ACIT COMPANY CIRCLE I, MADURAI V. THIAGARAJAR MILLS LTD., MADURAI

ITA 426/CHNY/2007

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2054 (ITAT-CHENNAI)
• Duration Of Justice: 12 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 15-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN
• Keywords: Question of law; Set aside
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NOS.426 & 1801/MDS/2007 & C.O. NO 104/MDS/2007 (IN I.T.A. NO. 1801/MDS/2 007) ! / ASSESSMENT YEARS :2003-04 & 2002-2003. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I, MADURAI. VS. M/S. THIAGARAJAR MILLS LTD, KAPPALUR, MADURAI 625 008. ( / APPELLANT) (RESPONDENT/ CROSS OBJECTOR) ./I.T.A. NO. 1160/MDS/2007 ! / ASSESSMENT YEAR : 2004-05. M/S. THIAGARAJAR MILLS LTD, KAPPALUR, MADURAI 625 008. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I, MADURAI. [PAN AAACT 4304R] ( / APPELLANT) ( /RESPONDENT) DEPARTMENT BY : SHRI. A.SUNDARARAJAN, ADDL. CIT. ASSESSEE BY : NONE ' # $ % /DATE OF HEARING : 02-12-2019 &'! $ % /DATE OF PRONOUNCEMENT : 05-12-2019 ITA NOS.426-1160-1801/17 CO. 104-07 :- 2 -: / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE APPEALS AND CROSS OBJECTION REMANDED BACK TO THIS TRIBUNAL BY HONBLE HIGH COURT OF MADRAS VIDE TAX C ASE APPEAL NOS.1125 TO 1129 OF 2009 DATED 04.09.2019 WITH THE FOLLOWING DIRECTIONS. 6. HAVING CONSIDERED THE SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE REVENUE, WE DO NOT FIND ANY SUBSTAN TIAL QUESTIONS OF LAW ARISING IN RESPECT OF THE METHOD O F VALUATION AND THEREFORE ALL THE APPEALS MAY BE REMANDED BACK TO THE TRIBUNAL AND THE LEARNED TRIBUNAL MAY PASS FINAL OR DERS ABOUT THE VALUATION OF CLOSING STOCK IN ACCORDANCE WITH LAW AFTER CONSIDERING THE DECISION OF THIS COURT CITED SUPRA WHILE PASSING THE FRESH ORDER. THE LEARNED TRIBUNAL UPO N SUCH REMAND SHALL PASS A FRESH ORDER, WITHIN A PERIOD O F SIX MONTHS FROM TODAY. THE ASSESSEE SHALL APPEAR BEFORE THE TRIBUNAL AT THE FIRST INSTANCE WITHOUT ANY FURTHER NOTICE ON 17.10.2019. 2. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE ASSESSEE APPEAL IN ITA NO.1160/MDS/2007 FOR ASSESSM ENT YEAR 2004- 05 ARE STATED HEREIN. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. THIAGARAJAR MILLS LTD . IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE MANUFACTURE OF COTTON YARN. THE RET URN OF INCOME FOR THE AY 2004-05 WAS FILED ON 29.10.2004 DISCLOSING T OTAL INCOME OF ITA NOS.426-1160-1801/17 CO. 104-07 :- 3 -: RS.10,78,73,768/-. AGAINST THE SAID RETURN OF INCOM E, THE ASSESSMENT WAS COMPLETED BY THE ASSISTANT COMMISSIONER OF INCO ME TAX, COMPANY CIRCLE-1, MADURAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 29.12.2006 PASSED U/S. 143(3) OF THE INCOME TAX AC T, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 15,01,47,156/-, A FTER MAKING SEVERAL ADDITIONS, WHICH INTER-ALIA INCLUDES ADDITION ON AC COUNT OF CHANGE IN VALUATION OF CLOSING STOCK OF G47,45,000/-, WITH WHICH, WE ARE CONCERNED. 