INCOME TAX ACT, 1961

Section 145(3)

Accounting method - Rejection - Reason, non-maintenance of stock register and adoption of incorrect method of stock valuation -

AO rejected assessee's books of account on account of non-maintenance of stock register and incorrect method of valuation of stock adopted by assessee. Assessee's case was that it was dealing in a large number of small items and was consistently following the method of physically verifying its stock at the end of year. Held: It was beyond understaning as to how non-maintenance of stock register had affected determination of true and correct profits of assessee in the circumstance. The revenue has found no other defect in the books of the assessee. All purchases and sale vouchers and other records were found to be in order. AO had not demonstrated as to how non-maintenance of stock register had been a hindrance in determining the true and correct profits earned by assessee and also what was the infirmity in the method adopted by assessee of physically verifying its stock at the end of the year. Admittedly, assessee has been applying Gross Profit Rate of the year to stock for determining the value. Thought, it was not a correct method of valuation of stock which ideally should be valued at cost or market price, whichever is less, but merely because of adoption of an incorrect method of valuation or merely on account of non compliance with prescribed accounting standard, books of account could not be rejected.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT

OR Try Reload the Page