Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income-Tax vs B. Arunkumar Trading Ltd. on 29 December, 2004
Equivalent citations: (2005)97TTJ(MUM)503
ORDER
D.K. Srivastava, Accountant Member
1. The present appeal filed by the Department of Income-tax is directed against the order of the learned Commissioner of Income-tax (Appeals) {'CIT(A)' in short} deleting the addition of Rs. 2,65,54,316/- made by the Assessing Officer ('AO' in short) to the total income returned by the assessee. The appeal relates to the assessment year (AY) 1997-98 for which the corresponding previous year ended on 31st March 1997. The Department has taken the following ground of appeal:
"On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 2,65,54,316/- to the total income without properly verifying the facts regarding frequent change of method of valuation of allowing assessee to adopt the change of method of valuation of stock on the ground that consistency has been maintained due to filing of revised return for A.Y. 1998-99 to 2000-01".
2. Both the parties represented by their respective counsel and representatives were heard.
3. Briefly stated, the facts of the case are that the closing stock was valued by the assessee as on 31.3.97 (AY 1997-98) at lower of the cost or market price. According to the note of the tax auditors as reproduced in the assessment order, there was a change in the method of valuation of closing stock during the previous year relevant to the assessment year under appeal, i.e., AY 1997-98 which had the effect of reducing the profit by Rs. 2,65,54,316/-. The AO examined the matter in detail and found that the assessee was valuing the stock at realizable value till assessment year 1996-97. It changed its method of valuation of 'closing' stock from the aforesaid method (i.e., realizable value) to lower of the cost or market price during the previous year relevant to the assessment year under appeal. The AO further found that the assessee once again changed the method of valuation of closing stock in assessment year 1998-99 in as much as it changed the method of valuation of stock to market value. The AO examined the pattern of profit and losses made by the assessee during the assessment years 1996-97 to 1998-99 and held that the assessee was frequently changing the method of valuation of stock in order to avoid the tax liability. He, therefore, held that change in the method of valuation of closing stock adopted by the assessee for the year under appeal was not guided by bona-fide considerations. He accordingly made the impugned addition of Rs. 2,65,54,316/-, which, as stated by the tax auditors, was the amount of by which the profit of the assessee stood reduced due to change in the method of valuation of closing stock.
4. As mentioned above, the assessee had changed the method of stock valuation once again in AY 1998-99 in that it had valued the closing stock at market value instead of valuing the stock at the lower of the cost or market price as in AY 1997-98. The AO had made this observation in the assessment order for AY 1997-98 on the basis of the original return of income filed by the assessee for AY 1998-99 which was available with him at that time. The addition made by the AO in AY 1997-98 was challenged by the assessee before the learned CIT(A). After the AO had completed the assessment for AY 1997-98 making the impugned addition on the ground that the assessee was not regularly following the method of stock valuation as changed in AY 1997-98 and after the assessee had filed the appeal against the said addition before the learned CIT(A), the assessee, in order to overcome the aforesaid objection of the AO, once again changed the method of stock valuation for AY 1998-99 from market price to the lower of the cost price by filing a so-called revised return after closure of the books of account for the previous year relevant to the assessment year 1998-99. This was done by the assessee in its purported desire to demonstrate that the method of stock valuation adopted by the assessee was regularly followed by it in AY 1998-99 also.
5. It is thus evident that the assessee changed the method of stock valuation in AY 1997-98 and AY 1998-99 as under:
(i) In AY 1996-97, the assessee valued the stock at realizable value.
(ii) In AY 1997-98, the assessee changed the method of stock valuation from realizable value to the lower of the cost or market price.
(iii) In AY 1998-99, the assessee changed the method of stock valuation from the lower of the cost or market price as adopted in AY 1997-98 to market value and valued the stock accordingly in the account filed along-with the original return of income.
(iv) In AY 1998-99 itself, the assessee filed a so-called 'revised' return to change once again the method of stock valuation from market value as adopted for valuation of closing stock in the original return to the lower of the cost or market price in the 'revised' return for AY 1998-99 in order to show the consistency and regularity in the employment of same method of stock valuation as was changed and adopted in AY 1997-98.
