TMI Blog2006 (9) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is directed against CIT(A) s order dated 31st July, 1996 in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 1992-93. 3. In the first ground of appeal, the assessee is aggrieved of CIT(A) s confirming the disallowance of Rs. 40,000 under section 37(2A) of the Act. 4. Having heard the rival contentions on the issue and having perused the material on record, we find that the disallowance has been made on the basis of accepted past history of the case and in the absence of details. However, in the past, 10% ad hoc disallowance has been confirmed by the CIT(A) and accepted by the assessee. We see no reasons to take any other view of the matter. Accordingly, the matter is remitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realizable value at yearly weighted average method, as against First In First Out (FIFO) method followed earlier. The Assessing Officer also noted that as a result of this change in valuation of stock, the profits of the assessee are understated by Rs. 43,90,180. The Assessing Officer did not accept the assessee s contention that the change of method was bona fide , that the new method followed by the assessee is one of the accepted and recognized stock valuation method, and that the new method has been consistently followed by the assessee. The Assessing Officer rejected these and other contentions of the assessee by observing as follows : For the purpose of reflecting the correct net profit, the closing stock of the relevant previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company does not determine the corrected weighted purchase price of goods in all possible situations and also in the facts and circumstances leading to the year under consideration". The CIT(A) thus rejected the method of accounting followed by the assessee, but held that the Assessing Officer is required to determine the value of stock on the basis of continuous determination of weighted average ( i.e. after each purchase or receipt of stocks) and compute the profits on that basis. The assessee is not satisfied and is in appeal before us. 11. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 12. In the light of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n what basis the cost of stock is to be computed. As far as this aspect of the matter is concerned, there cannot be any dispute that as long as all the material costs are taken into account, it is open to the assessee to adopt any recognized method of accounting as long as it is bona fide and consistent. Merely because a method results in lower valuation of stock and the resultant incidental tax advantage, cannot be a ground for rejecting the method of accounting followed by the assessee. Whether the valuation is on yearly weighted average method or continuous average method, these methods show the cost of the goods by one set of the recognized parameters. During the course of arguments before us also, learned Departmental Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly. 13. Ground No. 3 is thus allowed. 14. The appeal of the assessee for the assessment year 1992-93 is thus partly allowed in the terms indicated above. 15. We now move on to the assessee s appeal for the assessment year 1993-94 i.e. ITA No. 6411/Mum./96. 16. The ground of appeal in this appeal are exactly the same as in the appeal for the assessment year 1992-93 and even numbering of grounds is the same. The difference is only in the terms of quantum of respective disallowance. 17. Following the view taken by us for the assessment year 1992-93, as above, we dismiss the ground Nos. 2, 4 and 5. Ground No. 2 is dismissed following the esteemed views of Hon ble jurisdictional High Court in the case of Arrow India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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