SRIRAM BEARINGS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In the reference at the instance of the assessee, the Tribunal referred the following two questions of law for the opinion of this court under Section 256(1) of the Income-tax Act, 1961, for the assessment years 1972-73, 1973-74, 1974-75 and 1976-77 ;

(2.) Subsequently, the following further question was referred by the Tribunal in accordance with the directions issued by this court under Section 256(2) of the Income-tax Act, 1961 :

(3.) This reference is numbered as I. T. Reference No. 163 of 1986. Both the references were heard together. The facts are that the assessee-company is engaged in the business of manufacture and sale of ball bearings. In the course of the assessment proceedings, it was found by the Income-tax Officer that, for and up to the assessment year 1971-72, the assessee-company valued its closing stock of finished goods, on the basis of listed selling price less expenses to the extent of 26 per cent. But, during the previous years relevant to the assessment years under reference, it adopted a new method of valuation of finished goods. In these years, the closing stock of finished goods was valued at the listed selling price less 30 per cent. to 32 per cent. on account of selling expenses and a further reduction of 20 per cent. on account of unrealised profits. The Income-tax Officer did not accept the new method of valuation of finished goods adopted by the assessee-company. He rejected the disclosed trading results and, after applying the earlier method of valuation of stock as was followed by the assessee-company year after year, he made certain additions to the trading account of the assessee-company for each of the assessment years under reference.