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2013 (3) TMI 332 - HC - Income TaxInclusion of Excise Duty in valuation of closing stock - Whether the Tribunal was right in directing inclusion when assessee as it is a small Scale Unit and is not liable to pay the Excise Duty on the first clearance upto Rs.100 lacs in the financial year? - Held that:- As decided Chainrup Sampatram Versus Commissioner of Income Tax, (1953 (10) TMI 2 - SUPREME COURT) the closing stock has to be valued at the option of the assessee, at cost or market price, whichever is lower and it is wrong to assume that the valuation of the closing stock at the market rate has, for its object the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realized on the year's trading. It has been consistently laid down that the opening stock and closing stock should be maintained in the same manner either at the cost price or at the sale price. The assessee has not come out with the case that in the opening stock, the excise duty was not included. The explanation furnished by the assessee is that since in the subsequent assessment year, the turnover was less than one crore of rupees and as such, the goods were not liable to excise duty, therefore, in the closing stock of the relevant assessment year, the excise dutyhas not been added, is not legally tenable. The method of valuation of closing stock cannot be changed midway. Each year being self contained unit and taxes of a particular year being payable with reference to the income of that year, as computed in the terms of the Act. The method adopted by the assessee has been found to be such that the income cannot properly be deduced therefrom. Therefore, The Assessing Authority was right in adding the excise duty in the valuation of the closing stock - against assessee.
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