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TMI Blog2017 (6) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2003-04, the petitioner had filed the return of income which was taken in scrutiny by the Assessing Officer. Besides other issues, the Assessing Officer disputed the assessee's valuation of the closing stock of the polished diamonds which was taken at Rs. 1.14 crores (rounded off). We may clarify that there was no dispute on the valuation of the rough diamonds adopted by the assessee. The Assessing Officer noticed that the assessee had taken the market value of the polished diamonds at Rs. 12,187.65 per carat. The Assessing Officer required the assessee to produce the stock register and manufacture register of diamonds. It was conveyed by the assessee that it did not maintain quality and quantity vice details of polished diam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by having a quantitative tally. If in any case, after taking into account the absence of a stock register coupled with other materials, it is felt that correct profits and gains cannot be deduced from the accounts, resort to the first proviso can be bad. This view was held by the Hon'ble Apex Court in the case of S.N.Namasivayiam Chettiar v. CIT (1960) 38 ITR 579. In this case, the Hon'ble Supreme Court referred to Pandit Bros. v. CIT (1954) 26 ITR 159 (Punjab) and observed that the want of stock register was, in that particular case, not a very serious defect because the account books had been found and accepted as correct and disclosed a true state of affairs, and that case did not lay down as a proposition of law that the want ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal, the assessee preferred a Misc. Civil Application seeking rectification of the order by the Tribunal. In such application dated 30.03.2010, the assessee raised one single issue viz. that the Revenue as well as the Tribunal having discarded the assessee's method of valuing closing stock and substituted such methodology by another formula, same principle must apply for valuing the opening stock. Since this was not so provided by the Tribunal, the order of the Tribunal suffered from error on the face of the record which needed to be rectified. The assessee besides others, relied upon the decision of the Supreme Court in case of Commissioner of IncomeTax v. British Paints India Ltd. reported in (1991) 188 ITR 44. 4. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same basis as valuation of closing stock. The Tribunal therefore rightly did not examine this question in the rectification application. He further submitted that facts necessary for revaluing the opening stock were not available before the Tribunal. The assessee had not maintained proper details of the quality and weight of the polished diamonds. 7. Facts emerging from the record are very clear. The petitioner assessee who is in the business of trading of diamonds, had valued its closing stock of polished diamonds in particular manner. The Revenue objected to such methodology suggesting that the valuation of the closing stock was not properly done. The substituted formula for valuing closing stock as adopted by the Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incorrect since, for the income tax purpose, each year is a self contained unit. While doing so, it was observed that; " It is a wellrecognised principle of commercial accounting to enter in the profit and loss account the value of the stockintrade at the beginning and at the end of the accounting year at cost or market price, whichever is the lower. As stated by the Lord President in Whimster and Co. v. CIR [1925] 12 TC 813, 823 (C. Sess.):" 9. In the decision in case of Mahavir Alluminium Ltd. (supra), Division Bench of Delhi High Court observed that where there is change in valuation at one end, then there must be necessarily a corresponding change at the other and otherwise a true profit could not be reflected. The Court referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether specifically so argued by the assessee or not. When the assessee therefore applied for rectification at that stage, at least, the Tribunal could have accepted the request of the assessee. The Tribunal therefore, committed the serious error in rejecting the rectification application on the ground that no such argument was advanced at the time of hearing of the appeal. 11. The second contention of Shri Bhatt that the assessee did not maintain necessary details of quality or volume of the polished diamonds, should pause no challenge. It was precisely because of this reason that the Assessing Officer discarded the method of valuation of closing stock adopted by the assessee. The modified and if we may use the expression 'improved&# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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