4. THE FACTUAL MATRIX OF THE CASE IS AS UNDER:- IT WAS STATED THAT UNTIL ASSESSMENT YEAR 2003-200 4, ASSESSEE VALUED THE CLOSING STOCK OF YARN AND CLOT H AT MARKET VALUE. HOWEVER, WITH EFFECT FROM ASSESSMENT YEAR 2004-05, ASSESSEE HAD CHANGED THE METHOD OF VALUATION OF CLOSING STOCK A T LOWER OF COST OF MARKET VALUE IN ACCORDANCE WITH ACCOUNTING STANDAR D 2 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. A CCORDINGLY, ASSESSEE HAD VALUED THE CLOSING STOCK OF YARN AND CLOTH AT G191.14 LAKHS AS AGAINST MARKET VALUE OF G238.59 LAKHS. THE DIFFERE NCE WAS BROUGHT TO TAX BY THE ASSESSING OFFICER. 5. ON APPEAL BEFORE THE LD. CIT(A)-I, MADURAI, WHO VI DE ORDER IMPUGNED ORDER DATED 23.01.2007 IN ITA NO.240/06-07 AT PARA 7.3 HAD DELETED THE ADDITION BY HOLDING THAT CHANGE I N THE METHOD OF ITA NOS.426-1160-1801/17 CO. 104-07 :- 4 -: VALUATION OF STOCK IS BONAFIDE AND NO ADDITION IS REQUIRED ON ACCOUNT OF CHANGE OF METHOD OF ACCOUNTING. 6. THE DEPARTMENT HAD CHALLENGED THE CORRECTNESS OF D ECISION OF THE LD. CIT(A) BEFORE THIS TRIBUNAL. THIS TRIBUN AL VIDE ORDER DATED 03.04.2009 IN ITA NO.1160/MDS/2007 HAD REMITTED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VALUE THE OPE NING STOCK BY ADOPTING THE SAME METHOD OF VALUATION WHICH WAS ADO PTED FOR CLOSING STOCK. 7. CHALLENGING THIS DECISION OF THE TRIBUNAL, THE ASSE SSEE CARRIED THE MATTER TO THE HONBLE HIGH COURT. THE HONBLE HIGH COURT VIDE ITS JUDGMENT DATED 04.09.2019 IN TAX CASE APP EAL NOS.1125 TO 1129 OF 2009 HAD FRAMED THE FOLLOWING QUESTION OF L AW. 1. WHETHER THE APPELLATE TRIBUNAL WAS RIGHT IN RE VERSING THE ORDER OF THE FIRST APPELLATE AUTHORITY AND REST ORING THAT OF THE ASSESSING OFFICER FOR EXCLUDING RECEIPTS ARI SING IN THE CORE BUSINESS AND NOT SPECIFIED IN EXPLANATION (BAA) TO SECTION 80 HHC? 2. WHETHER THE TRIBUNAL WAS RIGHT IN DIRECTING THE ASSESSING OFFICER TO VALUE THE OPENING STOCK ALSO O N THE BASIS AS THE CLOSING STOCK IN A CASE OF CHANGE IN V ALUATION OF CLOSING STOCK WHICH WAS ACCEPTED AS BONAFIDE AND CONTRARY TO THE DECISION OF THE JURISDICTIONAL HIGH COURT? THE HONBLE HIGH COURT HAD REMANDED THE MATTER BAC K TO THIS TRIBUNAL VIDE PARA 6 OF ITS JUDGMENT. THUS, THE MA TTER AROSE AGAIN BEFORE US. ITA NOS.426-1160-1801/17 CO. 104-07 :- 5 -: 8. WHEN