6. On appeal, the learned CIT(A) took note of the 'revised' return filed by the assessee for AY 1998-99 during the pendency of the present appeal before him and held that the assessee, by filing the 'revised' return had amply demonstrated that the method of stock valuation adopted by him for the assessment year under appeal was not ad hoc in nature as the same was also followed by him for stock valuation in AY 1998-99 albeit through the said revised return. He therefore deleted the addition with the following observations against which the Department is in appeal before us:
"8. I have considered the arguments and the facts of the case and looking to the position of the facts of this case it is found that the appellant though changed the method for making the valuation of the closing stock as on 31.3.1997 from the method which was already followed upto 31.3.1996 and later on the method was changed as on 31.3.1998 following the same method which was being followed upto 31.3.1996, i.e., market value as against the cost or market value which is lower adopted for AY 1997-98. But having followed the method as it was adopted in AY 1997-98 and the subsequent years also by way of filing the revised returns, the assessee has maintained consistency in the method of valuation of closing stock. Therefore, the change in the method of the valuation of closing stock from market to cost or market whichever is lower is permissible subject to the condition that it is being followed in the subsequent years to maintain the consistency therein in the subsequent years. Since the assessee has been following this method for cost or market price whichever is lower from AY 1997-98 to subsequent years. Therefore, the addition made by the AO is not justified and it is, therefore, directed to be deleted. It is also worth to mention that at the time of passing the assessment order, the action of the AO in making this addition on account of the frequent change in the method for the valuation of the closing stock was correct but later on, after passing the assessment order, the appellant revised the returns of income for AY 1998-99, 1999-2000 and 2000-2001 which were pending with the Department. The revised returns were filed only to follow the same method for the valuation of the closing stock which was adopted in AY 1997-98 and, therefore, the consistency has been maintained which is permissible as per the provisions of the Act. Therefore, this addition is deleted."
(Emphasis supplied)
7. In support of appeal, the learned Departmental Representative took us through the assessment order and the order of the learned CIT(A) and submitted that the reason for frequent changes in the method of valuation of stock were not guided by any bona-fide consideration but by the sole consideration of avoiding proper tax liability. He invited our attention to the observations recorded in the assessment order in this behalf. According to him, a change in the method of valuation of stock was not permissible if such a change was effected to avoid proper tax liability by depressing the value of closing stock and thereby presenting a distorted picture of the profits.
8. In support of his submissions, the learned Departmental Representative relied upon the following decisions:
(i) Indo Commercial Bank v. CIT, 44 ITR 22
(ii) CIT v. Hazaribagh Coal Syndicate P. Ltd., 177 ITR 135
(iii) CIT v. West Godavari District Rice Millers' Association, 193 ITR 349 (Bom.)
(iv) CIT v. British Paints India Ltd., 188 ITR 44 (SC)
9. Per contra, the learned authorized representative for the assessee relied on the order of the learned CIT(A) deleting the addition made by the AO and submitted that the changed method of valuation of stock stood accepted by the AO in the assessment year 1998-99. He placed reliance on the written submissions filed before the learned CIT(A).
10. We have considered the rival submissions. There is no dispute about the factual aspects of the case. It is admitted that the assessee had valued its stock at realizable value during the previous year relevant to the assessment year 1996-97 and accordingly valued the opening stock for the previous year relevant to the assessment year under appeal, i.e., 1997-98 at the realizable value but changed the method of valuation of closing stock for the same assessment year, i.e., AY 1997-98 and, accordingly, valued the same at the lower of the cost or market price. The assessee again changed the method of valuation of stock during the previous year relevant to the assessment year 1998-99 and valued the stock at market value and showed the same in the accounts filed along with the original return of income on 31.12.1998. The assessee once again changed the method of stock valuation in AY 1998-99 itself, after the closure of the books of account for AY 1998-99, from market value as shown in the original return to the lower of the cost or market price as shown in the so-called 'revised' return for AY 1998-99 so as to make it appear that the assessee had changed the method of stock valuation in AY 1997-98 on a regular basis and followed the same in AY 1998-99 also. It is thus evident that the assessee was changing the method of valuation of stock frequently instead of following the same on regular basis. The requirement of law (i.e., Section 145) is that the method of accounting which obviously includes the method of valuation of stock, as held in Indo-Commercial Bank v. CIT, 44 ITR 22 (Mad.), should be regularly followed by the assessee. On the facts of the case, this requirement of law is not fulfilled.
