TaxTMI 
TaxTMI 
2007 (6) TMI 164
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....l was right in holding that the switch over from valuation as per market price to cost price was correct, being a substitution of one method by another scientific method? 2. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the assessee was right in changing over the method of valuation, when it does not reflect the true picture of profits and gains?" 2 The facts leading to the above substantial questions of law are as under: 3 The assessee is a dealer in shares. The relevant assessment years are1992-93 and 1993-94 and the corresponding accounting years ended on March 31, 1992 and March 31, 1993, respectively. For the assessment year 1992-93, the assessee filed a return of income on Februar....
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....ppearing for the Revenue submitted that the Tribunal erred in approving the irregular adoption of change in method of valuation of shares held as stock-in-trade from market price to cost price. It is also submitted that the change in valuation does not result in the determination of the true profits for tax purpose and the same is arbitrary and does not give a true picture of the profit and hence the order of the Assessing Officer is in accordance with law. 5 Heard counsel. The Tribunal as well as the Commissioner of Income-tax (Appeals) have given a finding that the changed method has been regularly followed by the assessee and it is only a substitution of one method by another scientific method. The first appellate authority considered....
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.... held as stock as on March 31, 1992, would have been artificially boosted and abnormally high if it had been valued at market price; it would not have reflected the correct position. It was because of this that the appellant switched over to valuation at cost price which was more realistic. Incidentally, the learned representatives also point out to me that the market price which was adopted for the assessment year 1990-91 was less than the cost price for that year and the cost price which has been adopted consistently from the assessment year 1992-93 onwards has been less than the market price. Thus the value adopted for all the years has been actually the lesser of the cost price or market price. As regards the decision cited by the asses....
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....g stock for this year has to be necessarily the value of closing stock for the earlier year. It is true that in the year of change of method of valuation of closing stock there is bound to be some anomaly; but that will get absorbed in course of time as the new method is going to be applied on a permanent basis thereafter. In the absence of any finding to the effect that the assessee had resorted to an ad hoc change in valuation merely to secure any temporary gain or advantage, I hold that the assessee is entitled to change the method of valuation of closing stock especially because the new method adopted is based on sound principles of accountancy and the chartered accountant has also submitted that the changed method has been regularly fo....