Law:

Section:

Section 145, read with section 271(1)(c), of the Income-tax Act, 1961 - Method of accounting - Valuation of stock - Assessment year 1994-95 - Assessee-company was carrying on business of manufacturing cotton yarn of two types - SG and RG, former being superior than latter - However, assessee valued whole of closing stock at price of 'RG' variety - Assessing Officer made an addition to income of assessee on account of understatement of SG variety and as a consequence, also imposed penalty under section 271(1)(c) - Tribunal confirmed addition as well as levy of penalty holding that assessee had incorrectly applied last purchase price of RG variety of cotton for valuing SG variety of cotton, and that instead of valuing both varieties of cotton as per rate applicable to each of them, assessee had adopted uniform rate for both varieties which resulted in under valuation of SG variety of cotton and concealment of income was made to evade tax, attracting provisions of section 271(1)(c) - Whether there was no infirmity in order of Tribunal - Held, yes FACTS The assessee-company was carrying on the business of manufacturing cotton yarn. The assessee filed its return of income which was accepted in toto by the department. After scrutiny, the Deputy Commissioner made an addition on account of undervaluation of the cotton the said addition was confirmed by the Commissioner (Appeals) as well as the Tribunal. On completion of the assessment proceedings, the revenue imposed penalty on the assessee under section 271(1)(c). On appeal, the Commissioner (Appeals) came to the conclusion that since the addition was sustained, the penalty imposed on account of understatement of stock should be confirmed. On second appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On appeal : HELD With regard to the addition on account of the difference in valuation of closing stock, the assessee contended that the Tribunal wrongly assuming that the entire stock of cotton was of SG variety, valued the stock at a higher rate and passed the impugned order and that it had failed to take into consideration the fact that the entire stock of cotton was of RG variety which was to be…

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