- (1.) This appeal arises from the order dated 30-4.1992, passed by Shri U.P. Singh, Commissioner of Income Tax(A)-XIV, Calcutta, in Appeal No. 3/.19/CIT(A) XIV/1991-92.
(2.) The issue involved here is, whether an assessee, who has changed the method of valuation of the closing stock, is also entitled to claim appropriate adjustment in the value of the opening stock on changed basis of valuation of closing stock.
(3.) The assessee is engaged in the plantation and production of tea. It is regularly assessed to tax for last several years. For the purpose of accounts, it follows calendar year as the previous year and for our purpose the previous year starts from 1-1-1987, and ends on 31-12-1987. Unit 31-12-1986, the assessee's closing stock of tea was valued on cost basis. In doing so, it was not including the element of depreciation, interest on Nabard loan and also some other element of cost. However, while valuing the closing stock as on 31-12-1987, the above three elements of expenditure were included in the closing stock. In audited accounts, statutory auditors have stated that the method of valuation of stock in the year under review underwent a change because of which there was increase in the profit of Rs. 7,11,680 and further the valuation of the stock was fair and proper and in accordance with normally accepted accounting principles. In the return of income originally filed by the assessee, it claimed this deduction of the amount of Rs. 7,11,680 on the basis that there was excess valuation of closing stock of tea owing to change in the method of valuation. The assessee filed revised return in which such deduction was limited to a sum of Rs. 5,14,458. This revision took place on account of adjustment in the valuation of the opening stock also on the basis of change in the method of valuation of the closing stock. The assessing officer rejected the claim for deduction on the ground that when the changed method of valuation of the closing stock was consistently followed in subsequent years, the increase in the valuation of closing stock will get adjusted in the following year on account of increased value of the opening stock and, therefore, the assessee will not be put to any disadvantageous position. This was confirmed by the Commissioner (Appeals).;