TaxTMI 
TaxTMI 
2005 (1) TMI 57
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....ss of manufacture and sale of gold ornaments. For the assessment year 1981-82, it filed a return on August 27, 1981, declaring an income of Rs. 30,280. The Inspecting Assistant Commissioner (Investigation), Karnal, completed the assessment on January 29, 1983. He made additions of Rs. 83,192 and Rs. 2,336 on account of alleged undervaluation of the closing stock of gold and silver, respectively. The appeal filed by the assessee against the order of assessment was allowed by the Commissioner of Income-tax (Appeals) vide his order dated January 31, 1984. He relied on the order passed by the Tribunal in I.T.A. No. 556/(Chand) of 1977-78-ITO v. Gopi Chand Kishori Lal and deleted the additions made by the Inspecting Assistant Commissioner. Feeling aggrieved by the appellate order, the Revenue filed an appeal before the Tribunal which was dismissed on December 20, 1985. The relevant extract of the order passed by the Tribunal is reproduced below: "5. After taking into consideration the rival submissions and going through the case law and the Tribunal's decision cited by the two parties before us, we are unable to interfere in the finding of the Commissioner of Income-tax (Appeals).....
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....d having regard to the nature and type of business carried on by the particular assessee.' Under the circumstances, there could not be any disturbance by the Revenue. As a matter of fact, the issue is squarely covered in the earlier decision and as per the consistent view of this Bench that since it is a common dispute arising in the case of jewellers, we have dealt with the two cases cited by the learned senior Departmental Representative also which, according to us, support the contentions those of the assessee on the basis of consistent adoption of method of closing stock valuation." Shri Rajesh Bindal, learned counsel for the Revenue, fairly admitted that the assessee had continuously followed the same method of valuation of the stock and that the Department had never questioned the same. He also conceded that in all the previous assessment years, the competent authority had made assessment by accepting the method adopted by the assessee for valuation of the stock and that the Revenue did not challenge the order passed by the Tribunal in the case of Gopi Chand Kishori Lal. He, however, argued that the method adopted by the assessee for valuation of the stock is not one of....
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....whether there has been income or not, but, in every case, it must be applied with care and within recognised 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." In CIT v. Fazilka Co-operative Sugar Mills Ltd. [2002] 255 ITR 411 a Division Bench of this court considered the question similar to the one referred by the Tribunal in the present case. The facts of that case were that the assessee had filed return of income for the assessment year 1991-92 declaring a loss of Rs. 7,52,53,863. The Assessing Officer completed the assessment and made an addition of Rs. 10,63,977 on account of revaluation of the closing stock. This addition was made on the hypothesis that the valuation of the closing stock had to be done on the basis of the average price for the month of March, 1991. The Commissi....
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....stock valuation in that case was given a clean go-by and which was the same as in the case of the assessee. After closely perusing the facts of the case and hearing the parties, in our opinion, the Income-tax Officer clearly misdirected himself in adopting the value of the closing stock in the assessee's case at market rate and the assessee's method of valuation was in conformity with the earlier years pattern of closing stocks as also in conformity with the other jewellers. Therefore, the Appellate Assistant Commissioner's approach in the case has been correct that there was no undervaluation of stock at all. On such view of the matter, we dismiss the Revenue's appeal. While deciding this appeal, we have closely perused the orders of the Income-tax Officer and the Appellate Assistant Commissioner and the evidence placed before us in the form of copies of trading accounts and other evidence filed before the Income-tax Officer and the Appellate Assistant Commissioner as also the Income-tax Officer's notice under section 143(3) and the assessee's reply thereto." In our opinion, by having accepted the method continuously adopted by the assessee for valuation of its stock and acc....