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2016 (5) TMI 139

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..... 16 - Abraham P. George (Accountant Member) And Vijay Pal Rao (Judicial Member) For the Petitioner : Sunil Kumar Agarwala For the Respondent : Vikram Vijayaraghavan JUDGMENT Abraham P. George (Accountant Member) 1. This is an appeal filed by Revenue directed against an order dated August 23, 2013, of the Commissioner of Income-tax (Appeals)-III, Bengaluru. 2. Of the four grounds taken by the Revenue, grounds 1, 3 and 4 are general needing no specific adjudication. Effective ground 2 is reproduced hereunder : 2. On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in law in directing the Assessing Officer to accept the value of closing stock at the value ad .....

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..... eal. 6. The Department had chosen to move in further appeal before the hon'ble jurisdictional High Court for both the assessment years. For the assessment year 1989-90 in which the change was made for the first time, their Lordships in their judgment dated November 26, 2007, in ITRC No. 2 of 2003, held as under at paragraphs 3 to 7 : 3. We have heard Sri M. V. Seshachala, learned counsel appearing for the Revenue and Sri Thiruvengadam, learned counsel for the assessee. During the relevant year, the board of directors of the asses see-company passed the resolution, which reads thus : 'Resolved that the closing stock of sugar for the accounting year ending on March 31, 1989, be valued at the cost price or market price, wh .....

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..... o produce additional material, so also the Revenue. Copy of this order shall be sent to the Tribunal as required under section 269 of the Act. 7. For the impugned assessment year directions given in ITA No. 184 of 2001, dated November 26, 2001, by the hon'ble jurisdictional High Court were as under : In ITRC No. 2 of 2003, which relates to the very assessee, we have remanded the matter to the Assessing Officer to decide the legality or otherwise of the method adopted by the assessee in evaluating the closing stock for the accounting year ending March 31, 1989, in terms of the order in ITR No. 2 of 2003 and according to law. In this appeal, the assessee has called in question the method adopted by the assessee for eva .....

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..... Income-tax (Appeals) by virtue of the judgment of the hon'ble apex court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC), valuation of stock at cost or market price, whichever was lower, was an accepted method of valuation. Further, as per the Commissioner of Income-tax (Appeals), change in method of valuation was approved by the board of directors of the assessee. He thus deleted the addition made by the Assessing Officer. 10. Now before us, the learned Departmental representative submitted that the hon'ble jurisdictional High Court had in the proceedings for the assessment year 1989-90 remitted the matter to the Assessing Officer. Assessment for the said year was still to be completed. According to him, s .....

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..... ptember as its accounting year end but by virtue of the amendments made by the Finance Act, 1989, the assessee was compelled to follow the financial year ending on 31st March as its previous year. Along with this change the assessee decided to change its method of valuation of stock also from net realisable value to the cost or market value, whichever was lower. According to him, the Assessing Officer had failed to consider the various submissions made by the assessee in this regard in the remand proceedings. Hence, as per the learned authorised representative, the Commissioner of Income-tax (Appeals) was justified in deleting the addition. 12. We have perused the orders and heard the rival contentions. The hon'ble jurisdictional Hig .....

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..... price, whichever was lower, of the stock, as on April 1, 1989, and stock as on March 31, 1990, were correctly made. Though the Commissioner of Income-tax (Appeals) was justified in taking a view that the assessee could change its method of accounting to the cost or market price, whichever was lower, for valuing its stock, the correctness of the cost arrived at by the assessee were not verified by any of the authorities below. Cost of opening stock will also depend on the assessment done by the Assessing Officer for the assessment year 1989-90 pursuant to the judgment of the hon'ble jurisdictional High Court reproduced by us at paragraph six above. 13. In the result, though we hold that the assessee was justified in adopting a new me .....

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