TMI Blog2005 (6) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... rds had never been maintained and as such the purchases of such items were accounted as expenditure. The Assessing Officer did not agree and observed that the true profits of the appellant could not be worked out in the absence of stock records. He rejected the books of account and taking recourse to provisions of section 145(3) of the Income-tax Act, he estimated the value of stock lying with the appellant under the head Medicines and consumables and printing and stationery at Rs. 1,75,000 and Rs. 25,000 respectively. 3. The assessee filed an appeal against the order of the Assessing Officer and contended before the CIT (Appeals) that all the purchases of medicines and consumables were treated as expense and stock at year end was neither determined nor accounted for. It was also explained that the appellant-firm was following the practice of showing purchases of such items on accrual basis. In this respect copy of ledger account was also filed which showed that the billing of such items were done on last date of each month. It was repeated before me that the practice was being followed by the appellant for last many years and could not be disturbed by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting policies. Owing to accounting expediency for numerous items of medicines and consumables consumed for numerous patients in/at nursing home, all such purchases are treated as expense, therefore, stock at the end is neither determined in any manner nor accounted as such. The assessee has furnished each and every information and document asked/directed by the Assessing Officer on receipt of notices under section 143(2) of the Income-tax Act. The assessee has not maintained any stock records for medicines, surgical and drugs and other consumables as they were numerous in number. 6. Thereafter, assailing, the orders of the tax authorities below the ld. AR submitted before me that the purchases and all expenses have always been accounted on accrual basis except consumption of medicines and consumables which are accounted on purchase basis. The learned AR further contended that non-maintenance of stock register by the assessee was duly mentioned in the financial statement as well as audited by the auditors in their audit report, so the question of its production was not possible. He further contended that the allegation of the purchases towards end of the month is factually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Neo Poly Pack (P.) Ltd. [2000] 112 Taxman 363 (Delhi) wherein it was laid down that "Strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year, but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not at all be appropriate to allow the position to be changed in a subsequent year." CIT v. A.R.J. Security Printers [2003] 131 Taxman 297 (Delhi) wherein it has been held that "Though each assessment year is independent of the other, yet for the sake of consistency and for the purpose of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reopened, unless some fresh facts are found in subsequent year." The above referred rulings are further supported by the rulings of the Apex Court in the following cases : Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC), Union of India v. Satish Pana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les. Consumables are essential for running these machines in the Nursing Home of the assessee. The assessee has admitted that it is not maintaining any stock register for Income-tax purpose, but it is strange that the assessee even does not maintain any register or follow any system for having internal control regarding the purchase of the items and supply of the same to its staff and nurses in order to know what item is finished or is going to finish or what item is required to be purchased. This strange system of the assessee even maintained during past, neither appeals to reason nor can be accepted for the Income-tax purpose because the assessee s counsel has admitted during the arguments before the Tribunal that at any point of time the assessee cannot get its stock verified. Further that after 1-4-1997 in view of the amendment in section 145(1) the assessee could not be allowed to maintain mix system of accounting as it was mandatory for it to either book the medicines and consumables on cash basis or on accrual basis. In the instant case the assessee is booking these items on cash basis whereas in respect of all other items it is maintaining accrual basis/following mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfers sufficient power upon the Assessing Officer - nay, it imposes a duty upon him - to make such computation in such manner as he determines for deducing the correct profits and gains. This means that where accounts are prepared without disclosing the real cost of the stock-in-trade, albeit on sound expert advice in the interest of efficient administration of the business, it is the duty of the Assessing Officer to determine the taxable income by making such computation as he thinks fit." 14. The learned Departmental Representative for the Revenue, further assailing the argument of the learned AR for the assessee, that any change in the closing stock would also require change in the opening stock of the next year so the addition made in the closing stock would have a zero effect and no addition is required to be made, submitted that there neither any need nor any duty is cast upon the Assessing Officer to make the change to the value of the opening stock in the next year. In support of this contention, the learned DR relied upon the decisions in Melmould Corpn. v. CIT [1993] 202 ITR 789 (Bom.) and in CIT v. Carborandum Universal Ltd. [1984] 149 ITR 459 (Mad.). 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of the items under consideration before me and consumption of the same cannot disclose the real cost of the stock-in-trade at any point of time in the year under consideration. This means that the system of accounting followed by the assessee cannot disclose the correct profits and gains. From the guidelines laid down by the Apex Court in the case ( supra ) and applying the same to the instant case of the assessee, I am of the opinion that the Assessing Officer has rightly rejected the account books of the assessee and estimated the value of the stock for working out the profits of the assessee. He has also not committed any illegality in not accepting the accounting system followed by the assessee, which was also followed by him in the past, when admittedly in the existing facts the real cost of the stock-in-trade cannot be deduced from such method followed by the assessee for determining the correct taxable income of the assessee. 19. I may also mention here that though in the instant case the assessee is not maintaining stock register for Income-tax purposes, but it is strange that he even does not maintain any register or follow any system for having an internal co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as passed the assessment order. In this view of the matter the ratio of the case ( supra ) relied upon by the ld. AR for the assessee, do not apply to the facts of the case of the assessee and I do not find any illegality in the assessment framed by the Assessing Officer. 22. Another argument advanced by the ld. authroised representative for the assessee before me was that any change in the closing stock would require a change in the opening stock of the next year and so the effect of the addition made in the closing stock would be zero and hence, no addition is called for. This contention of the learned AR for the assessee has no force in the light of the decision of Hon ble Bombay High Court in Melmould Corpn s case ( supra ) wherein their Lordships have observed that the value of the closing stock of the preceding year must be the value of the opening stock in the next year. The change, therefore, has to be effected by adopting the new method for valuing the closing stock, which will, in its turn, become the value of the opening stock of the next year, which means that if the change is effected in the closing stock of the year under consideration the change would have to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
