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2006 (4) TMI 360 - AT - Income TaxMethod of accounting - adjustment of Excise Duty to the opening stock - HELD THAT- There can be no exception to the rule that the closing stock of the earlier year will have to be necessarily the opening stock of this year. The change in the method of valuation of the closing stock as a result of section 145A has an overriding effect on section 145 relating to method of accounting itself. The sum and substance of that intent can only be achieved by making an addition to be value to the closing stock by its element of tax, duty, cess or fee, etc., and not by altering the opening stock. Whenever the assessees changed their method of accounting from one recognized method to another recognized method, there is bound to be tax effect in the year of change. But, over the year it is tax neutral. On the same analogy, when the Legislature has imposed a new system of valuing the closing stock it is bound to have an impact in that year, but becomes neutral in nature in the subsequent year. We are, therefore, of the view that the CIT(A) was not justified in accepting the claim of the assessee. Accordingly, the order of the CIT(A) on this issue is reversed and that of the Assessing Officer is restored. In the result, the appeal is allowed.
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