Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock - Assessment year 1981-82 - Assessee-firm was engaged in manufacture and sale of gold ornaments and assessee had continuously adopted ad hoc method of valuation of closing stock - Inspecting Assistant Commissioner (Investigation) made an addition to income declared by assessee on account of alleged undervaluation of closing stock of gold and silver - Whether since assessee had continuously adopted same method of valuation of closing stock and no objection was raised by department in any of previous years, there was no valid ground to hold that method adopted by assessee for valuation of stock was legally impermissible - Held, yes FACTS The assessee was a registered partnership firm, engaged in the business of manufacture and sale of gold ornaments and assessee had continuously adopted ad hoc method of valuation of closing stock. It filed the return declaring its income. The IAC (Investigation) completed the assessment by making additions on account of the alleged undervaluation of the closing stock of gold and silver. On appeal, the Commissioner (Appeals) deleted the additions made by the IAC. On second appeal, the Tribunal also upheld the order of the Commissioner (Appeals). On reference : HELD It was an admitted position that from the inception of its business, the assessee had continuously adopted the same method of valuation of the closing stock and no objection was raised by the department in any of the previous years. Rather, the competent authority accepted the method adopted by the assessee and, accordingly, made assessment. That being the position, there was no valid ground to accept the argument of the revenue that the method adopted by the assessee for valuation of the stock was legally impermissible and on that account, the additions made by the IAC should be restored. [Para 5] Admittedly, the revenue had neither questioned the method adopted by the assessee for valuation of its stock in the previous assessment years nor challenged the order passed by the Tribunal in ITO v. Gopi Chand Kishori Ltd. [IT Appeal No. 556 (Chd.) of 1977-78]. In that case, the Tribunal had…

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