TMI Blog2013 (4) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the A.O. Held that - The Companies Act, in Section 211, prescribes that the assessee shall follow the Accounting Standards issued by the ICAI in preparing its financial statements and AS-II, relevant to the year under consideration, the same has been conformed by the assessee by way of change in its method of valuation of closing stock, it cannot be but said that the action of the assessee in changing its method of valuation of closing stock was bona fide. In Jackson Engineers (P) Ltd. vs. ITO [1989 (2) TMI 159], Hero Honda Motors Ltd. vs. JCIT [2005 (5) TMI 265], Jaipur Taj Enterprises Ltd. vs. ITO [1991 (9) TMI 121] and DCIT vs. Venus Wire Industries Ltd. [2004 (9) TMI 569], it has been repeatedly held that if there is a bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in stated by Rs.306.53 Progress, which were hitherto Lacs. valued at cost, have been valued at lower of cost and net realizable value. 3. On query, the assessee submitted before the Assessing Officer that during the year, it had changed the method of valuation of its stock of raw material, components, WIP, etc., from cost basis to lower of cost or net realizable basis; that as recommended by the Institute of Chartered Accountants of India (ICAI) through its Revised Guidelines for valuation of stock, i.e., AS-II, which is mandatory in nature, the assessee company had made changes in the valuation of stock; and that since the said change in the valuation of stock was due to the mandatory application of AS-II, for the accounting period star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that the assessee has not been able to bring on record sufficient and adequate reasons for the change in method of accounting for valuation of closing stock. In light of this, I, therefore, hold that Assessing Officer's action in this regard was correct and this ground is dismissed." 6. Aggrieved, the assessee is in further appeal before us. 7. Challenging the impugned order, the ld. counsel for the assessee has contended before us that the Ld. CIT (A) has erred in upholding the addition of ₹ 3,06,53,000/- made by the Assessing Officer on account of rejection of the change in method of valuation of closing stock; that while doing so, the Ld. CIT (A) has erred in observing that there was no bona fide need or coherent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of inventory; that in the following cases, the Courts have held that bona fide change in the method adopted by the assessee for the valuation of the closing stock, in conformity with the AS-2 issued by the ICAI, is allowable:- i) 'CIT vs. Indo Rama Synthetics (I) Ltd.', 180 Taxman 35 (Del) ii) 'CIT vs. Dalmia Cement (Bharat) Ltd.', 215 ITR 441 (Del) iii) 'CIT vs. Corborandum Universal Ltd.', 149 ITR 759 (Mad) (SLP of the Department dismissed by the Hon'ble Supreme Court) iv) 'Finolex Pipes Ltd. vs. DCIT', 68 TTJ 422 (Del) v) 'DCIT vs. Discount and Finance House of India Ltd.', 14 SOT 334 (Mum) vi) 'Uniflex Industries (P) Ltd. vs. ITO', (2007) 15 SOT 246 (Lucknow) vii) 'DCIT vs. Hinduja Finance Corpn. Ltd.', ITA No.8726/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd.', 218 ITR 232 (MP) xii) 'Jaipur Taj Enterprises Ltd. vs. ITO', 42 TTJ 200 (Del) xiii) 'Punjab Communications Ltd. vs. DCIT', 84 ITD 505 (Chd.) xiv) 'Snowhite Food Products Co. Ltd. vs. CIT', 141 ITR 861 (Cal) xv) 'JCIT vs. Pact Securities Financial Ltd.', 86 ITD 115 (Hyd) xvi) 'DCIT vs. Venus Wire Industries Ltd.' 99 TTJ 561 (Mum) 6 ITA No.2071/Del/2008 8. The Ld. DR, on the other hand, has placed strong reliance on the impugned order. It has been contended that the assessee has utterly failed to controvert the Assessing Officer's finding to the effect that the Guidelines of the ICAI do not justify the change in the method of accounting adopted by the assessee; and that the assessee has, till this stage, not given an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orboration Universal Ltd.' (supra) was dismissed by the Hon'ble Supreme Court. 11. The issue is as to whether the change effected by the assessee in its method of valuation of closing stock was bona fide. Indeed, once the Companies Act, in Section 211 thereof, prescribes that the assessee shall follow the Accounting Standards issued by the ICAI in preparing its financial statements and AS-II, which was made mandatory w.e.f. 01.04.1999, relevant to the year under consideration, has been conformed to by the assessee by way of change in its method of valuation of closing stock, it cannot be but said that the action of the assessee in changing its method of valuation of closing stock was bona fide. Moreover, undeniably, the changed method of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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