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2014 (3) TMI 1048 - AT - Income TaxDisallowance on account of understatement of closing stock - change of acounting method - Held that:- So far as the change of account is concerned, it is a settled fact that section 145 of I.T. Act deals with method of accounting and this section has been substituted by the Finance Act, 1995 w.e.f. 01.04.1997 and thereafter sec. 145(1) mandates that the income chargeable under the head business and profession or income from other sources has to be computed either under the cash method or mercantile system of accounting. Sub-section (2) mandates the Central Government to notify in the Official Gazette, the Accounting Standards which are mandatorily required to be followed by any class of assessee or in respect of any class of income. The Central Government has so far notified only AS-1 and AS-2 and other Accounting Standards issued by the Institute of Chartered Accountants, has only advisory status of a technical body. So far as its application vis-a-vis Income tax provisions are concerned, the method of valuation by a particular method is based on commercial consideration. Any method which can give a proper computation of income for the previous year as per I.T. Law is a good method. The method of valuing the stock at "cost or market price whichever is less" has been accepted by different judicial forums and such change can be rejected only after bringing on record that the change if made from one method to another of valuing the stock at cost or at market cost whichever is less is driven by considerations to lower the profit only. In the present case, there is nothing on record to suggest that the change was made by the assessee with any such motive and the finding given by the Assessing Officer to that effect was found to be based on assumption only. Accordingly, the CIT(A) was justified in reversing the finding of Assessing Officer on the claim of assessee. This reasoned factual finding of CIT(A) needs no interference from our side. - Decided against revenue
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