M/S. SANJEEV WOOLEN MILLS vs COMMNR. OF INCOME TAX, MUMBAI

The Supreme Court addressed the valuation of stock for income tax purposes under Section 80 HHC of the Income-tax Act, 1961. The Court held that the method of valuing closing stock at market price, as adopted by the assessee, resulted in a distorted gross profit ratio and was deemed to artificially inflate profits to gain tax benefits. The Court upheld the Assessing Officer's conclusion that this method contravened basic accounting principles and was an attempt to defraud the Revenue, thereby affirming the assessment made by the tax authorities.