INCOME TAX ACT, 1961

Section 145A

Accounting method - Valuation of stock - Assessee following exclusive method - Assessee giving effect to provisions of section 145A in computation of income

Assessee-firm was engaged in business of manufacturing and trading of electronic goods and claimed that it was following the exclusive method of accounting. Therefore, opening stock, purchases, sales and closing stock of the goods were recorded in the books of account without including the amount of Cenvat/VAT. AO found that there was a closing balance of Cenvat as on 31-3-2008 for Rs. 2,09,33,355 whereas the opening balance was of Rs. 1,18,72,183 only. Thus, difference was representing the element of CENVAT not included in closing stock and assessee had undervalued its closing stock Held: There was no ambiguity that assessee was following the exclusive method of accounting. However, assessee to comply the provisions of section 145A had given the effect of CENVAT/VAT in the opening stock, purchases, sales and closing stock in the profit and loss account as placed. Assessee had made its computation of income after taking the profit as shown in the memorandum profit and loss account as on 31-03-2008 which was offered to tax. Hence, there could not be any fault of assessee merely on reasoning that assessee had not valued its closing stock as per the provisions of section 145A.

REFERRED : CIT v. Indo Nippon Chemicals Co. Ltd. (2003) 130 Taxman 179 (SC) : 2003 TaxPub(DT) 0972 (SC) and Pr. CIT v. Gujarat Gas Company Ltd. [Tax Appeal No. 90 of 2017, dt. 7-2-2017]

FAVOUR : In assessee's favour

A.Y. :

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