9911796707
TMI Blog1978 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1961-62. By the aforesaid notices the appellant sought to reopen the respondent's assessments in respect of the aforesaid years. Out of the aforesaid five notices the learned judge of the court of first instance cancelled and rescinded four notices relating to the assessment years 1956-57 to 1959-60 and directed the appellant to forbear from giving effect thereto in any manner whatsoever. The learned judge however upheld the notice for the assessment year 1961-62 and as there is no appeal against that decision it is not necessary for us to refer to the said notice for the assessment year 1961-62. As the learned judge of the court of the first instance in his judgment has set out the relevant facts of this case in detail, to avoid pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars that the stock-in-trade and work-in-progress were valued by the company very much below the cost, viz., at percentages ranging between 80 and 84%. Whatever may be the position of the manufacturing charges to the total cost, the company, according to the deponent, should have valued its closing stock either at cost or at market value, whichever is lower. It is further alleged that the company had changed its method of valuation of stocks without ever drawing the attention of the ITO to this fact. The following significant sentence in para. 4 of the affidavit may be noted : " Whatever disclosure that was made by the company was a mere description in the balance-sheet and no more. " As the recorded reasons for the respective years were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147 of the Act. It should be further stated that in the balance-sheet filed for the various years, the company has stated that the stocks have been valued at ' cost or under ' ; but it was only in 1963-64, that the full particulars were obtained and it was noticed that the stocks have not been valued according to the recognised commercial principles. " The learned judge of the court of first instance considering the facts and circumstances of the case and the arguments that were advanced before him on behalf of the parties, for the reasons mentioned in detail in his judgment was of the view that in the instant case with regard to the notices in respect of the four assessment years, i.e., 1956-57 to 1959-60, there was no non-disclosure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ...... In my view, these observations of mine apply with considerable force to the facts of this case. As I have already indicated, the basis of the valuation of the different types of stocks as also their respective values were clearly shown in the balance-sheets which accompanied the returns for all the relevant years. Thereafter, it was the duty of the Income-tax Officer to exercise due care and caution and make the necessary enquiries for the purpose of finding out whether the assessee was following a correct basis of valuation or whether he was, by adopting a method of valuation which is unknown in commercial practice, was seeking to escape its legitimate liability for income-tax. A failure to make such an enquiry or investigation or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been approved and upheld by this court in its decision in the case of British Paints India Ltd. v. CIT [1978] 111 ITR 53 (Cal). Therefore, according to the respondent, there could not be any question of non-disclosure of material facts in the instant case. On behalf of the revenue, it was mainly contended that the mere filing of the balance-sheets would not suffice but it was the duty of the assessee to point out to the officer making the assessment the relevant items of the balance-sheet as also to indicate the correct mode of valuation and inasmuch as, in the instant case, there were omissions or failure on the part of the assessee in that behalf the ITO had jurisdiction to reopen the assessment of the respondent. It was further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed methods of valuation. But what is being disputed is that the assessee did not indicate to the officer making the assessment the correct method of valuation applicable to the facts of this case and it was the duty of the assessee to satisfy the ITO that the method of valuation adopted by the assessee was the correct method. We are unable to accept this contention of the department. If all the material facts relevant on the question of valuation were disclosed by the assessee and the method of valuation adopted by the assessee could not be disputed as one of the recognised methods of valuation then it was the duty of the ITO who made the assessment to satisfy himself in the background of the primary facts disclosed by the assessee whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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