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TMI Blog2006 (11) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of execution of works contract. Being the assessee under the Income-tax Act 1961, for short, the Act, it filed its report for the financial years 1991-92, 1992-93, 1993-94 and 1994-95 showing the income and its tax liability etc. The appellant also filed the audit report, trading account, balance-sheet, etc. as required under law. 4. The appellant-company followed the accounting system-AS-7 as laid down by the Institute of Chartered Accountants of India, wherein the closing value of work-in-progress is determined on the basis of the method provided therein. The assessing authority issued a notice under section 143(2) of the Act and thereafter completed the assessment holding-inter alia, that the submissions made by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant made the departure from ' doctrine of actualities' on a scientific and prudent manner based upon measurable standards laid down by the highest accounting authority in the country, viz., ICAI." 6. The Revenue, thereafter, took the matter to the Income-tax Appellate Tribunal who set aside the order of the appellate authority and restored the order of the Assessing Officer, and, hence the present appeals. The substantial question of law formulated by this court in all the above four appeals, reads as follows : "Whether, on the facts and circumstances of the case, the Tribunal was right in not accepting the valuation of closing work-in-progress in accordance with accounting standard (AS-7) as laid down by the Institute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question had arisen in the case of CIT v. Doom Dooma India Ltd. [1993] 200 ITR 496 (Gauhati) wherein the question of valuation of stock arose as a result of the accounting system. Referring to the provision of section 145 of the Act this court held (page 500) : "It is for the assessee to adopt any recognized method of account ing for his business. The income shall be computed in accordance with the method of accounting regularly employed by the assessee. In other words, it is open to the assessee to opt for such method of accounting as he deems reasonable and appropriate. He may opt to adopt the manufacturing cost price method or the market price method provided the method is followed in regard to both the open ing stock and the closing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. v. CIT [1970] 77 ITR 533 (SC) ; and (3) A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC). 11. We may recapitulate the following observations of the hon' ble Supreme Court in Investment Ltd. v. CIT [1970] 77 ITR 533, 537 : "A taxpayer is free to employ, for the purpose of his trade, his own method of keeping accounts, and for that purpose to value his stock in-trade either at cost or at market price. A method of accounting adopted by the trader consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping account or of valuation. The method of accounting regularly employed may be discarded only if in the opinion of the taxing authorities income of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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