Books of account couldn’t be rejected just because assessee didn’t maintain stock register

INCOME TAX: Mere fact of non-maintenance of stock register could not be basis for rejection of books of account

INCOME TAX: Applying Gross Profit Rate of year is not correct method of valuation of stock which ideally should be valued at cost or market price; for adopting an incorrect method of valuation, books of account could not be rejected

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IN THE ITAT CHANDIGARH BENCH 'B'

Paramount Impex Vs Assistant Commissioner of Income-tax

IT APPEAL NO. 1097 (CHD.) OF 2016

[ASSESSMENT YEAR 2013-14]

JUNE 30, 2020

Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of Account (Non-maintenance of stock register) - Assessment year 2013-14 - Whether where assessee was dealing in a large number of small items and it was consistently following method of determining stock at end of year by physically verifying same, in view of fact that all purchase and sale vouchers and other records had been found to be in order, mere fact of non-maintenance of stock register could not be basis for rejection of books of account if Revenue had found no other defect in books of assessee and there was no hindrance in determining true and correct profits earned by assessee

Held, yes [Para 11][In favour of assessee]

Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock (Gross profit rate) - Assessment year 2013-14 - Assessee had been applying Gross Profit Rate of year to stock for determining its value - Whether this was not a correct method of valuation of stock which ideally should be valued at cost or market price whichever is less - Held, yes - Whether, however 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

Held, yes [Para 12] [In favour of assessee]