JUDGMENT

P.P. Naolekar, J.—The appellant, (hereinafter to be referred to as an ‘assessee’) is a firm engaged in the imports of synthetic waste and manufacture and export of woolen blankets. Since the assessee had been in export, the economy of the business of the assessee worked out on the basis of U.S. $ price and for the purpose of stock valuation, the same was recorded in Rupees for which the prevailing exchange rate was applied. The assessee was maintaining books of accounts on a consistent method on mercantile basis right from the insertion of its business and Department has accepted the same for the purpose of income-tax except in the years in question. Since the Account Year, 1986-87, the assessee followed the method of accounting, and for which the stock of raw-material/semi-finished goods were valued at cost price and finished goods at the market price.

2. For the Assessment Year 1992-93 (hereinafter to be referred to as the ‘First year’), the assessee valued the closing stock at the rate of Rs. 130/- per kg. whereas the opening stock were shown at Rs. 90/- per kg. In the subsequent year 1993-94, the assessee valued the opening stock at Rs. 130 per kg. for the finished good