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D. Issue a Writ of Certiorari such other appropriate writ, order or direction quashing Exhibit-P4 notice and Exhibit-P6 intimation rejecting the reply of the petitioner. E. Pass such other appropriate writ, order or direction as this Hon'ble Court may deem just and fit in the circumstances of the case."

Submissions:

Petitioners':
8. Sri Ajay Vohra and Sri A Kumar, learned Senior Counsels, have submitted that Clause 16 of ICDS (II) is ultra vires Article 14 of the Constitution of India, inasmuch as it provides unreasonable classification. By virtue of the application of the provisions of Clause 16 of ICDS (II), the revaluation of the closing stock of the petitioner applying FIFO or Weighted average cost method as to the LIFO method earlier followed by the petitioner, is manifestly contrary to the fundamental principle of practice of the real income which is W.P.(C) Nos.30318/2019, 1529/2024, 17949/2020, 17828/2020, 17964/2020, 17972/2020, 28444/2021, 29846/2021, 30448/2021, 30354/2019, 30340/2019, 30373/2019, 32237/2019 the bedrock of application, operation, and implementation of the provisions of the Act. It is further submitted that the manner and methodology of the implementation and application of the provisions of Clause 16 of the ICDS (II) are fundamentally contrary to the foundational principle of the Act and the same cannot be employed as the basis for determining the value of the stock/inventory, especially in respect of an assessee, such as the petitioner, wherein the consequence of implementation of the provision of Clause 16 of the ICDS (II) retrospectively with effect from 01.04.2017 would lead to an inevitable consequence and its effects would be patently flawed and absurd.

accepted methods of stock inventory valuation, and the mandatory application of FIFO or Weighted average cost as the only method for valuation of the stock/inventory, is wholly unreasonable being devoid of any rationale and bears no nexus with the objects sought to be achieved, i.e., determination of the most accurate picture of the accounts of an assessee. Ergo, the exclusion of LIFO as an appropriate method for valuing the W.P.(C) Nos.30318/2019, 1529/2024, 17949/2020, 17828/2020, 17964/2020, 17972/2020, 28444/2021, 29846/2021, 30448/2021, 30354/2019, 30340/2019, 30373/2019, 32237/2019 stock/inventory leads to an unreasonable classification as there exists no rationale for creating such a classification to the exclusion of a well-established principle of valuation of stock/inventory.

8.7 The Revenue does not have the right to unilaterally impose a method of valuation of closing stock in place of a W.P.(C) Nos.30318/2019, 1529/2024, 17949/2020, 17828/2020, 17964/2020, 17972/2020, 28444/2021, 29846/2021, 30448/2021, 30354/2019, 30340/2019, 30373/2019, 32237/2019 regularly and consistently followed method which has been accepted over the years and bring to tax the difference as a result of unilateral/mandatory replacement/ substitution of the method of stock valuation, as income of the assessee. It is therefore submitted that the stipulation of Clause 16 of ICDS (II) to the extent that it mandates the adoption of FIFO or weighted average cost method to the exclusion of LIFO, as the only method for valuation of stock/inventory, suffers from the vice of unreasonable classification and manifest arbitrariness, being violative of Article 14 of the Constitution of India and therefore liable to be struck down.

Department's:

10. Sri. Jose Joseph, the learned Senior Standing counsel for the Income Tax department has submitted that the adoption of a uniform method of valuation of closing and opening stock is based on a long series of consultations with the experts and the recommendation of the specially constituted committee of professional which has been taken note of in the judgment of Delhi High Court in the case of Chamber of Tax Consultants (supra). He further submits that the Legislature is well within the power to amend the Statute to provide mandatorily one or more methods of valuation of W.P.(C) Nos.30318/2019, 1529/2024, 17949/2020, 17828/2020, 17964/2020, 17972/2020, 28444/2021, 29846/2021, 30448/2021, 30354/2019, 30340/2019, 30373/2019, 32237/2019 the stock. There is no legislative incompetence in providing one or more methods of valuation of the stock by amending the IT Act. He also submits that a uniform method of valuation of the stock has been provided by substituting Section 145A of the IT Act with effect from 01.04.2017, for all the assessees. So, there is no discrimination by making Clause 16 of the ICDS (II) mandatory for valuing the stock with effect from 01.04.2017, under FIFO method. He also submits that there is no unreasonable classification or manifest arbitrariness in making it mandatory to value the stock by applying the FIFO or weighted average cost method.