Income Tax Act, 1961

--Accounting method--Rejection No dejects in books of account--Assessing officer noticed that the assessee had shown closing stock as on 31-3-2008 however, proportionate expenses on account of insurance on goods in transit, height and handling, entry-tan and channel finance interest had not been taken into account by the assessee for valuing the closing stock therefore, he had included these expenses in valuation of closing stock by invoking provisions of section 145(3). Assessee contended that the expenses considered by the assessing officer for increasing the value of the closing stock had already been debited in the books of account and those expenses were directly related with the purchases because insurance on goods in the transits was incurred to cover the transit risk and the expenses were already debited as part of the purchase, therefore, not to be added while valuing the closing stock similar was the position with regard to freight and handing expenses. Held : Rightly so as All the expenses which were added by the assessing officer on proportionate basis for the valuation of closing stock were already included in the purchase and the method of valuation of the assessee was cost or market price, whichever was less. This fact was also clear from col. 12(a) in Form 3CD which was part of tax audit report under section 44AB of the Act. It was also an admitted fact that the Department had accepted the tax audit report and pointed out no discrepancy in the said report. Therefore, the assessing officer was not justified in making the addition in the valuation of the closing stock particularly when the same valuation of the stock had also been accepted by VAT authorities and CTO respective assessment orders. More so, there was no deviation in valuing the closing stock from the method of valuation accepted by the Department in earlier assessment year 2004-05.