TaxTMI 
TaxTMI 
2017 (10) TMI 587
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.... without any reason to differ with the same and also when the CIT (A) was judicially required to follow the same. d) Ignoring the continuity and consistency. e) Ignoring the method employed by the assesse in all the earlier and subsequent years. f) Without prejudice to above and only on alternative ground the CIT (A) erred in uphold the additions without making any adjustment in the Opening Stock. g) Upholding the addition of Rs. 1,50,000/- without any reason basis and also without considering the submissions made by the assessee in appeal proceedings. h) Upholding the addition of Rs. 1,50,000/- on ad-hoc basis based on personal sweet will and how the CIT(A) found the addition or disallowance reasonable. 2. At the outset, it is mentioned that notice of hearing was sent to the appellant i.e. by registered post fixing the date of hearing on 14/09/2017, however neither anyone appeared on behalf of the assessee nor filed any application for adjournment and therefore case was heard ex parte qua the assessee. 3. Facts in brief of the case are that the assessee filed return of income on 14/10/2010 declaring total income of Rs. 64,31,373/-....
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....d while valuing stock, even if Cenvat credit availed of such duty paid. In respect of finished stock, excise duty payable should be added to the inventory valuation even if not paid as goods are still lying in the factory. Both opening as well as closing stod should be valued on same basis. The amended section 145A is effective from 01.04.1999 and will apply to A.Y. 1999-2000 and onwards. However, as per Account Standard of ICAI (AS-2), inventory cost should comprise of all cost of purchases, cost of conversion and other costs incurred in bringing the inventories to the present location and condition. Cost of purchases should be exclusive of duties which are recoverable from the taxing authorities, (e.g. Convat). Inventory should be valued at lower of cost or net realizable value. Inventory should be valued on FIFO (First in First Out) method or weighted average. (LIFO is not permitted). The AS-2 has been made mandatory w.e.f. 1st April 1999. For purposes of Income Tax, inventory is required to be valued inclusive of excise duty, even if assessee is entitled to get Cenvat credit of duty. However, for purposes of balance sheet as per Companies Act, inventory should....
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....gains of business or profession" shall be (a) In accordance with the method of accounting regularly employed by the assessee (b) Further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. 4.1.4 In CIT Vs. British Paints(lndia) Ltd. (1991) 188 ITR 44(SC) t has been held that the AO has power to substitute correct method in place of wrong method of valuing closing stock adopted by the assessee. Merely because the wrong method was consistently followed, it cannot be accepted. Consistency should be with reference to the correct method. Therefore, the AO was justified in substituting correct method in the place of incorrect method. The Apex Court laid down the following principles: * It is not only the right but the duty of the AO to consider whether or not the books disclose the true state of accounts and the correct income can be deduced. * It is incorrect to say that the officer is bound to accept the system of accounting regularly employed by the assessee, the correctness ....
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....tion of inventory e.g. Finished Inventory or all the inventories in a particular business segment. 4.1.7. Accordingly, reliance is placed on the following judgments: (i) CIT Vs. Majestic Auto Ltd. [2013] 39 taxmann.com 114 (Punj. & Har.) wherein it was held that items may be small and also, may be numerous, but each item, which is in stores of the assessee, is required to be valued and, therefore, assessee could not be permitted to assert that stock of spares was not required to be valued in closing stock. However, since the assessee was maintain average stock of 15 days, addition needed to be required to stock of 15 days instead of one month. (ii) Krishi Discs (P.) Ltd. Vs. CIT [2013] 32 taxmann.com 136/215 Taxman 132 (All.) wherein it was held that where the assessee was liable to pay excise duty on finished goods, revenue authorities were justified in adding amount of excise duty so payable during relevant year at time of valuation of closing stock. 4.1.8. Considering the matter in its entirety, the action of the AO is upheld and this ground of appeal of the appellant is dismissed being not tenable." 3.3 The disallowance of Rs. 1,50,000/- o....
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....red Accountant, then the assessee is required to follow the provisions of the Income Tax Act and not the provisions of the companies Act or the guidance of the Institute of Chartered Accountant. In principle, we agree with the finding of the Ld. CIT-(A) that assessee should follow the provision of section 145A of the Act. However, we do not agree with the approach of the authorities in invoking the provision of section 145A only for valuation of the closing stock. In ground No. (f), the assessee has made alternative payer of allowing the corresponding adjustment to opening stock. 5.1 In our opinion, following the provisions of section 145A of the Act, effect of taxes or duty etc. paid has to be given to purchase and sales of goods and inventory including, both the closing and opening stock, which the authorities have not considered. Accordingly, we feel it appropriate to restore the issue to the file of the Ld. CIT-(A) with the direction to adjudicate the issue of the effect of section 145A of the Act in the case of the assessee in a comprehensive manner on purchase, sales and inventory (both opening and closing stock) instead of applying selectively only on the closing stock. T....