DCIT 9(1), MUMBAI V. DAMAN PAPER LTD, MUMBAI

ITA 7756/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75812 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-02-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 11-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO. 7756/MUM/2010 ( / ASSESSMENT YEAR: 2005-06) DY. CIT, RANGE-9(1), ROOM NO.223, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 / VS. DAMAN GANGA PAPER LTD. 101/102, C WING, RIZVI NAGAR, SANTACRUZ (W), MUMBAI-400 054 ./ ./PAN/GIR NO. AAACD 2024 J ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ % / APPELLANT BY : SHRI SANJEEV JAIN '#! $ % / RESPONDENT BY : CA DHARAN GANDHI & ' ( $ ) * / DATE OF HEARING : 06.02.2014 +,- $ ) * / DATE OF PRONOUNCEMENT : 26.02.2014 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-19, MUMBAI (CIT(A) FOR SH ORT) DATED 14.09.2010, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2005-06 VIDE ORDER DATED 10.12.2007. 2 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. 2. THE ONLY ISSUE RAISED BY THE REVENUE PER ITS INS TANT APPEAL IS THE NON-INCLUSION OF THE DEMURRAGE CHARGES PAID BY THE ASSESSEE TO THE P ORT AUTHORITIES IN THE VALUATION OF THE CLOSING STOCK AS AT THE YEAR-END, IN DEPARTURE WITH ITS CONSISTENT PAST PRACTICE OF VALUING ITS CLOSING INVENTORY BY INCLUDING THE SAME AS AN E LEMENT OF COST, ALLUDING TO S.145A. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THAT THE SAID NON-INCLUSION REPRESENTS A DEPART URE FROM THE PAST IS NOT IN DISPUTE. THE LD. CIT(A) HAS ACCEPTED THE ASSESSEES CLAIM ON THE GROUND THAT THE SAID CHANGE IN ITS METHOD OF ACCOUNTING BY THE ASSESSEE IS A BONA FIDE CHANGE AND, THUS, COULD NOT BE VALIDLY OBJECTED TO BY THE REVENUE. IN OUR VIEW, TH E SAME DOES NOT REPRESENT A METHOD OF ACCOUNTING, SO THAT THERE IS, FIRSTLY, NO QUESTION OF ANY CHANGE THEREIN. REFERENCE IN THIS CONTEXT MAY BE DRAWN TO THE DECISION IN THE CASE OF CIT V. A. KRISHNASWAMI MUDALIAR [1964] 53 ITR 122 (SC). THE ASSESSEE, AS IN THE PAS T, CONTINUES TO BOOK THE DETENTION/DEMURRAGE CHARGES ON INCURRING THE SAME. THE ONLY QUESTION IS WHETHER THE SAME OUGHT TO BE INCLUDED IN WORKING THE COST OF TH E GOODS ON WHICH THE SAME STANDS INCURRED, I.E., WHERE HELD IN STOCK AS AT THE YEAR- END. THE INCLUSION IN THE PAST WAS ON THE GROUND THAT TH E SAME, BEING FOR THE DELAYED REMOVAL/CLEARING OF GOODS, REPRESENTS A STORAGE COS T, SO THAT IT IS A PART OF THE COST OF THE GOODS (RAW MATERIAL) TO THE ASSESSEE. WE COULD NOT DISAGREE MORE. NEITHER THE PRINCIPLES OF COMMERCIAL ACCOUNTING, WHICH WOULD APPLY IN THE ABSENCE OF ANY SPECIFIC PROVISION IN THE ACT IN THE MATTER, PRESCRIBE SO NOR THE ACCOUNT ING STANDARD (AS)-2 TITLED VALUATION OF INVENTORIES ISSUED BY THE INSTITUTE OF CHARTERE D ACCOUNTANTS OF INDIA (ICAI), TO WHICH REFERENCE STANDS ALSO DRAWN BY THE LD. CIT(A). ACCO