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2014 (5) TMI 470 - ITAT AHMEDABADValuation of closing stock – Addition of proportionate transport charges – Whether freight expenses incurred on account of purchases were to be included in the value of closing stock or not - Held that:- Following Hero Motocorp Limited vs. ACIT [2013 (8) TMI 57 - ITAT DELHI] - the Revenue has rejected the method of accounting which is consistently followed by the assessee on the ground that there may be chance where in a particular year, the method adopted by the assessee may result in underestimation of profits - the Revenue failed to demonstrate with facts and figures that the impugned method of accounting may result in material underestimation of profits - the assessee has demonstrated that the change in the method of accounting for year under appeal would result in loss to the revenue as the opening stock would also require similar adjustment and the cascading effect will be loss to revenue - in many of the additions made in this case by the revenue, the consistent method of accounting is unnecessarily disturbed, though it has been accepted in many years - such tinkering with the method is unjustified when the exercise does not materially alter the profits - such petty additions should be avoided on the ground of materiality, as AS-1 which talks about materiality, consistency, prudence etc. is part of the I.T. Act after it is notified u/s 145(2). Adjustment made to total value of closing stock and consumption of stock is uncalled for - If valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method - The closing stock of a particular year is the opening stock of the subsequent year - the method of valuation of closing stock is materially affecting the accounts and profits disclosed by the assessee – the adjustment sought to be made is revenue neutral and at best may result in preponement or postponement of revenue - Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee – the addition made on account of proportionate inward transport charges is set aside – Decided in favour of Assessee.
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