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2017 (6) TMI 456 - GUJARAT HIGH COURT

2017 (6) TMI 456 - GUJARAT HIGH COURT - TMI - Revaluation of closing stock of the polished diamonds - addition to income - rectification application - as per assessee 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 - Held that:- This was a case where the Revenue's contention about correct formula for valuing closing stock became final. I .....

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nsideration. - when the Revenue or the Tribunal was modifying or substituting the method of valuation of closing stock of the assessee in a particular year as a necessary corollary, the same methodology would have to be applied for the purpose of computation of the opening stock for that year also. The issue being absolutely clear, perhaps the Tribunal on its own, could also have provided for it while disposing of the Tax Appeal itself whether specifically so argued by the assessee or not. W .....

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of directing that valuation of the opening stock of polished diamonds of the assessee for the assessment year 2003-04 shall be done on the same basis as the Assessing Officer has applied for the purpose of valuation of the closing stock of that year. - SPECIAL CIVIL APPLICATION NO. 9990 of 2012 - Dated:- 5-6-2017 - MR. AKIL KURESHI, AND BIREN VAISHNAV, JJ. For The Petitioner : Mr J.P.Shah, Advocate for Mr Manish J Shah, Advocate For The Respondent : Mrs Mauna M Bhatt, Advocate ORAL JUDGMENT (PER .....

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see's valuation of the closing stock of the polished diamonds which was taken at ₹ 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 ₹ 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 .....

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closing stock of the polished diamonds and added a sum of ₹ 66.90 lakhs (rounded off) to the income of the assessee on the basis of revaluation of the closing stock. 2. The assessee carried the matter in appeal. The Commissioner of Income Tax (Appeals) confirmed the view of the Assessing Officer and rejected the assessee's appeal on this point. The assessee has thereupon approached the Tribunal. The Tribunal by its judgment dated 30.04.2008, rejected the assessees contention in this re .....

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eat importance because that is a means of verifying the assessee's accounts 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 refer .....

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nd closing stock without any basis and it has adopted the value as certified by a diamond expert dated 142003. The valuation of closing stock is always done either or the cost price or market price whichever is lower. Where the market value has fallen before the date of valuation and on that date the market value of the article is less than its actual cost, the assessee is entitled to value the articles at market valued and thus anticipate the loss which he will probable incur at the time of sal .....

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d all along. In view of the above discussion, we feel that CIT(A) is quite reasonable in upholding the addition on account of valuation of closing stock by the Assessing Officer. Accordingly, we uphold the order of lower authorities on this issue and the appeal of assessee is dismissed. 3. After the appeal was so dismissed 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 .....

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Tax v. British Paints India Ltd. reported in (1991) 188 ITR 44. 4. The Tribunal by the impugned order dated 09.02.2012 rejected the application for rectification filed by the assessee on the single ground that no such issue was canvassed before the Tribunal at the time of hearing of original appeal. It is this order of the Tribunal the assessee has challenged in this petition. 5. Learned advocate Shri J.P.Shah for the petitioner contended that if the method of valuation of the closing stock was .....

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e ground for the Tribunal to reject the rectification application. He submitted that the principle that the closing stock and opening stock must be valued on same principles is so clearly and firmly established that the Tribunal on its own ought to have provided for the same while rejecting the assessee's appeal and accepting the Revenue's methodology of valuing the closing stock. 6. On the other hand, learned counsel Shri M.R.Bhatt for the Revenue opposed the petition contending that th .....

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o 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 was confirmed by the Commissioner of Income Tax (Appeals) and the Tribunal. In short, this was a case where the Revenue's contention about correct formula for valuing closing sto .....

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for the year under consideration. 8. In case of British Paints India Ltd. (supra), the Supreme Court held and observed that any system of accounting which excluded for the valuation of closing stock of costs other than the costs of raw materials for the goods in process and finished products was likely to result in a distorted pictures of two states of business for the purpose of computing the chargeable income. It was observed that such a system might produce a lower valuation of the opening s .....

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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 ot .....

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ry, this will affect both the opening as well as the closing stock. It is also to be noted that if any adjustment is required to be made by a statute, (as for example Section 145A of the Act), effect to the same should be given irrespective of any consequences on the computation of income for tax purposes. Section 145A of the Act begins with as nonobstante clause, and therefore, to give effect to Section 145A of the Act, if there is a change in the closing stock as on 31st March, 1999, there mus .....

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