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[2009] 309 ITR 102 (HP)JUDGMENT Deepak Gupta, J.- This appeal by the Revenue has been admitted on the following questions of law : "(i)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the change in the method of valuation of closing stock by the assessee from FIFO method to average cost method was justified ? (ii)Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 17,33,319 made on account of change in the method of valuation of closing stock ?" 2. The undisputed facts of the case are that the assessee, i.e., H.P. State Civil Supplies Corporation prior to the assessment year 1992-93 was following the "first in first out" (FIFO) method for evaluating the costs of its inventories. In the assessment year in question, the assessee changed the system and started following the system of "average cost valuation". The Assessing Officer came to the conclusion that the assessee could not change this method and rejected the plea of the assessee justifying its action of changing the method. On this basis, an amount of Rs. 17,33,319 was added to the income of the assessee. The assessee filed an appeal and it was urged that the assessee had as many as 250 separate depots functioning under it through the State of Himachal Pradesh and, therefore, it was difficult to apply the FIFO method and as such, the assessee had changed the method of working out the cost of stock to the "average cost valuation" method. The Commissioner, Income-tax held that the assessee had failed to show any resolution of the board of directors permitting it to change the method of accounting. He also held that no permission has been sought from the income-tax authorities for changing the accounting method. According to him, the assessee had been following the FIFO method for many years and should not have changed the same and as such rejected the appeal. 3. Aggrieved by the order of the Commissioner, Income-tax, the assessee approached the Income-tax Appellate Tribunal (for short "the ITAT") in appeal. The Income-tax Appellate Tribunal accepted…

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