Exclusive Method’ of accounting is valid in absence of any notified standard by Department

Brief of the Case

In A.C.I.T. vs. Kiran Industries Pvt Ltd, the Ahmedabad Tribunal following its co-ordinate bench decision and relying upon the decision of Hon’ble High Court (T&AP) held that excise duty component need not to be included in valuation of inventory if the assessee is following exclusive method of accounting. Further in the absence of accounting standards notified by the Central Government, the assessee can follow the accounting standards and guidance note issued by the ICAI.

Fact of the Case

Assessee is a company engaged in the business of manufacturing of dyed yarn, knitted fabrics and dying of fabrics on job work basis. The Case of the assessee was sought to be re-opened u/s 148 for the reason that the unutilized CENVAT credit was not taken into consideration while working out the closing stock and thus considering value of closing stock as understated, the A.O. framed the assessment u/s 143(3) r.w.s. 147 by making addition of Rs.18,84,923/- to the closing stock u/s 145A of the Act. On an appeal, CIT(A) granted substantial relief to the assessee reducing the addition to Rs.5,03,187/- revising the computation of adjustment to be made u/s 145A. Aggrieved by the order, the revenue filed the appeal before the Tribunal and assessee filed cross objection to the appeal.

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