INCOME TAX ACT, 1961

Section 260A

Appeal (High Court) - Addition towards valuation of closing stock - Substantial question of Law -

The case of assessee was selected for scrutiny and notice under section 143(2) was issued. Subsequently, notice under section 142(1) was issued along with questionnaire. The assessee produced the details called for pursuant to such notice. The business of assessee's firm was taken over by a private limited company together with all its assets and liabilities, as they stood in the books of firm at the close of business. AO while completing the assessment made an addition towards valuation of closing stock among others on the ground that valuation of closing stock does not give the true and correct status of business and profit and the matter relating to allowability of this method of stock valuation was not accepted by the Department in the earlier years and additions were made to the extent of closing stock. Held: Though this issue was raised by assessee before the Tribunal in a slightly different form, Tribunal did not deal with the said issue, but followed the earlier decision in assessee's own case and dismissed the assessee's appeal. The issue with regard to whether valuation of closing stock would arise when the business of the assessee along with the stock was taken over by the company needs to be decided. This was a mixed question of fact and law, which has to be considered because the revenue did not dispute the fact that the business of the assessee along with the stock was taken over by the company, therefore, it would be appropriate to remand the matter to AO for fresh consideration on this aspect after providing due opportunity of hearing to the assessee.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13

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