The assessed must value opening and closing stock uniformly, considering relevant costs; inconsistencies can lead to valid legal scrutiny.

1. This application has been filed under sub-section (2) of S.256 of the Income Tax Act, 1961 , herein called "the Act", by Messrs K. G. Khosla & Co. P. Ltd. herein in called "the assessed", praying that the Income Tax Appellate Tribunal be directed to state the case and refer to this court, the following questions of law, said to have arisen out of its order :
"1. Is not the finding of the Tribunal vitiated by a wrong appreciation of the law and practice of valuation of closing stock ?

2. Was there any material on which the Tribunal could hold that the closing stock must necessarily include the customs duties and incidental charges ?

3. Was the Tribunal justified in law in holding that on no account the opening stock could be revalued to make it consistent with system adopted for valuation of closing stock ?

4. Was there any evidence on which the Tribunal could hold that the credit of Pounds 607 12s. 6d. had in fact been given by the foreign party from whom the purchases had been made even though the said party had reversed the entry in the statement of account submitted to the assessed ?

5. Was the Tribunal justified in law in valuing the credit of Pounds 607 12s. 6d. at the exchange rate of Rs. 21 per pound and not at the rate of Rs. 13.13 which was the rate prevailing at the date of the credit, namely 15th November, 1960 ?
The assessed - company is engaged in the manufacture of air - compressors, garage equipment, hydraulic presses, etc., for which purpose it imports certain components and raw materials. Besides paying the invoice price, it incurs customs duty, freight and handling charges. Materials and components are also purchased from within the country, and the assessed incurs freight and other charges on this account as well. The accounting year under appeal is the calendar year ending on December 31, 1960. For the financial year ending on December 31, 1959, the value of the closing stock included an ad hoc amount for customs duty and other charges, although the opening stock as on January 1, 1959, and in the earlier years had been valued at the invoice cost without adding customs duty and other charges. The method of valuation of closing stock without adding customs duty, freight and handling charges for the year ending December 31, 1960, was considered to be defective by the department.

6. The Income Tax Officer came into possession of a photostat copy of a letter dated March 9, 1962, in which it was found that the foreign principals from whom the assessed purchased components and other materials had given a credit for Pounds 607 12s. 6d. in a statement of account sent by them to the assessed which had not been accounted for in the assessee's books. The Income Tax Officer, Therefore, asked the assessed - company to explain the above two discrepancies.

7. The assessed claimed that the closing stock of the imported items was valued at invoice cost plus appropriate customs duty and other charges thereon as at the close of the year ending on December 31, 1959, on an ad hoc basis and the same was brought forward as the opening stock on January 1, 1960. This was done on the suggestion of the auditors, who had made a remark to this effect in the balance - sheet. As the imported components and other materials were too numerous in number, it was not possible, according to the assessed, to allocate such charges correctly to each and every item. It was considered by it an impossible task to split up the said charges. The attempt made in 1959 by adding an ad hoc value for these charges is said to have been found extremely difficult which could not fully succeed. Since these components were only for the purpose of manufacture and consumption by the assessed itself, it made no practical difference in the ultimate analysis,