UNTING STANDARDS BY THE ICAI REPRESENT THE OFFICIAL PRONOUNCEMENT BY THE ACCOUNT ING REGULATORY BODY OF WHAT ARE CONSIDERED AS STANDARD ACCOUNTING PRACTICES IN ALIG NMENT WITH THE ACCOUNTING THEORY. THE PITH AND SUBSTANCE OF ITS PRESCRIPTION IN THE MATTE R CAN BE SAID TO BE CAPTURED IN PARA 6 OF THE AS-2 UNDER THE HEADING COST OF INVENTORIES, A S UNDER, WHILE MAKING IT CLEAR PRIOR THERETO (AT PARA 5) THAT THE MEASUREMENT OF INVENTO RIES WOULD BE AT THE LOWER OF COST AND NET REALIZABLE VALUE: 3 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. 6. THE COST OF INVENTORIES SHOULD COMPRISE AL THE COSTS OF PURCHASE, COST OF CONVERSION AND OTHER COSTS INCURRED IN BRINGING THE INVENTORIES TO THEIR PRESENT LOCATION AND CONDITION. STORAGE COST IS NEITHER A COST OF PURCHASE NOR OF C ONVERSION NOR CAN IT BE CONSIDERED AS TOWARD BRINGING THE INVENTORY HELD IN STOCK TO ITS PRESENT LOCATION OR CONDITION. IT IS IN THE NATURE OF A HOLDING COST, WHICH COULD BE CONSIDERED AS AN ELEMENT OF COST ONLY WHERE THE GOODS HAVE TO BE NECESSARILY HELD IN A PARTICULAR M ANNER, ENTAILING COST, FOR A DEFINED PERIOD, PRIOR TO THEIR FURTHER PROCESSING, I.E., IT SELF REPRESENTS A PROCESS INTEGRAL TO THEIR CONVERSION, SO THAT IT REPRESENTS A PROCESS AND, TH US, CONVERSION COST. THERE IS ACCORDINGLY NO QUESTION OF THE SAME BEING ADDED TO ITS VALUE. A SIMPLE QUESTION WOULD CLARIFY THE ISSUE, I.E., WHETHER RENT, WERE THE GOODS, INSTEAD OF LYING AT T HE PORT, REMOVED EXPEDITIOUSLY TO A RENTED PREMISES, SAVING DEMURRAGE, OR THE COST OF THE STAFF ATTENDING THERETO (GODOWN) OR OTHERWISE SUPERVISING THE STORA GE, ETC. BE SAID TO FORM PART OF THE ACQUISITION OR CONVERSION COST OF THE GOODS OR OTHE RWISE INCURRED IN BRINGING THE SAME TO THEIR PRESENT LOCATION AND CONDITION, SO AS TO BE I NCLUDED IN THEIR VALUATION ? SURELY NOT. THE THIRD ELEMENT OF COST, I.E., OTHER THAN TOWARD ACQUISITION AND CONVERSION, IT WOULD BE NOTED, IS BROADLY WORDED, SO THAT IT COULD IN FACT BE SAID TO INCLUDE THE COST OF ACQUISITION AND CONVERSION AS WELL. IT IS ONLY THE DIRECT COST INCURRED TOWARD SO BRINGING THAT COULD BE INCLUDED INASMUCH AS IT ADDS VALUE. IN FACT, THE DE MURRAGE/DETENTION CHARGES, BEING TOWARD THE COST FOR THE DELAY IN REMOVAL OF THE GOO DS, CAN ONLY LOOSELY/BROADLY BE SAID TO BE A HOLDING COST, AND IT WOULD BE MORE APPROPRIATE TO CONSIDER IT AS A COST FOR THE DELAYED REMOVAL OF GOODS, I.E., BEYOND THE STIPULATED PERIO D. THE SAME THUS IS ONLY A REVENUE EXPENDITURE OF THE PERIOD TO WHICH IT RELATES AND N O MORE AND, THUS, NOT LIABLE FOR INCLUSION IN THE VALUE OF THE GOODS FROM ANY STAND POINT. AS REGARDS THE OBJECTION BY THE REVENUE WITH REFER ENCE TO SECTION 145A OF THE ACT, THE SAME DESERVES TO FAIL. THIS IS AS EVEN IF THE DETENTION/DEMURRAGE CHARGE IS CONSIDERED AS NOT ARISING ON ACCOUNT OF A CONTRACTU AL OBLIGATION, BUT A STATUTORY ONE, I.E., AS IN THE NATURE OF A LEVY OR IMPOST (WHICH WOULD T HOUGH NEED TO BE ESTABLISHED), IT WOULD 4 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. STAND TO BE INCLUDED U/S. 145A ONLY WHERE IT REPRES ENTS A QUALIFYING COST WHICH WE HAVE FOUND IT AS NOT, AND NOT OTHERWISE. 