TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 470
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Officer. 3. The brief facts of the case are that the Assessing Officer observed that the assessee has claimed inward transport charges of Rs 68,87,724/- but while valuing the closing stock, this expenditure has not been included in the closing stock. According to the Assessing Officer, this being a direct expenditure should be included in the value of closing stock. Therefore, the Assessing Officer included proportionate expenditure incurred on inward transport charges of Rs 2,58,049/- in the closing stock of the assessee and added the same to the income of the assessee. 4. On appeal, the Ld. CIT(A) confirmed the action of the Assessing Officer on the ground that when there is change in the method of accounting by the assessee, there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the case, the Delhi Bench of the Tribunal in the case of Hero Motocorp Limited (supra) while deciding the issue whether freight expenses incurred on account of purchases were to be included in the value of closing stock or not, held as under: "7.13. We have considered the submissions and the material filed by both the parties. The issue in question is regarding method of valuation of closing stock. The primary contention of the assessee is that it had to make emergency purchases and that these stocks so purchased were immediately consumed. In such exceptional situations, the assessee has directly accounted the freight and import clearing charges to the profit and loss account. This means that such raw material stocks are not part of clos....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of res judicata may not apply to the income tax proceedings as each year is an independent year, yet there ought to be uniformity in treatment and consistency as propounded by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT 193 ITR 321, when the facts and circumstances are identical. It is a judicially accepted principle that when the facts are same, a uniform view should be adopted for the subsequent years in the income tax proceedings. Unless there is a material change in the facts, which is neither demonstrated by assessing officer nor DRP, the view which is taken earlier, should not be changed, as held by various courts. We now discuss some of the case laws. 7.17. The Hon'ble Supreme Court in the case of Radhas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee results in underestimation of profits and is, therefore, rejected. Otherwise, the presumption would be that the entire exercise is revenue neutral. In the instant case, that exercise had never been undertaken. The Assessing Officer was required to demonstrate both the methods, one adopted by the assessee and the other by the department. In the circumstances, there was no reason to interfere with the conclusion given by the High Court." 7.20. The Hon'ble Supreme Court in the case of CIT Vs. Bilahari Investment P. Ltd. 299 ITR 1 (SC) held as follows: "Every assessee is entitled to arrange its affairs and follow the method of accounting, which the Department has earlier accepted. It is only in those cases where the Department r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d been brought on record to show that there had been distortion of profits or that the books of account did not reflect the correct picture. In the absence of any reason whatsoever, there was no warrant or justification to depart from the previous accounting system which was accepted by the Department in respect of the previous years." 7.22. In the present case, the Revenue has rejected the method of accounting which is consistently followed by the assessee on the ground that there may be chance where in a particular year, the method adopted by the assessee may result in underestimation of profits. However, the Revenue failed to demonstrate with facts and figures that the impugned method of accounting may result in material underestimation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fits disclosed by the assessee. This adjustment sought to be made is revenue neutral and at best may result in preponement or postponement of revenue. The issue is whether such exercise is at all required on the ground of materiality. Materiality is a concept which is well recognized both in accountancy and law. Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee. 7.24. Further, the Hon'ble Supreme Court in the case of Berger Paints India Ltd. Vs. CIT (2004) 266 ITR 99 at page 103 (SC), has noted with approval, the observations of the Special Bench of the ITAT in the case of Indian Communication Network Pvt. Ltd. Vs. IAC (19....