This is departmental appeal on short ground as to whether learned CIT (Appeals) was justified in giving relief of Rs. 2,88,200 to assessee-bank on account of valuation of closing stock of Government securities, held by assessee-bank as its stock-in-trade. 2. relevant facts are very brief and may be noted. assessee is banking concern and as part of its stock-in-trade it holds, inter alia, Government securities. Its accounting period is calendar year. UP to calendar year 1981, corresponding to assessment year 1982-83, assessee-bank has been valuing Government securities in its stock at market price. In accounting period under consideration, however, assessee switched on to valuation of closing stock at cost or market price, whichever was lower. As result of this change in method of valuation of closing stock, value of closing stock got reduced by Rs. 9,03,819.34p. IAC (Asst.) recorded aforesaid change in method of valuation as bona fide, and, therefore, accepted closing figure as per declaration of assessee. IAC (Asst.), however, felt that in order to arrive at correct figure of total income of assessee, figure of opening stock of securities should also be adjusted on principle of cost or market value whichever is lower. He, accordingly, worked out valuation of opening stock on basis of cost or market price whichever was lower and found that on that principle figure of opening stock should go down by Rs. 2,88,500. above sum of Rs. 2,88,500 was, therefore, reduced by ITO from reduction in closing stock figure of Rs. 9,03,819.34p. It naturally resulted in corresponding increase in total income of assessee. 3. In support of above action IAC (Asst.) relied on following judgments: (i) CIT v. Ahmedabad New Cotton Mills Co. Ltd. [1930] 4 ITC 245 (PC); (ii) K.G. Khosla & Co. (P.) Ltd. v. CIT [1975] 99 ITR 574 (Delhi). 4. assessee challenged above order of IAC (Asst.) before CIT (Appeals) and it was pointed out to him by assessee that Hon'ble Allahabad High Court had not approved approach of IAC (Asst.) in case of Ram Luxman Sugar Mills v. CIT [1967] 63 ITR 51 (All.) and Ramswarup Bengalimal v. CIT [1954] 25 ITR 17 (All.). Their Lordships of Hon'ble Allaha- bad High Court had based their judgment on decision of Hon'ble Supreme Court in case of Chainrup Sampatram v. CIT [1953] 24 ITR 481 and as such according to learned counsel for assessee order of IAC (Asst.) deserved to be reversed on this issue and disallowance made by him ought to be negatived. 5. learned CIT (Appeals) after going through judgments relied upon by learned counsel for assesses accepted assessee's plea and accordingly deleted disallowance made by IAC (Asst.). 6. revenue is in appeal against aforesaid order of CIT (Appeals). It is contention of learned D.R. that matter is squarely covered by Privy Council judgment in case of Ahmedabad New Cotton Mills Co. Ltd. (supra). In that case their Lordships of Hon'ble Privy Council had pointed out that real profits of assesses could not be ascertained by merely raising valuation of closing stock, value of opening stock should also be correspondingly increased. According to learned D.R., therefore, valuation of closing stock alone could not have been done and that it was necessary to value opening balance also on same principle in order to arrive at real profit of assessee for year under consideration. According to learned D.R. aforesaid judgment of Hon'ble Privy Council was not taken note of by Hon'ble Allahabad High Court. It was further pointed out by learned D.R. that, in present case, we are concerned with change in system of accounting, whereas case of Ram Luxman Sugar Mills (supra), question referred for opinion of their Lordships was not as above. question there was: "Whether, in circumstances of case, opening stocks have been. In law, rightly taken at cost resulting in addition of Rs. 1,09,595 on account of revaluation of opening stock?" Their Lordships, therefore, did not have to go into question, as to what should be done when assessee was adopting change in system of accounting with regard to valuation of closing stock. Referring to judgment of Hon'ble Supreme Court in case of Chainrup Sampatram (supra), learned D.R. again pointed out that question before their Lordships. In that case was also not as to what should be done when change in system of account is permitted and closing stock is allowed to be valued on certain principle, whether in such case, opening stock should or should also b e revalued on basis of valuation of closing stock, was not for consideration of their Lordships and, therefore, it cannot be said that their Lordships of Supreme Court had disapproved proposition laid down by their Lordships of Privy Council in case of Ahmedabad New Cotton Mills Co. Ltd. (supra). In support of proposition that same principle should govern valuation of opening stock and closing stock in given year, in order to find out real profit of assessee, learned D.R. relied upon following orders of Tribunal: Goodlass Nerolac Paints Ltd. v. IAC [1985] 13 ITD 270 (Bom.) Sandvik Asia Ltd. v. ITO [1985] 14 ITD 35 (Bom.) ITO v. Hindustan Petroleum Corpn. Ltd. [1986] 16 ITD 574 (Bom.). It was stressed by learned D.R. that for purpose of assessment of business income under section 28, it had to be real income and if method of accounting produces figure which was not real income, that should not be accepted by Courts and that if accounts of assessee did not bring out real income, it was open to ITO to make such adjustments in account, as will bring out real business income of assessee. 