3.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR) PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. [1991] 188 ITR 44 (SC). THE SAID RELIANCE BY THE REVENUE, EVEN AS OBSERVED BY THE BENCH DURING THE C OURSE OF HEARING, IS MISPLACED INASMUCH PER THE SAME IT STANDS CLARIFIED THAT IT I S ONLY THE CORRECT METHOD OF VALUATION (OF INVENTORIES) THAT IS TO BE FOLLOWED, IRRESPECTIVE O F THE FACT THAT AN INCORRECT METHOD HAD BEEN CONSISTENTLY FOLLOWED IN THE PAST, SO THAT THE RE IS NO ESTOPPEL IN SUCH MATTERS. IF THE SYSTEM ADOPTED DOES NOT DISCLOSE TRUE AND PROPER IN COME, WHICH IS THE GUIDING PRINCIPLE AND PREMISE, THE ASSESSING OFFICER (A.O.) IS ENTITL ED; RATHER, DUTY BOUND TO ADOPT THE APPROPRIATE COMPUTATION TO DETERMINE THE TRUE INCOM E. REFERENCE WAS ALSO MADE BY THE APEX COURT TO S.145 OF THE ACT IN THE MATTER TO HOL D THAT IT CONFERS SUFFICIENT POWER FOR SUCH ADJUSTMENT TO THE A.O. INASMUCH AS THE INCLUSI ON OF THE DETENTION/DEMURRAGE CHARGES IN THE VALUATION OF THE STOCK, RATHER THAN WRITING IT OFF IN THE OPERATING STATEMENT OF THE PERIOD TO WHICH IT RELATES, DISTORTS ITS COS T AND THEREBY THE CORRECT PROFIT, THE SAME STOOD RIGHTLY DISCONTINUED BY THE ASSESSEE. THE SAI D DECISION THUS FAVOURS THE ASSESSEE AND NOT THE REVENUE, AND BEING RELEVANT, SHALL APPL Y, FURTHER FORTIFYING ITS CASE. 3.3 WE ARE CONSCIOUS AND ALIVE TO THE FACT, EVEN AS SOUGHT TO BE BROUGHT TO OUR NOTICE BY THE LD. DR, THAT THE OPENING STOCK FOR THE YEAR UNDER REFERENCE WOULD INCLUDE DEMURRAGE CHARGES, WHILE THE CLOSING STOCK WOULD NO T, AND WHICH WOULD ITSELF BECOME A SOURCE OF DISTORTION. THOUGH NORMALLY BOTH THE OPEN ING AND THE CLOSING STOCK ARE TO BE VALUED ON THE SAME BASIS, IT CANNOT ALSO BE DENIED THAT THE VALUATION OF THE OPENING STOCK HAS TO AGREE WITH THAT OF THE CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR. IT IS NOT IN DISPUTE THAT THE VALUE OF OPENING STOCK, AS ASSUMED BY THE ASSESSE, IS THE SAME AS ADOPTED IN RESPECT OF THE CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR. ANY CHANGE WOULD LEAD TO A DISTORTION - TO THE EXTENT OF THE CHANGE - IN THE YEAR THE SAME IS EFFECTED, SO THAT THE SAME IS INCIDENTAL THERETO, AND THE FUNDAMENTAL QUESTION THAT WOULD NEED TO BE ADDRESSED AND ANSWERED IS IF THE CHANGE IS VALID . WE HAVE FOUND IT AS SO. FURTHER, 5 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. ALTERING THE VALUE OF THE OPENING STOCK WOULD AMOUN T TO EFFECTIVELY MODIFYING THE CLOSING STOCK AND, THUS, THE INCOME FOR THE IMMEDIATELY PRE CEDING YEAR, WHICH STANDS