TaxTMI 
TaxTMI 
2015 (12) TMI 1067
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....ued the closing stock on LIFO basis as per his previous practice? 2. A few facts necessary for disposal of the present appeal as mentioned therein are that the assessee filed the return of income on 24.9.2009 for the assessment year 2009-10 declaring a total income of Rs. 9,15,800/-. Notice under Section 143(2) of the Act was issued to the assessee on 23.9.2010. The cognizance over the issue of valuation of closing stock was taken on the basis of the details submitted by the assessee and it was found that the closing stock was valued at Rs. 814.47 per gram which was much more down to the purchase cost and as per standard norms and practice, the closing stock should be valued either at market rate or cost price whichever is lower. The Assessing Officer framed the assessment vide order dated 13.12.2011 (Annexure A-1) by making an addition of Rs. 58,29,237/- on account of undervaluation of closing stock. The Assessing Officer observed that the assessee has failed to give any reasonable and justified explanation for not rejecting his books of account and for accepting his method of valuation of closing stock by adopting Last In First Out (LIFO) method. Feeling aggrieved, the assesse....
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....n of inventory. The said method was also followed by the assessee in the assessment year 2007-08 and in the said year, the Assessing Officer had made an addition of Rs. 32,08,977/- on account of valuation of closing stock of gold ornaments. The Tribunal in ITA No. 1378/Chd/2010 relating to the assessment year 2007-08 in the case of the assessee upheld the decision of the CIT(A) deleting the addition made by the Assessing Officer with the following observations:- "10. We have heard the rival contentions and perused the record. The assessee is engaged in the business of sale and purchase of jewellery. The assessee, in order to value its closing stock is following LIFO method which is one of the prescribed method of accounting standards issued by the Institute of Chartered Accountants of India for valuation of inventory. The said method of valuing the closing stock of gold ornaments has been consistently followed by the assessee from year to year. Similar method was followed by the assessee in assessment year 2007-08. The Assessing Officer in assessment year 2007-08 had made an addition of Rs. 32,08,977/- on account of valuation of closing stock of gold ornaments. The Tribuna....
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.... accepted by the AO in the past. I agree with the appellant that rule of consistently has to be followed and observed. Further, it is seen that the Hon'ble Punjab and Haryana High Court in appellant's own case CIT vs. Sant Ram Mangat Ram (195 CTR 345) observed as under:- "It is an admitted position that from the inception of its business, the assessee had continuously adopted the same method of valuation of the closing stock and no objection was raised by the Department in any of the previous years. Rather, the competent authority accepted the method adopted by the assessee and accordingly, made assessment. This being the position, we do not find any valid ground to accept the argument of Shri Bindal that the method adopted by the assessee for valuation of the stock was legally impermissible and on that account, the additions made by the Inspecting Assistant Commissioner should be restored. In United Commercial Bank v. CIT (1999) 240 ITR 3545, their Lordships of the Supreme Court held that the method which was consistently followed by the appellant bank for valuing the stock-in-trade could not be rejected by the accessing authority in a particular year." T....
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....value stock-in-trade either at cost or market price. (3) A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on he view that he should have adopted a different method of keeping accounts or of valuation. (4) The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognized limits. (5) Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. (6) Under section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income-tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income-tax Officer may determine." 8. Following the aforesaid pronouncement, a Division Bench of this Court in Sant Ram Mangat Ram's case (supra) had held as follows:- "It is an admitted position that from the inception of its business, the assessee had continuously ado....