First appellate authority must adjudicate all grounds raised by assessee; failure to do so vitiates order, requiring remand for fresh consideration including consistent tax method for stock valuation despite change in books.

ORDER

PER OM PRAKASH KANT, AM

These two appeals by the assessee are directed against two separate orders dated 29.09.2025 and 30.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi [in short “Ld. CIT(A)”] for Assessment Year 2009-10. The impugned orders arise from assessment orders passed under section 143(3) read with section 263 and section 143(3) read with section 254 of the Income-tax Act, 1961 (the Act) respectively.

2. Briefly stated, facts of the case are that the assessee filed its return of income on 19.09.2009 declaring a loss of ₹5,43,91,122/-. The assessment was completed under section 143(3) on 18.10.2011 determining the loss at ₹5,29,69,448/- and book profit under section 115JB at ₹66,78,263/-.

2.1 Subsequently, the Ld. Principal Commissioner of Income Tax (PCIT) examined the assessment records and formed a view that the assessee had undervalued its closing stock by ₹6,07,91,429/-, on the ground that the assessee had adopted one method of stock valuation in the books of account and another for income-tax purposes. Invoking the provisions of section 263, the Ld. PCIT, vide order dated 25.03.2014, set aside the assessment directing the Assessing Officer to re-examine the issue and disallow the difference in valuation attributable to foreign exchange fluctuation.

2.2 The Ld. PCIT accordingly invoked provision of section 263 of the Act and passed order on 25th March, 2014 directing the Assessing Officer to examine and pass a fresh order disallowing the difference of value of inventory in the books of accounts and the value adopted for tax purpose, which was stated to be on account of currency exchange fluctuation.

2.3 Pursuant thereto, the Assessing Officer passed an order under section 143(3) read with section 263 on 13.10.2014, making an addition of ₹6,07,91,429/- on account of difference in valuation of the stock.

2.4 Meanwhile the assessee challenged the order passed under section 263 before the Tribunal. The Co-ordinate Bench of the Tribunal, vide order dated 08.07.2016 in ITA No.3662/Mum/2014, upheld the assumption of jurisdiction under section 263 but directed the Assessing Officer to examine the issue afresh in accordance with law in the light of the material available on record. The direction given by the Ld. PCIT in question was accordingly modified. For ready reference, said direction is reproduced as under:

“8. In view of the said direction, it is quite clear that the Assessing Officer has to do the reassessment in accordance with the directions passed by the CIT(8) Mumbai while passing the order u/s 263 of the Act. The said direction nowhere leaves the room for the Assessing Officer to examine the matter of controversy afresh in the light of the material available before him. We are of the view that the issue in question is required to be examined afresh independently by the Assessing Officer and to pass the fresh order in accordance with law. The direction given by the CIT(8) is question is hereby modified accordingly. However, the appeal filed by the assessee is hereby ordered to be dismissed.”

2.5 The Assessing Officer again, in compliance to the order of the Tribunal (supra) allowed the opportunity of being heard to the assessee and passed an assessment order under section 143(3) read with section 254 of the Act on 29/09/2017.

3. The assessee preferred appeal before the Ld. CIT(A) against the order under section 143(3) read with section 263 dated 13th October 2014 as well as order under section 143(3) read with section 254 dated 29th September 2017. The Ld. First Appellate Authority dismissed both the appeals filed by the assessee on merit.

4. Aggrieved, the assessee has filed appeal before the T