THE APPEAL WAS CALLED UP FOR HEARING, NONE APP EARED ON BEHALF OF THE ASSESSEE DESPITE DUE SERVICE OF NO TICE AS WELL AS THE DIRECTION OF THE HONBLE HIGH COURT TO APPEAR BEFOR E THE TRIBUNAL AT THE FIRST INSTANCE ON 17.10.2019 OR ANY OTHER SUBS EQUENT HEARING. THE HONBLE HIGH COURT HAD DIRECTED US TO DISPOSE O F THE MATTER WITHIN A PERIOD OF SIX MONTHS. HENCE, WE HAVE NO OTHER OP TION BUT TO PROCEED TO DISPOSE OF THE MATTER EX-PARTE. 9. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT IT IS SETTLED POSITION OF LAW THAT OPENING STOCK AS WELL AS CLOSING STOCK SHOULD BE VALUED ADOPTING THE SAM E METHOD OF VALUATION FOLLOWING THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF M/S. KADARI AMBAL MILLS LTD VS. JCIT AND ANOTHER IN TCA NO.430 OF 2005, DATED 20.06.2011 . 10. WE HEARD THE LD. SR. DEPARTMENTAL REPRESENTATIVE AN D PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES TO VALUATION METHOD OF CLOSING STOCK. ADM ITTEDLY, THE ASSESSEE HAS BEEN FOLLOWING THE METHOD OF MARKET VALUE FOR THE PURPOSE OF VALUING CLOSING STOCK OF YARN AND COTTON. FROM T HIS ASSESSMENT YEAR ONWARDS, ASSESSEE HAD CHANGED THE METHOD OF VALUAT ION OF CLOSING STOCK OF YARN AND COTTON BY ADOPTING LOWER OF COS T OR MARKET PRICE ITA NOS.426-1160-1801/17 CO. 104-07 :- 6 -: PURSUANT TO ACCOUNTING STANDARD NO.2 ISSUED BY I NSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. HOWEVER, THE ASSES SING OFFICER HAD NOT ACCEPTED THE CHANGE OF METHOD OF VALUATION OF C LOSING STOCK AND BROUGHT THE DIFFERENCE ON ACCOUNT OF CHANGE OF ME THOD OF ACCOUNTING OF VALUATION IN THE CLOSING STOCK TO TA X. ON APPEAL BEFORE THE LD. CIT(A), THE LD. CIT(A) DELETED THE ADDITIO N CITING THAT THIS IS A BONA FIDE METHOD OF VALUATION AND NO ADDITION SHOUL D BE MADE. THE DEPARTMENT CARRIED THE MATTER BEFORE THIS TRIBUNA L, THIS TRIBUNAL HAD REMANDED BACK THE MATTER TO THE FILE OF THE ASSES SING OFFICER TO VALUE THE OPENING STOCK AS WELL AS THE CLOSING STOCK ADOP TING THE SAME METHOD OF VALUATION. THIS DIRECTION OF THE TRIBUN AL IS IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF M /S. KADARI AMBAL MILLS LTD (SUPRA ) WHEREIN IT WAS STATED AS UNDER. 5. HEARD THE LEARNED COUNSEL. AND PERUSED THE DOC UMENTS ON RECORD. DURING THE RELEVANT ASSESSMENT YEAR,. THE A SSESSEE HAS CHANGED THE METHOD OF VALUATION OF STOCK FROM MARKE T PRICE TO COST PRICE. THE ASSESSES VALUED THE CLOSING STOCK O N THE BASIS OF COST PRICE BUT VALUED THE OPENING STOCK ON THE BASI S OF MARKET PRICE. FOR THE EARLIER ASSESSMENT YEARS,. THE ASSES SEE VALUED THE CLOSING STOCK OF FINISHED GOODS AT MARKET PRICE. TH E AUDITOR OF THE