TMI Blog2009 (8) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... n prior to date of search carried out in the case of the assessee. In the case of a person where a search is initiated u/s.132 or books of account, other documents or any assets are requisitioned u/s.132A after the 31st May, 2003 assessment has to be made u/s.153A. Sec. 153A(1) contains non obstante clause and hence provisions of this section will override the provisions of s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153 of the Act. Under s. 153A(1) the AO is empowered to issue notices to the assessee searched for a period of six years in order to assess the income on the basis of material found during the course of search. The second proviso to s. 153A(1) provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in s.153A(1) pending on the date of initiation of search u/s.132 or making of requisition u/s.132A as the case may be shall abate. Therefore, after initiation of search no assessment in respect of pending assessment shall be made and AO is empowered to issue notice u/s.153A to assess or reassess the total income of six assessment years immediately preceding assessment year rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not permitted to value the closing stock for concluded years at average cost price. Accordingly, the AO as well as CIT(A) was justified in rejecting the change in method of valuation adopted by the assessee for all these years. Hence, we do not find any infirmity in the order passed by the CIT(A), confirming the additions made by the AO due to change of method of valuation. - Member(s) : I. P. BANSAL., K. D. RANJAN. ORDER-K.D. RANJAN, A.M.: These appeals by the assessee for asst. yrs. 2000-01 to 2005-06 arise out of separate orders of CIT(A)-I,New Delhi. These appeals were heard together and for the sake of convenience these are disposed of by this common order. 2. The only issue for consideration which is common in all the six appeals relates to valuation of closing stock. The effective ground of appeal is reproduced as under: The lower authorities had erred in no appreciating the facts and circumstances of the case or the submissions of the appellant and had further erred in working out the value of the closing stock at the end of the first year of appellant's business on 31st March, 2000 on an ad hoc estimate basis, which had been show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plea that judgment of Travancore-Cochin High Court in the case of Concordia Corporation Ltd. vs. CIT (1952) 22 ITR 344 (Trav.-Coch) favoured this method. As a result of this change in the method, there was difference in the closing stock which resulted in lowering of returned income detailed as above. However, the AO did not agree with that the method of change in valuation of closing stock and he added the difference in the valuation of closing stock as mentioned above in relevant assessment years. 4. On appeal before CIT(A), it was argued that previously the assessee was valuing the closing stock on ad hoc basis (cost or market price whichever is lower), but afterwards when the returns were filed under s. 153A, the valuation of closing stock was revised by valuing the closing stock on average cost basis. The CIT(A) after considering the submissions made by the assessee observed that original returns filed by the assessee under s. 139 were already accepted by the Department and the assessee had never revised the returns. After the search at the time of filing of the returns under s. 153A, the assessee all of a sudden revised the basis of valuation of closing stock. He fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad hoc basis. Therefore, when returns were filed under s. 153A, assessee applied the correct method of valuation of closing stock i.e., average cost method. He also submitted that in the case of jewellers, it is difficult to value the stock correctly. Rather, it is physically impossible to value the stock on cost basis as no jeweller is maintaining stock register. It is difficult to identify a particular item of jewellery when it was purchased and at what rate. Therefore, the correct method of valuation of jewellery will be on average cost method which has been followed by the assessee while valuing the closing stock in returns filed under s. 153A of the Act. He further submitted that the closing stock of a particular year has to be taken as opening stock of next assessment year. Therefore, there is no loss of revenue. The assessee had relied on the judgment of Travancore Cochin High Court in the case of Concordia Corporation Ltd. and judgment of Madras High Court in the case of CIT/CEPT vs. Chari Ram (1949) 17 ITR 1 (Mad). Further, the assessee had relied on the judgment of Hon'ble apex Court in the case of CIT vs. Britsh Paints India Ltd. (1991) 91 CTR (SC) 108 : (1991) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble apex Court in the case of Sanjeev Woollen Mills vs. CIT (2005) 199 CTR (SC) 441 : (2005) 279 ITR 434 (SC). He submitted that the facts of the case (of) assessee's are identical to the facts of the case of Sanjeev Woollen Mills decided by the Hon'ble apex Court. Therefore, the recognized practice of accounting in relation to closing stock was to value the closing stock on cost or market price whichever was lower. 7. We have heard both the parties and gone through the material available on record. During the course of hearing, it was clarified by the learned Authorised Representative of the assessee that for asst. yrs. 2001-02 to 2005-06, the books of account were audited by the auditors. The tax audit report in Form No. 3CD has been placed on record. It was also submitted that for asst. yr. 2000-01, no tax audit was carried out by the auditors. The assessee himself had valued the closing stock for asst. yr. 2000-01 at cost. We have gone through the tax audit report for asst. yr. 2001-02. As per the tax audit in Form No. 3CD, the method of valuation of closing stock employed in the asst. yrs. 2001-02 to 2005-06 was at cost . 8. The original returns of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under s. 132 or making of requisition under s. 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-s. (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-s. (1) or s. 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-s. (1), shall stand revived with effect from the date of receipt of the order of such annulment by the CIT: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation: For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, s. 153B and s. 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or such change. The concluded proceedings cannot be reopened on the ground that the assessee had incorrectly valued the closing stock in those years. The assessee had filed returns of income for all the six assessment years under s. 139(1). The assessments or reassessments cannot be made in these years by invoking the provisions of s. 147 after initiation of search proceedings in view of second proviso to s. 153A(1) of the Act. From the facts given above it is clear that the assessee had changed the method of valuation of the closing stocks for six assessment years to reduce the profits and hence the change in the method of valuation is not bona fide. As regards the contention of the assessee that it is impossible to value the closing stock at cost price in the case of jewellers, this is a sweeping generalization without having any material on records to prove. The assessee had not filed any evidence to support its contention and hence deserves to be rejected. 11. The provisions of s. 153A are directed to assess or reassess the income for six assessment years based on search proceedings and hence the assessment proceedings under s. 153A are beneficial to the Revenue. In other wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled to change his method of valuation provided it is bona fide and it is a method of valuation for regular employment by the assessee and not merely for the year in question. This decision of Hon'ble Madras High Court also does not support the case of the assessee. In the instant case, the valuation adopted is to get advantage in search assessment. The assessee by adopting the change in method of valuation of closing stock has claimed lower income and instead of paying tax on search assessments, the assessee wants to get the refund from the Department in the guise of change of method of valuation. Therefore, this decision of Hon'bleMadrasHigh Court relied upon by the assessee is not applicable to the facts of the assessee's case. The decision of Hon'ble Supreme Court in the case of Britsh Paints India Ltd. also does not support the case of the assessee. The assessee has been following the method of valuation of cost price or market price whichever is lower which is being changed in order to get the advantage, in the search assessments. The decision in the case of Chhaoni Lal Pragdas also does not support the case of the assessee as the valuation in asst. yrs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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