11. Perusal of the assessment order shows that the AO has analyzed the trend of tax liabilities of the assessee for the assessment years 1996-97, 1997-98 and 1998-99 and has brought ample material on record to show that the change in the method of valuation of stock was guided by the desire to dodge the revenue when it became evident to the assessee that it would be liable to pay greater amount of advance tax than what it would be liable to pay if it changed the method of valuation of stock in the manner it did. Thus, motivating factors for change in the method of valuation of stock are evident on a bare perusal of the assessment order. The relevant observations made in the assessment order in this behalf are as follows:
"The following facts show that the frequent change in the method of valuation of closing stock was not for business requirements but it was to avoid the tax. It was a tax evasion by an act done knowingly with the intention to deceive the tax authorities. It was a deliberate omission of revenue. The tax payer has apparently circumvented the law to avoid the tax.
On the perusal of trend in the advance tax payment for A.Y.1996-97, it is found that assessee paid advance tax of Rs. 6 crores and there was a TDS of more than Rs. 39 lakhs. With effective tax rate of 43% the tax was paid for the income estimates of about Rs. 15 crores. The advance tax installment for the month of March 1997 was Rs. 4,15,00,000/-. Thus, by the end of the year the assessee was very much clear that his income shall be in the vicinity of near about Rs. 15 crores. The return filed was about Rs. 12 crores only and the refund of more than Rs. 1 crores was made in the return of income. The return was filed on 02.02.98 and the Tax audit was filed on 01.12.97. By the third quarter of the financial year 1997-98, assessee came to know that there shall be heavy loss for A.Y. 1998-99 and there shall be no tax liability, which is clear from the change of method of valuation for A.Y. 1998-99 in which the profit has been increased by Rs. 7.53 crores and even after that the return of income was filed for loss of Rs. 1,58,58,551/-. Assessee paid advance tax of Rs. 1 crore in 1st installment for A.Y.1998-99.
We must recognize that there is a moral sanction behind the taxation law, as much as, it is with other welfare legislation and it shall be a pretence to say that avoidance of taxation is not unethical. It is wrong to encourage or to entertain the belief that it is honourable to avoid the payment of taxes by resorting to dubious methods. It is obligation of every citizen to pay the taxes honestly without resorting to subterfuges. Tax avoidance by some artifice is not permissible in law. The tax authorities are not required to put on blinkers while looking at the documents produced by the assessee. The surrounding circumstances needs to be looked into to find out the reality of recital made in the documents and one should look behind the smoke screen and discover the true state of affairs.
In this case, the assessee has tried to avoid the tax by indulging in frequent change in method of valuation. Hence, the income of Rs. 2,65,54,000/- is being added to the income of the assessee."
12. It is evident on perusal of the order of the learned CIT(A) that the learned CIT(A) was guided, while deleting the impugned addition, by the fact that the assessee had filed a 'revised' return for AY 1998-99 by which the assessee sought to revert to the old method of stock valuation (i.e., the lower of the cost or market price) and that this attempt of the assessee, according to the learned CIT(A), demonstrated that the method of stock valuation as changed in AY 1997-98 was followed by the assessee in AY 1998-99 also. These aspects therefore need closer scrutiny. As stated above, the method of stock valuation at the lower of the cost or market price reportedly followed in AY 1997-98 was again changed over and replaced by another method of stock valuation, i.e., market value in AY 1998-99 and the closing stock was accordingly valued and reflected in the accounts filed along with the return of income for AY 1998-99 on 31.12.1998 declaring total loss at Rs. 1,58,56,553/-. It may be mentioned here that filing of the return for AY 1998-99 on 31.12.1998 would mean that the books of account had been maintained to reflect the value of stock at market price as it is this value at which the closing stock was valued and shown in the original return for AY 1998-99. While the return for AY 1998-99 was still pending assessment, the return for AY 1997-98 had been taken up for scrutiny on 5.8.1998 on the basis of which assessment for the assessment year under appeal, i.e., AY 1998-99 came to be finalized on 16.3.2000 making the impugned addition. It is at this stage that the assessee thought of revising the return for AY 1998-99 originally filed on 31.12.1998 and hence filed the so-called 'revised' return enhancing the originally returned loss to Rs. 10,38,49,996/-. The assessee filed yet another revised return for AY 1998-99 on 16.8.2000 enhancing the said loss to Rs. 10,38,51,996/-. The reasons stated by the assessee for filing the 'revised' returns for AY 1998-99, as mentioned in the assessment order for AY 1998-99, were to change the method of stock valuation from market value as adopted while filing the original return of income to the lower of the cost or market price so as to provide consistency in the employment of method of stock valuation as adopted in AY 1997-98. Thus, the assessee changed the method of stock valuation once again in 1998-99 itself after the books of account for that year had been closed and this was done after the requisite enquiries in this behalf were taken up by the AO in AY 1997-98 and assessment order for AY 1997-98 had been passed. This was all the more easy for the assessee as this change also did not attract any tax liability in AY 1998-99 and at the same time enabled the assessee to counter the reasoning given in the assessment order for AY 1997-98 that the assessee had not followed the changed method of accounting as adopted in AY 1997-98 in AY 1998-99. Be whatever it may, one fact is absolutely clear that the assessee had changed the method of stock valuation frequently.
