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1. In this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the revenue is aggrieved by an order 9-6-2006, passed by the Income Tax Appellate Tribunal, New Delhi, Bench "E" (hereinafter referred to as "the Tribunal"), in I.T.A. No. 413/Del/2003 relevant to the assessment year 1999-2000.

Admit.

2. After hearing learned Counsel for the parties, the following question of law is framed for consideration.

Whether the Income Tax Appellate Tribunal was correct in law in allowing the adjustment of Rs. 54,83,272 to the assessee in the opening stock for the previous assessment year 1998-99 (being a transitional year) under Section 145A of the Income Tax Act, 1961 ?

3. Filing of paper book is dispensed with.

4. In its closing stock for the previous year ending on 31-3-1999, the assessee had charged modvat credit on certain inputs. While doing so, the assessee made an adjustment, in the opening stock as on 1-4-1998. The adjustment was to the extent of Rs. 54,84,272. According to the assessing officer, Section 145A of the Act (which came into force on 1-4-1999) did not permit the assessee to make a change in the valuation of the opening stock as on 1-4-1998, although it permitted a change in the closing stock as on 31-3-1999. Section 145A of the Act reads as follows:

23.13. It may be noted that when the adjustments are made in the valuation of inventories, this will affect both the opening as well as closing stock. Whatever adjustment is made in the valuation of closing stock, the same will be reflected in the opening stock also. Question for consideration is whether the opening stock as on 1-4-1998, should be adjusted as required under Section 145A. It is now well-settled that if any adjustment is required to be made by a statute, effect to the same should be given irrespective of any consequence on the computation of income for tax purposes. Section 145A starts with the non obstante clause 'notwithstanding anything to the contrary contained in Section 145'. Therefore, to give effect to Section 145A, the opening stock as on 1-4-1998, will have to be increased by any tax, duty, cess or fee actually paid or incurred with reference to such stock if the same has not been added for the purpose of valuation in the accounts.

15. We are of the opinion that in the present case, there is no question of any double benefit being given to the assessee. Paragraph 23.13 of the guidance note itself makes it clear that whenever any adjustment is made in the valuation of inventory, this will affect both the opening as well as the closing stock. It is also to be noted that if any adjustment is required to be made by a statute, (as for example Section 145A of the Act), effect to the same should be given irrespective of any consequences on the computation of income for tax purposes. Section 145A of the Act begins with a non obstante clause, and therefore, to give effect to Section 145A of the Act, if there is a change in the closing stock as on 31-3-1999, there must necessarily be a corresponding adjustment made in the opening stock as on 1-4-1998.