Sakthi Trading Co vs Commissioner Of Income-Tax, ...

The Supreme Court addressed the issue of stock valuation under Section 263 of the Income Tax Act, 1961, determining that when a firm is dissolved but its business continues without discontinuance, the Income Tax Officer cannot substitute market value for the closing stock determined by the regular accounting method. The Court upheld the Tribunal's finding that revaluation of stock is unnecessary in a continuing business scenario, thus affirming the assessment order made by the Income Tax Officer. The ruling clarifies that the method of accounting regularly followed by the firm is sufficient for tax purposes without requiring market value adjustments.