13. It deserves to be noted from the assessment order and the order of the learned CIT(A) that the assessee did not assign any reason for changing the method of valuation of stock before them. The case of the assessee before is solely based on the plea that the change in the method of valuation of stock as adopted in the assessment year 1998-99 through revised return stood accepted by the Department in that year. The fact, however, remains that the assessee has given no reason for effecting the change in the method of valuation of stock from the realizable value in the assessment year 1996-97 to the lower of the cost or market price in AY 1997-98 and again to market price in AY 1998-99 and then again to lower of the cost or market price in 1998-99. The nature of the business of the assessee remained the same. It is not known as to what useful purpose was to be served by resorting to frequent changes in the method of valuation of stock. In the absence of any cogent reason coming forward from the assessee for such frequent changes in the method of valuation of stock even before us, we are inclined to agree with the findings recorded by the AO that the changes in the method of valuation of stock were guided more by considerations of avoiding taxes legitimately due to the Public Exchequer in the assessment year 1997-98 than by any bona-fide consideration. The assessee has placed no material before us to justify that the change in the method of valuation of stock was guided by any bona fide considerations or was necessary in the interest of the business being carried on by the assessee during the assessment year under appeal. On the facts of the case before us, we hold as under:
(i) The assessee has placed no material before us to explain the reasons for such frequent changes in the method of stock valuation.
(ii) The assessee has placed no material before us to establish that the change in the method of stock valuation in AY 1997-98 was bona-fide or was guided by business expediency.
(iii) The assessee has placed no evidence before us to rebut the finding recorded in the assessment order that the change in the method of stock valuation was guided by the desire to defraud the Revenue by avoiding proper tax liability when the same became evident at the close of the year.
(iv) The AO, on the other hand, has brought materials on record to clearly indicate that the change in the method of stock valuation was not guided by any bona-fide consideration.
14. We shall now turn to the judicial authorities on the subject.
15. In Sarupchand v. CIT, 4 ITR 420 (Bom), the Hon'ble jurisdictional High Court has held that the assessee must start a new regular method and not merely a new method for a casual period. The Hon'ble Court has laid down the following, amongst others, propositions:
(i) "... The assessee is not entitled to change his method of accounting from year to year as suits him best; the reference in Section 13 to the regular method of keeping accounts precludes any practice of that sort."
(ii) "... as the question of construction of Section 13 has been raised in the course of the discussion, I should like to state shortly my view of the section. The section says that income, profits and gains shall be computed for the purposes of Sections 10, 11 and 12 in accordance with the method accounting regularly employed by the assessee. It follows from that section that when an assessee says that the method which he has followed has been regularly employed by him, the question whether that is so or not is entirely for the Income tax authorities, any opinion expressed by them would amount to nothing more than a finding of fact and would not entitle the assessee to come to this Court."
(iii) "... There is nothing in the section or the Act to prevent an assessee from changing his method. He has of course to satisfy the Income-tax authorities that he is doing so in good faith, and if the revenue is not likely to be defrauded, I think the Income-tax Officer will accept the new method, and if he refuses, his discretion can be questioned on an appeal to the superior officers."
(Emphasis supplied)
16. In Indo-Commercial Bank v. CIT, 44 ITR 22 (Mad.), the Hon'ble Madras High Court has cited the principles laid down by the Hon'ble Bombay High Court in Sarupchand (supra) with approval and observed as under:
"As we said, we accept as sound the principle laid down in Sarupchand v. Commissioner of Income-tax. Extending that principle to changes in the method of valuation of closing stock, the position we reach is that an assessee is entitled to change his method of valuation, provided it is bona fide and provided further it is a method of valuation for regular employment by the assessee and not merely for the year in question. In other words, a change in the method of valuing the closing stock under such circumstances does not entail a rejection of the method of the assessee's choice on the application of the proviso to Section 13."