ASSESEE OBJECTED THE SAME AND ALSO ADVISED TO VALUE THE CLOSING STOCK AT COST OR MARKET PRICE, WHICHEVER IS LESS. T HEREFORE, THE ASSESSES HAS CHANGED THE METHOD OF ACCOUNTING WITH REGARD TO VALUATION OF CLOSING STOCK FROM MARKET PRICE TO COS T PRICE. THE ASSESSING OFFICER ACCEPTED THE METHOD OF VALUATION OF THE CLOSING STOCK AT COST PRICE WITHOUT QUESTIONING THE BONAFID E OF THE ASSESSEE. SO,. THERE IS NO DISPUTE THAT THE ASSESSI NG OFFICER HIMSELF HAD ACCEPTED THE VALUATION OF THE CLOSING S TOCK AS ON 31.03..1994 AS DECLARED BY THE APPELLANT/ASSESSEE. IN RESPECT OF THE OPENING STOCK,. THE ASSESSEE VALUED THE OPENING STOCK AS ON ITA NOS.426-1160-1801/17 CO. 104-07 :- 7 -: 01.04.1993 AT MARKET PRICE. THEREFORE, THE ASSESSIN G OFFICER WAS OF THE VIEW THAT VALUATION IN RESPECT OF THE OPENIN G STOCK AND CLOSING STOCK SHOULD BE VALUED IN THE UNIFORM METHO D IE, COST PRICE. THE DISPUTE IS AS TO WHETHER DIFFERENT METHO DS COULD BE ADOPTED, ONE FOR THE OPENING STOCK AND ANOTHER FOR CLOSING STOCK. THE SAID CONTROVERSY IS ALREADY SETTLED BY THIS COU RT IN THE CASE OF CIT VS. CARBORANDUM UNIVERSAL LIMITED REPORTED IN 1 49 ITR 759 (MAD) - IN THAT JUDGMENT,. THE ISSUE WAS AS TO WHET HER TH CLOSING STOCK IS TO BE VALUED IN THE SAME METHOD AS WHAT WA S APPLIED TO THE OPENING STOCK. THE HIGH COURT AFTER CONSIDERING THE PRINCIPLES OF VALUATION AND ALSO SERIES OF CASE LAWS HELD AT P AGE 765 AS FOLLOWS: ON A DUE CONSIDERATION OF THE MATTER, WE ARE INCLIN ED TO AGREE WITH THE VIEW OF THE TRIBUNAL. IF THE ASSESSE E IS CALLED UPON TO APPLY THE NEW METHOD OF VALUATION TO THE OPENING STOCK OF THE ACCOUNTING YEAR AS WELL, THEN, IN CONSEQUENCE, THE VALUE OF THE CLOSING STOCK OF THE YEAR PREVIOUS TO THE ACCOUNTING YEAR WILL ALSO GET ALTER ED AND THAT WILL RESULT IN THE MODIFICATION OF THE ASSESSM ENT FOR THE PREVIOUS YEAR. IT IS FOR THIS REASON, THE TRIBUNAL HAS STATED THAT THOUGH BY ADOPTION OF THE NEW NETHOC1 OF VALUA TION FOR THE CLOSING STOCK ALONE THE ASSESSEA MAY. APPEA R TO GET SOME UNINTENDED BENEFIT, IN CAUSE OF TIME IT WI LL GET ADJUSTED AND THE REVENUE WILL NOT BE A LOSER.. EVEN APART FROM THIS REASON, IF THE REVENUES CONTENTION THAT THE NEW METHOD SHOULD BE ADOPTED BOTH TO OPENING STOCK AND CLOSING STOCK EVEN IN THE FIRST YEAR OF THE INTRODU CTION OF THE NEW METHOD IS ACCEPTED, THEN IT VIII LEAD TO TH E POSITION THAT THE ASSESSEE CANNOT AT. ALL CHANGE THE METHOD OR THE ASSESSES HAS TO REVALUE THE CLOSING STOCK OF THE PR EVIOUS YEAR WHICH WILL BE THE OPENING STOCK OF THIS YEAR, AND SUCH A REVALUATION ON THE NEW BASIS AS PER THE ASEESSEE IS NOT ORDINARILY POSSIBLE.. THAT WHEN A NEW METHOD OF VAL UATION OF STOCK IS ADOPTED IN ANY PARTICULAR YEAR, THE ASS ESSEE CAN ON THAT BASIS LEAVE INTACT THE VALUATION OF THE OPENING STOCK ON THE OLD METHOD HAS BEEN LAID DOWN IN A SER IES OF CASES. 