TaxTMI 
TaxTMI 
2021 (11) TMI 628
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....m of appeal are as follows:- Being aggrieved by the order of the learned Commissioner of Income-tax (Appeals) - 3, Mumbai, dated 21.08.2019, the Appellant prays to prefer the present appeal on the following ground: 1. In the facts and circumstances of the case and in law, the Ld. AO erred in disallowing the valuation loss in respect of securities held by the Appellant as Available for Sale and Held for Trading. 2. In the facts and circumstances of the case and in law, the Ld. AO erred in not treating the Appellant as a Banking Company governed by the Banking Regulation Act, 1949 and the circulars and directions issued by the Reserve Bank of India. 3. In the facts and circumstances of the case and in law, ....
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....ly a very few material facts need to be taken note of. The assessee before us is a co-operative bank and the present assessment proceedings were initiated as a result of revision order u/s. 263 passed by the learned Commissioner holding that non-examination of breakup of investment into three categories i.e. " Held to Maturity", " Available for Sale", and "Held for Trading", and non-examination of the quantification of loss arising from the valuation of the securities rendered the original assessment proceedings erroneous and prejudicial to the interest of the revenue. It was this backdrop that the present assessment proceedings were resorted to. During the course of the resultant assessment proceedings the Assessing Officer noted elaborate....
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..... Investments are always valued on the basis of cost price. Accordingly, loss on mere conversion of securities from one category to another cannot be allowed as deduction. In the view of the above assessee's claim of Rs. 4,02,87,000/- on account of Valuation loss charged to investment depreciation reserve ' is disallowed and added back to total income of the assessee. 5. Aggrieved by the aforesaid addition of Rs. 4,02,87,000, the assessee preferred an appeal before the learned Commissioner appeals, but without any success. While learned Commissioner referred to the observations made by the Assessing Officer, he did not deal with the arguments advanced by the assessee and proceeded to confirm the stand of the Assessing Of....
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....l legal position and held that loss on all in value of investments which are held as stock and trade by the bank constitute and admissible deduction. We may in this regard reproduce the following observation made by the lordships while dealing with this question. 22. Hence, for the purpose of income tax whichever method is adopted by the assessee a true picture of the profits and gains, that is to say, the real income is to be disclosed. For determining the real income, the entries in a balance sheet required to be maintained in the statutory form, may not be decisive or conclusive. In such cases, it is open to the Income Tax Officer as well as the assessee to point out the true and proper income while submitting the income tax ret....
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....stock, it is open to the assessee to value it at the cost or market value, whichever is lower; (2) In the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn. A taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price; (3) A method of accounting adopted by the tax payer consistently and regularly cannot be discarded by the departmental authorities on the 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 income or not, but in e....
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.... only if such method is actually followed and adopted by him in preparing the final accounts. Without following this method in preparing the accounts, which are required to be prepared and presented under Section 29 of the Banking Regulation Act, 1949 in the form set out in the third Schedule thereto, the assessee Bank cannot be permitted to claim a loss on revaluation by claiming different method of stock valuation notionally for income tax purposes only. 25. In our view, as stated above consistently for 30 years, the assessee was valuing the stock-in-trade at cost for the purpose of statutory balance sheet, and for the income tax return, valuation was at cost or market value whichever was lower. That practice was accepted by the ....