 703 (Bang) v) 'Maharashtra Land Development Corpn. Ltd. vs. ITO', 36 ITD 118 (Pune) vi) 'Prajatantra Prachar Samity vs. ITO', 39 TTJ 280 (Ctk) vii) 'United Credit Ltd. vs. ACIT', 60 ITD 367 (Cal) viii) 'Hero Honda Motors Ltd. vs. JCIT', 103 ITD 157 (Del) ix) 'National Aluminium Co. Ltd. vs. DCIT', 101 TTJ 948 (Cuttack) x) 'CIT vs. B. Amrithlakshmi', 2007-TIOL-417-HC-MAD-IT xi) 'CIT vs. Destiny Investment Pvt. Ltd.', 218 ITR 232 (MP) xii) 'Jaipur Taj Enterprises Ltd. vs. ITO', 42 TTJ 200 (Del) ....
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....ect cost. It was held that the change was bona fide and was to be adopted in future and that it was, therefore, justified. 'Corborandum Universal Ltd.' (supra) was considered in 'CIT vs. Indo Rama Synthetics (I) Ltd.' (supra). Therein, the Hon'ble High Court upheld the decision of the Tribunal to the effect that change in method of valuation of inventory was a result of recommendation in consonance with AS-II on valuation of inventories and that the assessee had followed the changed method consistently in the subsequent years. It is also noticed that in 'Indo Rama' (supra), it was taken note of that the SLP filed by the Department against the decision in 'Corboration Universal Ltd.' (supra) was dismissed by the Hon'ble Supreme Court. 11.....