6. THE ABOVE JUDGMENT WAS ALSO CONSIDERED BY THE BO MBAY HIGH COURT IN THE CASE OF MELMOULD CORPORATION YE. COMMI SSIONER OF INCOME TAX REPORTED IN (1993) 202 ITR 789.. IN PAGE NOS 792 TO 794 IT WAS HELD AS FOLLOWS: ITA NOS.426-1160-1801/17 CO. 104-07 :- 8 -: WE ARE NOT HERE CONCERNED WITH WHETHER THIS IS THE CORRECT METHOD OR AN ACCEPTABLE METHOD FOR DETERMINING COST PRICE. AT NO STAGE OF THE PROCEEDINGS WAS THE QUEST .ION EVER RAISED AS TO WHETHER IT WAS PERMISSIBLE FOR TH E ASSESSES TO REVALUE ITS STOCK BY NOT INCLUDING IN T HE COST PRICE OVERHEAD EXPENSES.. THE TRIBUNAL HAS NOT DEAL T WITH THIS ASPECT, VIZ., THE MANNER IN WHICH THE CLOSING STOCK HAS BEEN VALUED IN THE PRESENT CASE. THEREFORE, THE DEC ISION OF THE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD., (1991) 188 ITR 44, IS NOT ATTRACTED TO THE QUESTION BEFORE US FOR CONSIDERATION. THE DECISION OF THE TRIBUNAL IS ON THE FOOTING THAT SINCE THE CLOSING S TOCK WAS VALUED BY ADOPTING A CERTAIN METHOD, THE EARNS METH OD SHOULD BE ADOPTING IN VALUING THE OPENING STOCK. IN OTHER WORDS, THE CHANGE IN THE METHOD OF VALUATION, ACCOR DING TO THE TRIBUNAL, SHOULD COMMENCE WITH VALUING THE OPEN ING STOCK OF ANY PREVIOUS YEAR BY THE NEW METHOD WHICH IS TO BE ADOPTED FOR VALUING THE CLOSING STOCK AS WELL.. THE ASSUMPTION SO MADE BY THE TRIBUNAL APPEARS TO BE CONTRARY TO THE NORMALLY ACCEPTED ACCOUNTING PRINCI PLES.. MR.BHUJALS HAS DRAWN OUR ATTENTION TO A BOOKLET CAL LED VALUATION OF STOCK AND WORK-IN-PROGRESS- NORMALLY ACCEPTED ACCOUNTING PRINCIPLES BROUGHT OUT BY INDI AN MERCHANTS CHAMBER ECONOMIC RESEARCH AND TRAINING FOUNDATION AND WRITTEN BY SHRI G.P.KAPADIA. AT PAGE 4 OF THIS BOOKLET THERE IS A DISCUSSION ABOUT CHANGE FRO M ONE VALID BASIS TO ANOTHER VALID BASIS.. IT STATES : 2. WHERE A CHANGE FROM ONE VALID BASIS TO ANOTHER VALID BASIC IS ACCEPTED, CERTAIN CONSEQUENCES NORMALLY FO LLOW.. THE OPENING STOCK OF THE BASE YEAR OF CHANGE IS VAL UED ON THE SAME BASIS AS THE CLOSING STOCK. WHETHER THE CH ANGE IS TO A HIGHER LEVEL OR TO A LOWER LEVEL,, THE REVE NUE NORMALLY DOES NOT SEEK TO REVISE THE VALUATION OF E ARLIER YEARS. IT NEITHER SEEKS TO RAISE ADDITIONAL ASSESSM ENTS, NOR DOES IT ADMIT RELIEF UNDER THE ERROR OR MISTAKE PROVISIONS. 