ASSESSED. THE CHANGE THUS GETS EFFECTIVELY SHIFTED TO THAT YE AR. THE ARGUMENT QUA UNIFORMITY IN THE VALUATION OF OPENING AND CLOSING STOCK WOULD THEN S TAND TO BE ASSUMED FOR THAT YEAR, LEADING TO A MODIFICATION IN THE VALUE OF THE OPENI NG STOCK FOR THAT YEAR, AND SO ON, THUS CAUSING A RIPPLE EFFECT. THE ARGUMENT IS, THUS, TO NO MOMENT, AND INASMUCH AS A CHANGE HAS BEEN VALIDATED FOR THE CURRENT YEAR, AN EXCEPTI ON TO THE PRINCIPLE OF UNIFORMITY IN THE VALUATION OF THE CLOSING AND OPENING STOCK FOR THAT YEAR WOULD HAVE TO BE DRAWN. THESE AND THE LIKE ARGUMENTS WOULD THUS SUGGEST NON-DISTU RBANCE OF THE VALUE OF THE (OPENING) STOCK AS CARRIED FORWARD FROM THE PRECEDING YEAR, E VEN THOUGH THE SAME MAY NOT BE VALID, SUBJECT OF COURSE TO THE CHANGE IN THE METHOD OF VA LUATION BEING BONA FIDE . AT THE SAME TIME, HOWEVER, IT CANNOT BE DENIED THAT THIS ASPECT OF THE MATTER FORMS PART OF THE DECISION BY THE APEX COURT IN BRITISH PAINTS INDIA LTD. (SUPRA). IN THE FACTS OF THAT CASE, THE A.O., WHOSE ACTION STOOD APPROVED BY THE HONBLE COURT, HAD APPLIED THE CHANGED/REVISED METHOD OF VALUATION TO BOTH THE OPE NING AS WELL AS THE CLOSING STOCK, AND WORKED OUT THE INCOME OF THE ASSESSEE FOR THE YEARS UNDER REFERENCE ON THAT BASIS . WITHOUT DOUBT, THE INCLUSION OF PRODUCTION OVERHEAD COST (IN VALUING WIP) TO THE OPENING STOCK FOR THE FIRST YEAR ALTERED ITS VALUE FROM THA T ADOPTED IN ITS RESPECT FOR THE IMMEDIATELY PRECEDING YEAR, I.E., AS THE CLOSING ST OCK FOR THAT YEAR. AGAIN, WHETHER THE CHANGE IN VALUE STOOD MADE AT THE INSTANCE OF THE A .O., AS IN THAT CASE, OR THAT OF THE ASSESSEE, AS IN THE INSTANT CASE, WOULD BE TO NO MO MENT INASMUCH AS IT IS ONLY THE CORRECT VALUATION METHOD THAT STANDS VALIDATED AND IS TO BE APPLIED. FURTHER, IT NEEDS TO BE APPRECIATED THAT THE DECISION BY THE APEX COURT IN BRITISH PAINTS INDIA LTD. (SUPRA) IS BASED ON TWO FUNDAMENTAL PRINCIPLES OF JURISPRUDENC E ON TAX LAW, I.E., IT IS THE CORRECT INCOME FOR THE YEAR THAT IS TO BE BROUGHT TO TAX FO R THAT YEAR AND, TWO, EACH YEAR IS AN INDEPENDENT AND SELF CONTAINED UNIT OF ASSESSMENT . IT CANNOT ALSO BE SAID THAT THE SAID ASPECT IS NOT INTEGRAL TO THE ISSUE ARISING BEFORE AND DECIDED BY THE APEX COURT IN THAT CASE. ITS VERDICT WOULD THUS APPEAR TO BE CLEARLY IN FAVO UR OF THE CHANGE BEING APPLIED 6 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. UNIFORMLY INASMUCH AS ONLY THE SAME WOULD RESULT IN THE CORRECT INCOME FOR THAT YEAR, I.E., INDEPENDENT OF THE PRECEDING YEAR. FURTHER ON, WE FIND THAT THE SAID DECISION STANDS C ONSIDERED AND DISTINGUISHED BY THE HONBLE JURISDICTIONAL HIGH COURT IN MELMOULD CORPORATION V. CIT [1993] 202 ITR 789 (BOM), WHEREIN IT HELD OTHERWISE, HOLDING THAT THER E WAS NO WARRANT TO CHANGE OR REVISE THE VALUE OF THE OPENING STOCK WHERE THE VALUE OF T HE CLOSING STOCK (FOR THAT