7. above submissions of revenue were opposed by learned counsel for assessee who stressed facts that assessee came from State of U.P. and, therefore, judgments of Hon'ble Allahabad High Court were binding on us with regard to question in issue before us and that t h e Judgment of their Lordships was categorical in this regard and clearly stipulated that it was not open for Income-tax Department to revalue opening stock, merely because closing stock was valued on different principle. Referring to judgment of Hon'ble Delhi High Court in case of K.G. Khosla & Co. (P.) Ltd. v. CIT [1975] 99 ITR 574, learned counsel pointed out that in that case also question involved was not regarding change in system of accounting and as to how should it be given effect to for purpose of valuation of stock and to arrive at real income of assessee. question was as to whether valuation of closing stock was done by assessee in that case on same principle on which opening stock was valued. It was no- body's case in that case that method of valuation of closing stock was being changed from one recognised manner to another one. There, while valuing opening stock of goods, assessee h d gone by interest plus customs duty and charges, but while valuing closing stock, customs duty and charges were excluded. method of valuation in that case was thus same namely, cost price but while working out cost price, whereas certain components of cost were taken into consideration while valuing opening stock, same were ignored while valuing closing stock. In that setting of facts, their Lordships of Delhi High Court had pointed out that this could not be done. 99 ITR 574 could not, therefore, be authority for proposition that even when there was bona fide change in method of accounting of valuation of closing stock, opening stock must also be valued on same principle as closing stock. 8. learned counsel for the, assessee drew support for his case from following authorities of Hon'ble Madras High Court in Indo Commercial Bank Ltd. v. CIT [1962] 44 ITR 22 and CIT v. Carborandum Universal Ltd. [1984] 149 ITR 759. It was pointed out to us that at page 765 Hon'ble Madras High Court had taken note of judgment of Privy Council in aforementioned case reported in 4 ITC 245 and had yet held that it would not be correct for ITO to value opening stock also on same principle at which closing stock was valued, when assessee was seeking to change method of valuation. In that case our attention was invited to following observation of their Lordships at page 765: "The main contention of revenue in this case is that change in method of valuation of stock should be applied both to opening stock as well as closing stock, which alone will indicate true or real profits as has been well as closing stock, which alone will indicate true or real profits as has been held in CIT v. Ahmedabad New Cotton Mills Co. Ltd. [1930] 4 ITC 245 (PC), and that it is not open to assessee to apply new method to closing stock alone without reference to opening stock. Thus, according to learned counsel for revenue whatever be method of valuation adopted by assessee, it should be applied to both opening and closing stock, as otherwise it will give distorted picture of assessee's income. Tribunal's reasoning for rejecting this contention of revenue is that so far as first year when charge is introduced is concerned, there is bound to be light distortion in profits but that will get adjusted in course of time as new method of valuation of stock is going to be applied on permanent basis year after year. On due consideration of matter, we are inclined to agree with view of Tribunal. If assessee is called upon to apply new method of valuation to opening stock of accounting year as well, then, in consequence, value of closing stock of year previous to accounting year will also get altered and that will result in modification of assessment for previous year. It is for this reason Tribunal has stated that though by adoption of new method of valuation for closing stock alone assessee may appear to get some unitended benefit, in course of time it will get adjusted and revenue will not be loser. Even apart from this reason, if revenue's contention that new method should be adopted both to opening stock and closing stock even in first year of introduction of new method is accepted, then it will lead to position that assessee cannot at all change method or assessee has to revalue closing stock of previous year which will be opening stock of this year, and such revaluation on new basis as per assessee is not ordinarily possible. That when new method of valuation of stock is adopted in any particular year, assessee can on that basis leave intact valuation of opening stock on old method has been laid down in series of cases." For above stand their Lordships of Hon'ble Madras High Court again relied upon observation of Hon'ble Supreme Court reported as Chainrup Sampatram's case (supra) and on earlier judgment in case of Indo-Commercial Bank Ltd. (supra). 9. We have given our careful consideration to facts of case and rival submissions. There is merit in submission of assessee's learned counsel that issue before us is directly and squarely covered by ratio of judgment of Hon'ble Allahabad High Court in case of Ram Luxman Sugar Mills (supra). There too dispute was, whether opening stock could be revalued on same principle at which closing stock had been valued. accounting period of assessee in that case ended on 30th September, 1949. For earlier assessment year, i.e., for assessment year 1948-49, for which relevant previous year closed on 30th September, 1947, closing stock of sugar was valued by assessee at market rate at figure of Rs. 5,39,874. same amount was shown as value of opening stock in relevant previous year, beginning from 1-10-1947 and ending on 30th September, 1948. For purpose of computing profits for assessment year 1949-50, assessee chose to value his closing stock at end of previous