3. IT IS NOT POSSIBLE TO DEFINE WITH PRECISION WHAT AMOUNTS TO A CHANGE OF BASIC.. IT IS A CONVENIENCE, BOTH TO THE TAX PAYER AND TO THE REVENUE, NOT TO REGARD EVERY CHANG E IN THE METHOD OF VALUATION AS A CHANGE OF BASIS. IN PA RTICULAR, THE REVENUE ENCOURAGES THE VIEW THAT CHANGE WHICH INVOLVES NO MORE THAN A GREATER DEGREE OF ACCURACY, OR A REFINEMENT, SHOULD NOT BE TREATED AS A CHANGE OF BA SIS, ITA NOS.426-1160-1801/17 CO. 104-07 :- 9 -: WHETHER THE CHANGE RESULTS IN A HIGHER OR A LOWER VALUATION. IN SUCH CASES THE NEW VALUATION IS APPLI ED AT THE END OF THE YEAR WITHOUT AMENDMENT OF THE OPENING VALUATION.. (UNDERLINING OURS).. THE SAME PRINCIPLE HAS BEEN ADOPTED BY THE KARNATAK A NIGH COURT IN CLT VS. CORPORATION BANK LTD.., (198) 174 ITR 616. IT HAS SAID (HEADNOTE): THE TWO PRINCIPLES APPLICABLE WITH REGARD TO THE V ALUATION OF STOCK ARE THAT THE ASSESSEE IS ENTITLED TO VALUE THE CLOSING STOCK EITHER AT COST PRICE OR MARKET VALUE WHICHEVER IS LOWER,. END THAT THE CLOSING STOCK MUS T BE THE VALUE OF THE OPENING STOCK IN THE SUCCEEDING YEAR.. IT IS,. THUS, CLEAR THAT IRRESPECTIVE OF THE BASIS ADOPTED FOR VALUATION IN THE EARLIER YEARS, THE ASSESSEE HAS TH E OPTION TO CHANGE THE METHOD OF VALUATION OF THE CLOSING ST OCK AT COST OR MARKET PRICE, WHICHEVER IS LOWER, PROVIDED THE CHANGE IS BONE TIDE AND FOLLOWED REGULARLY THEREAFT ER. THUS, THE VALUE OF THE CLOSING STOCK OF THE PRECEDI NG YEAR MUST BE THE VALUE OF THE OPENING STOCK OF THE NEXT YEAR. THE CHANGE, THEREFORE, HAS TO BE EFFECTED BY ADOPTI NG THE NEW METHOD FOR VALUING THE CLOSING STOCK WHICH WILL , IN ITS TURN, BECOME THE VALUE OF THE OPENING STOCK OF THE NEST YEAR. IF, INSTEAD, A PROCEDURE IS ADOPTED FOR CHANG ING THE VALUE OF THE OPENING STOCK, IT WILL LEAD TO A CHAIN REACTION OF CHANGES IN THE SENSE THAT THE CLOSING VALUE OF T HE STOCK OF THE YEAR PRECEDING WILL ALSO HAVE TO CHANGE AND CORRESPONDINGLY THE VALUE OF THE OPENING STOCK OF T HAT YEAR AND SO ON. THIS WAS POINTED OUT BY THE MEDRAS HIGH COURT IN THE CASE OF CIT VS. CARBORADUM UNIVERSAL LTD.,. (1984) 149 ITR TH9. IN THE CASE BEFORE THE MADRAS HIGH COU RT. ALSO THE VALUATION OF OPENING STOCK HAD BEEN DONE B Y THE COMPANY ON THE BASIS OF TOTAL COST I..E. COST INCLU DING OVERHEADS WHILE IT CHANGED ITS METHOD OF VALUATION FOR THE CLOSING STOCK TO DIRECT COST,. I.E.,. COST WITHOU T OVERHEADS. THIS CHANGE IN METHOD WAS MADE BONE FIDE AND THE ASSESSEE SAID THAT IT WOULD BE ADOPTING THIS MET.HO D CONSISTENTLY IN THE FUTURE JUST AS IN THE PRESENT C ASE. THE COURT IN THAT CASE HELD THE CHANGE WAS A BONE FIDE ONE AND WAS A ARRANGEMENT WHICH WAS TO BE FOLLOWED YEAR AFTER YEAR, THE CHANGE WOULD HAVE TO BE ACCEPTED ITA NOS.426-1160-1801/17 CO. 104-07 :- 10 -: NOTWITHSTANDING THE FACT THAT DURING THE