2012 (11) TMI 898 - AT - Income Tax

Validity of re-assessment proceedings on the basis of audit objection – under valuation of stock of rough diamonds and stock of cut and polished diamonds – average method of valuation - Held that:- If the closing stock is disturbed then corresponding adjustment has to be made to the opening stock - closing stock balance of this year becomes the opening stock balance of next year and therefore it becomes revenue neutral. Since the method followed by the assessee is an accepted method of valuation of closing stock and since the Revenue in the past as well as subsequent year has accepted the method followed by the assessee without disturbing the method of valuation of closing stock of rough diamonds and cut and polished diamonds and since the A.O. has not made corresponding adjustments for valuing the opening stock of rough diamonds and cut and polished diamonds, therefore average method of valuation followed by the A.O. in the instant case is erroneous and not in accordance with law - assessee succeeds on merit as per ground of appeal No. 2, the first ground of appeal challenging the validity of reassessment proceedings on account of audit objection becomes academic in nature – in favor of assessee