YEAR) IS DETERMINED BY ADOPTING A DIFFERENT METHOD OF VALUAT ION. HOWEVER, AS WOULD BE APPARENT FROM A READING THEREOF (REFER PARA 5/PG.792D), THE HONBLE COURT MADE IT CLEAR THAT IT WAS NOT CONCERNED WITH THE CORRECTNESS (OR OTHERWISE) O F THE METHOD (OF VALUATION) ADOPTED FOR DETERMINING THE COST PRICE, OBSERVING THAT THAT WAS NOT AN ISSUE AT ANY STAGE OF THE PROCEEDINGS, NOR DEALT WITH BY THE TRIBUNAL. REFERE NCE WAS MADE BY IT TO A BOOKLET ON ACCEPTED ACCOUNTING PRINCIPLES FOR VALUING STOCK AN D WIP (BY G. P. KAPADIA), WHICH IS AGAIN ON THE PREMISE OF CHANGE FROM ONE VALID BASIS TO ANOTHER, SO THAT UNDER SUCH CIRCUMSTANCES NO CHANGE IN THE VALUATION OF OPENING STOCK OF THE BASE YEAR, I.E., THAT OF CHANGE, WAS REQUIRED TO BE MADE, WHICH WOULD THUS C ONTINUE TO BE VALUED AS PER THE CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR. T HE SAME IS INAPPLICABLE IN THE INSTANT CASE, WITH WE HAVING FOUND THE VALUATION OF STOCK I NCLUSIVE OF DEMURRAGE CHARGES AS NOT A VALID BASIS OF VALUATION, I.E., FOR DETERMINING THE CORRECT PROFIT OR INCOME. FURTHER, THE DECISIONS FOLLOWED BY THE HONBLE COURT, VIZ. CIT VS. MOPEDS (INDIA) [1988] 173 ITR 347 (AP) AND OTHERS, AS WOULD BE APPARENT FROM A BARE B ROWSE THEREOF, ARE ALSO RENDERED PRIOR TO THE DECISION BY THE APEX COURT IN BRITISH PAINTS INDIA LTD . (SUPRA). RATHER, WE OBSERVE THIS TO BE THE CONSISTENT VIEW OF THE COURTS OF LAW WHEN SUCH MATTERS CAME BEFORE THEM, AS FOR INSTANCE IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LTD . [2008] 297 ITR 77 (DEL). THE REVENUE, SEEKING TO REVALUE THE CLOSING STOCK F OR MODVAT CREDIT IN VIEW OF SECTION 145A, THE HONBLE COURT HELD THAT THE OPENING STOCK WOULD ALSO HAVE TO BE VALUED LIKEWISE, IRRESPECTIVE OF THE CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR HAVING BEEN VALUED EXCLUDING THE SAME, REFERRING TO THE GUIDANC E NOTE ISSUED BY ICAI. TRUE, IT COULD BE ARGUED THAT S. 145A IS NOT APPLICABLE IN THE INS TANT CASE, AS IT WAS IN THAT CASE. HOWEVER, THE PRINCIPLE EXTENDS BEYOND THE APPLICATI ON OF S. 145A PER SE , WHICH ITSELF 7 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. INCORPORATES THE SAID PRINCIPLE, I.E., OF LIKE VALU ATION OF THE OPENING AND THE CLOSING INVENTORIES, WITH WE HAVING FOUND, ON THE BASIS OF LEGAL PRECEDENTS, THAT THIS MAY NOT NECESSARILY OBTAIN WHEN THE CHANGE IS FROM ONE VALI D BASIS TO ANOTHER. THIS IS AS A CHANGE IN PROFIT WOULD THEN BE A CONCOMITANT OF THE CHANGE IN THE METHOD OF VALUATION AND, FURTHER, IT CANNOT IN SUCH A CASE BE SAID THAT THE PROFIT OF ONE YEAR IS THEREBY BEING TRANSFERRED TO ANOTHER . AS WAS FOUND BY THE APEX COURT IN BRITISH PAINTS INDIA LTD . (SUPRA); IT REJECTING THE ARGUMENT OF VALUING THE I NVENTORY CONSISTENTLY, SO THAT THE CLOSING STOCK FOR ONE YEAR FORMED THE OPENING FOR THE FOLLO WING YEAR, STATING THAT THAT WAS NO