(Emphasis supplied)
17. In Sriram Bearing Ltd. v. CIT, 199 ITR 579, 584 (Cal.), the Hon'ble Calcutta High Court has held that the AO can reject the change in the method of stock valuation adopted by the assessee if it is not followed by him consistently year after year. The Hon'ble Court has held:
"It is by now well settled that the method of stock valuation is a part of the method of accounting. Where an assessee regularly employs a method of accounting, its income has to be computed in accordance with such regular method. An assessee is also entitled to change his regular method of accounting by another regular method. But there cannot be any casual departure in regard to the method of accounting adopted by the assessee. It has been held by this court in Champalal Baid v. CIT [1967] 65 ITR 670 that the tax authorities can reject the method of stock valuation adopted by an assessee if it is not followed by him consistently year after year."
(Emphasis supplied)
18. Dealing with the relevance of the bona-fides of the assessee in changing the method of accounting, the Hon'ble Calcutta High Court has held in AK Jalan v. CIT, 71 Taxman 248, 255-256 as under:
"12. The learned counsel for the assessee seeks to eliminate the question of bona-fides altogether. According to him, the question of the change being bona-fide is an extra-ordinary requirement. There is nothing in the provisions of Section 145 which carves out any place for such question. Therefore, according to him, the Tribunal unnecessarily or irrelevantly concerned itself with a matter which could not at all be in controversy according to the requirement of law. If we concede to this line of argument, it will amount to saying that the honest intention to project the true profit is not a necessary ingredient of Section 145. Thus, we are urged to hold that Section 145 permits of a change which is manifestly mala-fide. Such a view is not at all rational."
"13. In fact, strictly literal reading of Section 145 as convassed by Mr. Chopra is destructive of his own case in a way. If we go by the strict word of Section 145(1), we would find that the statute is silent just as well on the assessee's right to change from its pre-existing method of accounting, it speaks only of regular employment of an accounting method but not of change from one to another. As a logical corollary of his argument he would then be shut out from pleading for the permissibility of any change from the earlier method because law in terms does not provide for a change. It is only Judge-made law which by construction has laid down that a method once chosen cannot be just permanently fixed on the assessee even where for honest and good cause a change is indicated and the change is with no intention or for no collateral purpose of dodging tax. It is only for an even deal to the revenue that the judiciary in the same breath requires that permissibility should go only to the extent the change is bona-fide. Therefore, attempt to have any change pushed through on the plea that bona-fide or mala-fide, every change is lawful, must fail. The absence of express requirement in the law cannot be capitalized on. The attempt to do so would, in fact, recoil on the case of the assessee. The Revenue could retort likewise saying that the law permits no change and the method once employed has to be followed all the time without variation."
19. In CIT v. West Godavari District Rice Millers' Association, 193 ITR 349 (Bom.), the Hon'ble jurisdictional High Court has once again reiterated the proposition that a change in the method of accounting is possible only when the change in the method of accounting is followed regularly and is guided by bona-fide considerations.
20. The aforesaid authorities as also several other authorities lay down the proposition that it is permissible for the assessee to change the method of accounting including the method of stock valuation provided the assessee satisfies the assessing authority that the change in the method is guided by bona-fide considerations and is meant to be regularly followed thereafter. They also lay down the proposition that the assessing officer can reject the change in the method of accounting including the change in the method of stock valuation in any of the following situations:
(i) Where the assessee fails to establish that the change in the method of accounting including stock valuation is based on bona-fide considerations.
(ii) Where the assessee fails to establish that the changed method is intended to be regularly followed and has in fact been so followed in the future.
(iii) Where the main reason behind the change in the method is to defraud the revenue or to present a distorted picture of the profits of the taxable entity with a view to dodge the Revenue.
21. Tested on the aforesaid principles, the facts of the case before us are clear enough to hold that the action of the AO in rejecting the change in the method of stock valuation in the assessment year under appeal was perfectly justified.
