Rajes Kumar, J. - (1.) The Income Tax Appellate Tribunal has referred the following question of law under Section 256 (2) of the Income Tax Act, 1961 (hereinafter referred to as " Act") for the assessment year 1980-81 for opinion to this Court. "Whether the Tribunal was legally correct to upheld the addition made to the closing stock valuation and to reject the method of valuation adopted by assessee to average cost instead of the market value."
(2.) The brief facts of the case are as follows:- The assessee a registered Firm, was a dealer in gold and silver ornaments and bullion. He has been valuing its closing stock at the market rate. During the year under consideration, the matter of valuation of the closing stock was changed. During this year, it was claimed by the assessee that the valuation of the closing stock has been shown by taking the average cost. On being questioned by the I. T. O., the assessee pointed out that he has changed this system on regular basis and follow the same in the subsequent years and in this way, it was not a casual change. The I.T.O., on scrutiny of accounts, found that the change of the method of closing stock was not proper and it amounted to dilution of the profits of the assessee. Consequently, he rejected the said system and valuing the closing stock at market rate, made an addition of Rs. 80,191/- to the income of the assessee. The said order was confirmed by the learned C.I. T. (Appeal) and was also upheld by the Tribunal in Second Appeal.
(3.) Heard Sri R. S. Agrawal, learned Counsel for the applicant and Sri Shambhu Chopra, learned Standing Counsel.;