TaxTMI 
TaxTMI 
2007 (11) TMI 41
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....correct in law in allowing the adjustment of Rs.54,83,272/- to the assessee in the opening stock for the previous assessment year 1998-99 (being a transitional year) under Section 145 A of the Income Tax Act, 1961 ?" 3. Filing of paper book is dispensed with. 4. In its closing stock for the previous year ending on 31^st March, 1999, the assessee had charged Modvat credit on certain inputs. While doing so, the assessee made an adjustment in the opening stock as on 1^st April, 1998. The adjustment was to the extent of Rs.54,84,272/-. According to the Assessing Officer, Section 145 A of the Act (which came into force on 1^st April, 1999) did not permit the assessee to make a change in the valuation of the opening stock as on 1^st April, ....
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....n rendered by the Calcutta Bench of the Tribunal in the case of Mehra Electric Company 148 Taxman 37. The Tribunal also relied upon Circular No. 772 dated 27^th December, 1998 passed by the Central Board of Direct Taxes ("CBDT") as well as the guidance note issued by the Institute of Chartered Accountants of India. 7. Thereafter, the Tribunal held that the adjustment on account of modvat credit and excise duty can be made in the opening stock also and that the assessee did not commit any error in doing so. Therefore, the Tribunal set aside the order of the Assessing Officer. 8. The Revenue has now preferred an appeal before us under Section 260 A of the Act. 9. Learned counsel for the assessee has drawn our attention to Notes on Cl....
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....alized by the sale, change in market values being immediately reflected in the price obtained for the goods that are sold, in these circumstances to contend that there should be under valuation at one end and not at the other is to raise an argument which their Lordships cannot accept." 11. The opinion of the Privy Council was that whenever there is a change in the valuation at one end (that is on 31^st March, 1999 as in the present case) then there must necessarily be a corresponding change at the other end (that is on 1^st April, 1998 as in the present case) otherwise, the true profit would not be reflected. 12. Circular No. 772 dated 23^rd December, 1998 issued by the Central Board Direct Taxes refers to the method of accounting an....
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....ed counsel for the Revenue referred to the Guidance Note on Tax Audit under Section 44 AB of the Act issued by the Institute of Chartered Accountants of India, New Delhi. She referred to paragraphs 23.8, 23.13 and 23.14 thereof. The contention of learned counsel for the Revenue was that by changing the method of valuation, the assessee has in fact got a double benefit which is not permissible. The paragraphs cited by learned counsel for the Revenue read as follows : "23.8 Section 145A has been enacted by the Finance (No.2) Act, 1998 and has come into force from the accounting year 1.4.1998 to 31.3.1999 (assessment year 1999-2000). This section provides that the valuation of purchase and sale of goods and inventory for the purpose of comp....
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....adjustment is required to be made by a statute, effect to the same should be given irrespective of any consequence on the computation of income for tax purposes. Section 145A starts with the non obstante clause Notwithstanding anything to the contrary contained in section 145. Therefore, to give effect to section 145A, the opening stock as on 1.4.98 will have to be increased by any tax, duty, cess or fee actually paid or incurred with reference to such stock if the same has not been added for the purpose of valuation in the accounts. 23.14 It may be noted that while making the adjustments stated in para 23.8 and 23.13 above, the tax auditor should ensure that if any deduction is claimed for any tax, duty, cess or fee on the items covered....