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TMI Blog1998 (7) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... r : Units Cost ----- ----- Opening stock 20 100 Purchases 30 170 ----- ----- 50 270 weighted average cost 5.4 per unit The above average cost was applied to the units consumed by the assessee during the year upto 31-12-1974 to the raw material consumed in the process of manufacturing. 3. However, the assessee changed its method of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 982-83 since no finality had been reached till the time the above assessments were framed. The Tribunal vide its order dated 19-10-1988 in ITA Nos. 2206 to 2210/PN/1982 decided the issue in favour of the assessee following the Third Member decision. No reference was sought by the revenue against this order. 7. While framing the assessment for the assessment year 1989-90, the Assessing Officer accepted the fact that the assessee had continued to value the stock by applying the LIFO method. He also noticed that such method has been accepted by the Tribunal in the past and no reference application was made by the department. Accordingly, he found the method as correct and accepted the valuation made by the assessee on the basis of LIFO method. The Assessing Officer vide his order dated 30-4-1990 also rectified the assessments for assessment years 1983-84 to 1988-89 by accepting the LIFO method. The Assessing Officer has also accepted the assessee's method upto assessment year 1993-94. 8. Surprisingly, the matter has again been re-opened by the Assessing Officer in assessment year 1994-95 by rejecting the aforesaid method adopted by the assessee and accepted by the revenue from asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ang v. CIT [1992] 193 ITR 321 / 60 Taxman 248. He also relied on the decision of the Tribunal, Ahmedabad Bench in the case of Dy. CIT v. Harjivandas J. Zaveri [IT Appeal No. 3300 (Ahd.) of 1992, dated 28-8-1997] for the proposition that LIFO method for valuing the closing stock is the well recognised method which can be adopted by the assessee. A copy of order of the Ahmedabad Bench of the Tribunal is placed on record. 10. On the other hand, the learned Sr. D.R. has supported the order of the CIT(A) reiterating the reasoning given by the Assessing Officer as well as the CIT(A). According to him, the Tribunal in the subsequent decisions in the case of P. N. Gadgil and M/s. Kirloskar Cummins Ltd. has rejected the LIFO method for valuing the stock. It was further contended by him that if true profits cannot be deduced from the method adopted by the assessee then the book results can be rejected and true profits can be arrived at by applying the correct method despite the fact that incorrect method was consistently being applied by the assessee in the past. In support of this contention, he relied on the decision of the Supreme Court in the case of CIT v. British Paints India Ltd. [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so a further limitation, namely, that the effect of revising a decision in a subsequent year should not lead to injustice and the court must always be anxious to avoid injustice to the assessee. For instance, if the court is satisfied that by depriving the assessee of his rights under the later decision, in an earlier year, the assessee lost an important advance or lost some benefit which he could have got under the Income-tax Act, then the court may take the view that departing from the earlier decision leads to injustice or denial of justice and the court may prevent an income-tax authority from doing something which would be unjust and inequitable. These principles apply not only to the income-tax authorities strictly so called but also to the Income-tax Appellate Tribunal; for, though the Appellate Tribunal is not included in the class of income-tax authorities in the Act, it is a part of the machinery for collection of income-tax, and is not in the same position as the High Court, the jurisdiction of which is purely advisory." 13. The same view has been reiterated by the Apex Court in the case of Radhasoami Satsang (supra). The relevant portion of the judgment is extracted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons for doing so. 15. In our opinion, there is no fresh material on record on the basis of which the settled issue could be reopened by the Assessing Officer. The reason given by the lower authorities is that the Tribunal has given two decisions favourable to the revenue i.e. in the case of P. N. Gadgil and M/s. Kirloskar Cummins Ltd. Let us go through these decisions. 16. In the case of P. N. Gadgil, the assessee was a jeweller who used to value the closing stock at the market value upto assessment year 1979-80. Thereafter, he changed the method of valuation. According to the new method, the closing stock was valued at the value at which opening stock was valued. In case the closing stock was more than the opening stock, the excess stock was valued at average price of the purchase made during the year. This method of valuation was described as last in first out (LIFO) method. The issue before the Tribunal was whether the assessee could be allowed to change the method of valuation. We have gone through the said order of the Tribunal. The Tribunal nowhere says that LIFO is incorrect method. On the contrary, it was observed that although such method is one of the recognised metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra). One cannot keep his eyes shut to the latest development of the modern age. The Tribunals in the country have also accepted the LIFO method. The Delhi Bench of the Tribunal in the case of Jain Abhushan Bhandar v. ITO [1987] 29 TTJ (Delhi) 75 and the Cochin Bench of the Tribunal in the case of ITO v. Sree Padmanabha Jewellery Mart [1986] 19 ITD 816 have accepted the LIFO method in the past. Even recently, the Ahmedabad Bench of the Tribunal in the case of Dy. CIT v. Harjivandas J. Zaveri [60 TTJ 155], to which one of us (AM) was a party, has approved the LIFO method. Therefore, it is wrong to say that LIFO method is incorrect method. 19. It has been observed by the learned CIT(A) that such method may be recognised for corporate accounting, but it does not give the correct and true profits for the purposes of Income-tax Act. The defect pointed out by her is that the profits are lowered by this method as stock purchased in the last are valued at lower rates of past years, while such stock should be valued at the cost of the material purchased in the last. This observation of the learned CIT(A) is based on assumptions; viz. (i) that price of the material will always rise; (ii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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