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2011 (9) TMI 806 - AT - Income TaxUnder valuation of the closing stock - rejection of books of account - alleged valuation of stock at lower rates against higher average market price and price at which assessee himself sold the same stock in succeeding year - assessee applied average price of items of closing stock, as the market price and valued the closing stock accordingly - Held that:- Arbitrary valuation of closing stock-in-trade, disregarding the recognised practice of valuation either at cost or market price, whichever is the lower, deserves to be rejected, even if the same is adopted uniformally year after year. It is the exclusive discretion of the assessee to value stock-in-trade either at cost or market rate, whichever is lower, but he is not entitled to value it below both. In cases of undervaluation, the AO is competent to reject that part of assessee's method and proceed to compute the income on the basis of either at cost or market price, whichever is the lower. The object of under valuation of stock-on-trade may be the creation of 'secret reserve' which involves the retention of profits not to be included in the profits intended for shareholders by the profits and loss account and the balance sheet, however, such profit constitutes part of taxable income - addition made is restored - Decided against the assessee
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