Brief of the Case
ITAT Lucknow held In the case of ACIT vs. M/s J. K. Synthetics Ltd. that CIT (A) correctly observed that there are many judgments in which, it was held that if there is change in the method of valuation of closing stock due to mandatory requirement and that change has been consistently followed by the assessee, no addition is called for. This is not the case of the Revenue that the change in method of valuation of closing stock has not been consistently followed by the assessee after this year and therefore, in our considered opinion, no interference is called for in the order of CIT (A). No addition is sustainable on account of change in method of valuation.
Facts of the Case
Change in method of valuation of stock
The following question was raised –
On the facts and in the circumstances of the case the CIT (A) has erred in deleting the disallowance of Rs.1,95,51,000/- on account of under valuation of stock in trade ignoring that the assessee changed valuation method of the closing stock during the previous year which resulted under valuation of stock in trade to the tune of Rs.1,95,51,000/-.
Held by ITAT
Change in method of valuation of stock
ITAT held that it is observed by learned CIT(A) that the assessee company was compelled to change its method of valuation of stock with a view to comply with the requirement of the AS-2 issued by the Institute of Chartered Accountants of India. He has also observed that as per various judgments reported in 298 ITR 163, 300 ITR 78 and 309 ITR 102, the issue is covered in favour of the assessee because in these judgments, it was held that if there is change in the method of valuation of closing stock due to mandatory requirement and that change has been consistently followed by the assessee, no addition is called for. This is not the case of the Revenue that the change in method of valuation of closing stock has not been consistently followed by the assessee after this year and therefore, in our considered opinion, no interference is called for in the order of CIT (A). This ground is rejected.
Accordingly appeal disposed of.