22. Before turning to the order of the learned CIT(A) deleting the impugned addition, it deserves to be mentioned that when the assessing authority finds that there is a departure from the pre-existing method of accounting, he is entitled to ask the question as to why the assessee had introduced such a change, inasmuch as such change necessarily in the first year would involve distortion in the profit or loss as shown in the return: AK Jalan v. CIT, 71 Taxman 248, 255 (Cal.). Thus the existence of bona-fide in the first year of change is essential. Perusal of the order of the learned CIT(A) shows that the assessee had followed the realizable method of stock valuation and accordingly had valued the closing stock on that basis in AY 1996-97. The method of stock valuation at realizable value followed till AY 1996-97 was changed over and replaced by another method, i.e., stock valuation at the lower of the cost or market price in the assessment year under appeal, i.e., AY 1997-98. In AY 1998-99, the method of stock valuation at the lower of the cost or market price followed in AY 1997-98 was again changed over and replaced by another method of stock valuation, i.e., market value and the closing stock was accordingly valued and reflected in the accounts filed along with the original return of income for AY 1998-99 on 31.12.1998 declaring total loss at Rs. 1,58,56,553/-. It may be mentioned here that filing of return for AY 1998-99 on 31.12.1998 would mean that the books of account had been maintained to reflect the value of stock at market price as it is this value at which the closing stock had been valued and shown in the original return for AY 1998-99. While the return for AY 1998-99 was still pending assessment, the return for AY 1997-98 had been taken up for scrutiny on 5.8.1998 on the basis of which assessment for the assessment year under appeal, i.e., AY 1997-98 came to be finalized on 16.3.2000 making the impugned addition. It is at this stage that the assessee thought of revising the return for AY 1998-99 originally filed on 31.12.1998 and hence filed the so-called 'revised' return enhancing the originally returned loss to Rs. 10,38,49,996/-. The assessee filed yet another revised return for AY 1998-99 on 16.8.2000 enhancing the said loss to Rs. 10,38,51,996/-. The reasons stated by the assessee for filing the 'revised' returns for AY 1998-99, as mentioned in the assessment order for AY 1998-99, were to change the method of stock valuation from market value as adopted while filing the original return of income to the lower of the cost or market price so as to provide consistency in the employment of method for stock valuation as adopted in AY 1997-98. Thus, the assessee changed the method of stock valuation once again in 1998-99 itself after the books of account for that year had been closed and this was done after the assessment order for AY 1997-98 had been passed. This was all the more easy for the assessee as this change did not attract any tax liability in AY 1998-99 and at the same time enabled the assessee to counter the reasoning given in the assessment order for AY 1997-98 that the assessee had not followed the changed method of accounting as adopted in AY 1997-98 in AY 1998-99. The assessee was successful in its attempt in that the learned CIT(A) accepted the aforesaid plea of the assessee and deleted the impugned addition on that basis without examining the case in the light of the judicial principles laid down in this behalf.
23. It was vehemently contended by the learned authorized representative for the assessee that the method of stock valuation as changed by the assessee in the assessment year under appeal was also followed by it in AY 1998-99 by filing the revised return and that the aforesaid fact was ample testimony, according to him, of the fact that the changed method of accounting was not only regularly followed in AY 1998-99 but also stood accepted by the Department in AY 1998-99. In this connection, he invited our attention to the observations made by the learned CIT(A) which has already been extracted from his order and reproduced earlier in this order. On careful consideration of the submissions made by the learned authorized representative for the assessee, we find it difficult to accept his submissions for several reasons: one, the assessee has indeed changed its method of stock valuation frequently as noted above; two, the assessee has changed the method of stock valuation twice in AY 1998-99 - first at the time of filing the original return and second at the time of filing the 'revised' return; three, the method of stock valuation in AY 1998-99 was changed through the revised return after the books of account had been closed; four, the books of account and the entries made therein are considered to be relevant in law only when they are regularly kept or made in the day-to-day course of the business (Section 34 of the Evidence Act) and that they cease to be relevant once it is shown that they were not kept or maintained regularly in the day-to-day course of the business; five, changing the method of stock valuation by filing the revised return shows that the change was effected after the expiry of the previous year and after the closure of the books; six, the 'revised' return for AY 1998-99 was filed only after the assessment for AY 1997-98 had been completed and that too with a view to defeat the case of the Revenue; and, seven, the assessee did not still establish its bona-fide in changing the method in the first year of change, i.e., in AY 1997-98 as also in frequently changing the method of stock valuation in AY 1998-99. The cumulative effect produced by the aforesaid events does not help the assessee in establishing its bona-fide or in supporting its contention that the changed method of accounting was regularly followed in the day-to-day course of its business. It is no doubt true that the AO did accept the revised return in AY 1998-99 but that too does not help the assessee as the assessee is still obliged to prove its bona-fide in effecting the change in the method of stock valuation in the first year of change, i.e., the assessment year under appeal which it has not been able to prove. Similarly, the method of stock valuation as changed in AY 1997-98 was not regularly followed in the day-to-day course of the business during the previous year relevant to the assessment year 1998-99. The submissions of the assessee in this behalf are therefore rejected.
24. In view of the foregoing, the order of the learned CIT(A) is reversed and that of the AO restored. Appeal filed by the Revenue is allowed.