Change in the method of valuation of closing stock.

Last updated: 29 April 2008

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Nilesh Shah Writes:
Cell: 92246-59941
E mail: nilesh63@vsnl.com

Change in the method of valuation of closing stock.

Where the Assessing Officer revises the method of valuation of
closing stock u/s 145A, he is bound to revise the valuation of
opening stock also on the same basis . It may, however, be pointed
out, that the inference may well be different, where the assessee
makes a bona fide change in method of accounting, so as to improve
its accounting system once for all. In such a case, there is no need
for adjustment of the value of opening stock, as was decided by the
Andhra Pradesh High Court in CIT v. Mopeds India Ltd. [1988] 173 ITR
347 . It was pointed out, that if such adjustment is made, further
adjustment to closing stock for the preceding year would also be
required entailing adjustment for opening stock with similar
revision for still earlier years in a chain reaction. It would,
therefore, appear that adjustment of opening stock is necessary only
where the Assessing Officer makes a change and not where the system
of valuation of stock undergoes a change on the assessee's volition
and the right of the assessee to make such a change is recognised by
law.

Yours Sincerely,

Nilesh Shah.