ASSESSMENT YEAR IN QUESTION, WHICH WAS THE FIRST YEAR WHEN THE CHANGE OF METHOD WAS BROUGHT ABOUT, A PREJUDICE OR DETRIMENT MIGHT BE CAUSED TO THE REVENUE BECAUSE THE OPENING STOCK WAS VALUED AT. TOTAL COST. WHILE CLOSING STOCK WAS VALUED AT DIRECT COST.. IT SAID (HEAD NOTE): IF THE ASSESSEE IS CALLED UPON TO APPLY THE NEW METHOD OF VALUATION TO THE OPENING STOCK OF THE ACCOUNTING YEAR AS WELL, THE VALUE OF THE CLOSING STOCK OF THE YEAR PREVIOUS TO THE ACCOUNTING YEAR W ILL ALSO HAVE TO GET ALTERED WHICH WILL RESULT IN A MODIFICATION OF THE ASSESSMENT OF THAT PREVIOUS YEAR. 7. FOLLOWING THE JUDGMENT OF THIS COURT CITED SUPRA AND ALSO AGREEING WITH THE JUDGMENT OF THE BOMBAY HIGH COURT , WE ARE OF THE VIEW THAT THE TRIBUNAL IS WRONG IN HOLDING THAT THERE MUST BE UNIFORMITY IN THE METHOD OF VALUATION OF OPENING ST OCK AS WELL AS THE CLOSING STOCK. IN THE INSTANT CASE, THE ASSESSI NG OFFICER HAS ACCEPTED THE VALUATION OF THE CLOSING STOCK AS ON 3 1.03.1994 AT COST PRICE AND ALSO BONE FIDE OF THE ASSESSEE IS NO T IN DISPUTE. FURTHER, THE ASSESSES HAS FOLLOWED THE NEW METHOD C ONSISTENTLY. THEREFORE, THE ORDER OF THE TRIBUNAL IS WRONG IN RE JECTING THE CONTENTION OF THE. ASSESSEE. HENCE, WE SET ASIDE TH E ORDER OF THE TRIBUNAL AND RESTORE THE ORDER OF THE COMMISSIONER OF INCOME (APPEALS).. IN THE CIRCUMSTANCES, WE ANSWER THE ABO VE QUESTIONS OF LAW IN FAVOUR OF THE ASSESSEE AND AS AGAINST THE REVENUE. THE TA CASE (APPEALS) STANDS ALLOWED. NO COSTS. IN VIEW OF THE ABOVE LEGAL POSITION AND FACTS, THE EARLIER ORDER OF THE TRIBUNAL STANDS REVERSED AND WE RESTORE THE ORDER OF LD. CIT(A). IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE ASSESSE E STANDS ALLOWED. 11. THE ISSUES IN OTHER GROUNDS OF APPEAL DOES NOT SUR VIVE BECAUSE THE QUESTION OF LAW FRAMED BY THE HONBLE HIGH COURT STANDS ITA NOS.426-1160-1801/17 CO. 104-07 :- 11 -: DISMISSED BY HONBLE HIGH COURT. IN THE RESULT, THE APPEALS FILED BY THE REVENUE STAND DISMISSED AND CROSS OBJECTION F ILED BY THE ASSESSEE BECOMES INFRUCTUOUS. 12. TO SUMMARIZE THE RESULTS, THE APPEALS OF THE REVEN UE IN I.T.A. NOS.426 & 1801/MDS/2007 FOR ASSESSMENT YEA RS 2003-04 & 2002-2003 ARE DISMISSED, THE APPEAL OF THE ASSESSE E IN NO.1160/MDS/2007, FOR ASSESSMENT YEAR 2004-05 IS A LLOWED, WHEREAS THE CROSS OBJECTION NO. 104/MDS/2007 FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 5TH DAY OF DECEMBER 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER ( # / CHENNAI ) / DATED:5TH DECEMBER, 2019 KV $ +%,- .-!% / COPY TO: 1 . /0 / APPELLANT 3. ' 1% () / CIT(A) 5. -4 +%5 / DR 2. +6 /0 / RESPONDENT 4. ' 1% / CIT 6. 7 8# / GF