REASON FOR NOT FOLLOWING A CORRECT AND VALID METHOD OF VALUATION, WHICH WOULD EXTEND TO BOTH THE OPENING AND THE CLOSING STOCK. CONCLUSION 4. THE A.O. HAVING ADOPTED THE SAME METHOD OF VALUA TION FOR THE CLOSING STOCK, I.E., AS FOR THE OPENING STOCK, BEING IN FACT CONSISTENTL Y FOLLOWED, THE QUESTION OF VALIDITY OF THE REVISION BY THE ASSESSEE AROSE FOR CONSIDERATIO N. THE SAME, AS BY THE FIRST APPELLATE AUTHORITY, FINDS OUR APPROVAL ON THE BASIS OF THE A CCOUNTING PRINCIPLES, WHICH WOULD GOVERN THE MATTER IN THE ABSENCE OF ANY SPECIFIC PR OVISION/S IN THE ACT TOWARD THE SAME, WITH SECTION 145A BEING INAPPLICABLE, ALSO RELYING ON THE DECISION IN THE CASE OF BRITISH PAINTS INDIA LTD . (SUPRA), WHEREIN THE SAME ISSUE AROSE; THE APEX C OURT THEREIN REITERATING ITS PROFESSED STAND IN THE MATTER (REFER: S.N. NAMASIVAYAM CHETTIAR VS. CIT [1960] 38 ITR 579 (SC) AND A. KRISHNASWAMI MUDALIAR (SUPRA)). HOWEVER, INTEGRAL THERETO IS THE QUESTION OF A CORR ESPONDING CHANGE IN THE VALUE OF THE OPENING STOCK, WHICH WOULD OTHERWISE CONTINUE T O BE VALUED PER THE OLD METHOD, SINCE HELD AS INVALID. IT IS AXIOMATIC THAT DETERMI NATION OF CORRECT PROFIT WOULD REQUIRE PROPER VALUATION OF INVENTORIES, BOTH AS AT THE BEG INNING AS WELL AS THE END OF THE RELEVANT ACCOUNTING PERIOD, AS STANDS CLARIFIED BY THE APEX COURT IN, AMONG OTHERS, BRITISH PAINTS INDIA LTD . (SUPRA) AND CHAINRUP SAMPATRAM VS. CIT [1953] 24 ITR 481 (SC). THIS IS ALSO IN ESSENCE THE RULE OF THE NON OBSTANTE PROVISION OF SECTION 145A, SINCE STATUTORILY MANDATED. THE ISSUE IS LEGAL, AND GOES TO THE ROOT OF THE MATTER. THE SAME WOULD 8 ITA NO. 7756/MUM/2010 (A.Y. 2005-06) DY. CIT VS. DAMAN GANGA PAPER LTD. ACCORDINGLY GET DECIDED ON THE BASIS OF LEGAL PRECE DENTS, INCLUDING AN ANALYSIS THEREOF. THE ISSUE ARISING DIRECTLY OUT OF OUR DECISION VALI DATING THE CHANGE BY THE ASSESSEE, HAVING NOT BEEN DEALT WITH BY THE LD. CIT(A) - WHO IN FACT APPROVED THE CHANGE IN THE FIRST INSTANCE, WITH NO SPECIFIC ARGUMENTS IN THE M ATTER HAVING ALSO BEEN MADE BEFORE US, WE ONLY CONSIDER IT FIT AND PROPER TO REFRAIN FROM DECIDING THE MATTER, AND ONLY CONSIDER IT PROPER TO RESTORE THE SAME BACK TO THE FILE OF THE LD. CIT(A), WHO SHALL DECIDE THE SAME IN ACCORDANCE WITH LAW PER A SPEAKING ORDER AFTER ALLO WING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTIES BEFORE HIM. WE DECIDE A CCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. /- )0 $ 1$ 234 5 6 7 ) $ ) 89 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 26, 2014 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & :( MUMBAI; ;' DATED : 26.02.2014 .'../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & <) ( ) / THE CIT(A) 4. & <) / CIT CONCERNED 5. ? @ ')'AB , * AB- , & :( / DR, ITAT, MUMBAI 6. @ CD E ( / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , & :( / ITAT, MUMBAI