year on 30th Septem- ber, 1948 at cost instead of market rate. In assessment proceedings ITO held that assessee was not entitled to value closing stock of previous year at cost, since in earlier year closing stock had been valued at market rate as also opening stock of this previous year. That decision of ITO was, however, set aside in appeal by AAC, who held that assessee was entitled to value his closing stock at end of previous year on 30th September, 1948 at cost price. Thereupon ITO in making reassessment, after remand, decided to revalue opening stock on 1st October, 1947 and held that it should also be valued at cost and not at market value. He, therefore, worked out value of opening stock at Rs. 4,20,279. value of opening stock having thus been reduced, difference of Rs. 1,09,595 in computation worked out as additional profit earned by assessee during this previous year, and this amount was thus added to his taxable profits. assessee appealed to Appellate Assistant Commissioner and Tribunal, but unsuccessfully. Thereupon on reference to Hon'ble High Court of Allahabad, assessee's viewpoint was upheld. 10. Similarity of facts stated as above with facts of present case, is in our opinion striking. Identical situation, as was considered by their case, is in our opinion striking. Identical situation, as was considered by their Lordships of Allahabad High Court in above case, obtains in present case. There too assessee had been following market price as basis for valuing closing stock up to end of immediately preceding year. opening stock this year is thus also based on market rate. For year under consideration assessee switched on to method of valuing closing stock of Government securities on cost or market value whichever is lower. IAC (Assessment) accepted change in method of valuation as it was bona fide, but he adjusted opening stock also on principle of cost or market value whichever was lower, and thereby reduced value of opening stock by Rs. 2,82,200. submission of learned D.R. that facts in this case were different and that ratio of said judgment will not therefore apply to facts of present case, does not appear to us to be correct, facts are identical and so ratio of aforesaid judgment will, in our opinion, squarely cover facts of case. For, it is not material in this case, as to in what form question referred to Hon'ble High Court in Ram Luxman Sugar Mills' case (supra) was framed. crux of problem in either situation is same, namely, whether when method of valuation of closing stock is changed in bona fide manner, same principle of valuation as adopted for closing stock, should also simultaneously be applied to valuation of opening stock. To this question, their Lordships gave categorical reply that it could not be done. reasoning of their Lordships was as follows: "The answer to question referred to us is very plain from principles recognised by Bench of this Court in case of Ram Swarup Bengalimal v. CIT. In that case also, question that came up for consideration related to method of valuation of opening and closing stocks. This Court held: 'Two principles have now become well settled: (1) that assessee is entitled to value closing stock either at cost price or market value, whichever is lower, and (2) that value of closing stock must be value of opening stock in succeeding year, that is, assessee cannot close his accounts and value his stock at particular figure and next morning on first day of next year he cannot value it at different figure'. " Their Lordships further pointed out that Hon'ble Allahabad High Court had already recognised principle that: "an assessee has right to value his stock at market price or cost price whichever is lower if he desires to do so. This principle was also recognised by Supreme Court in Chainrup Sampatram v. CIT." 11. decision of Hon'ble Allahabad High Court is binding on us and therefore, we have no option in matter, but to follow aforesaid judgment, even if some other High Court had taken different view in matter. But as it turns out, no judgment of any High Court has been brought to our attention which might have taken different view. Hon'ble Madras High Court has not only followed principle enunciated by their Lordships of Allahabad High Court in abovementioned case, but has also elaborated this in their judgment in case of Carborandum Universal Ltd. (supra), quoted by us in extenso above in para 8, supra. Their Lordships have also placed reliance on judgment of Supreme Court in Chainrup Sampatram's case (supra), for proposition they enunciated in above judgment. 12. Chainrup Sampatram's case (supra) is leading authority on question of valuation of stock, rational behind it and principle underlying it. At page 485, it is what their Lordships observed: "It is wrong to assume that valuation of closing stock at market rate has, for its object, bringing into charge any appreciation in value of such stock. true purpose of crediting value of unsold stock is to balance cost of those goods entered on other side of account at time of their purchase, so that cancelling out of entries relating to same stock from both sides of account would leave only transactions on which there have been actual sales in course of year showing profit or loss actually realised on year's trading." Having explained principle of valuing stock and bringing it into trading account as above, their Lordships proceeded to observe as follows: "From this rigid doctrine one exception is very generally recognised on prudential grounds and is now fully sanctioned by custom, viz., adoption of market value at date of making up accounts, if that value is less than cost. It is of course anticipation of loss that may be made on those goods in following year, and may even have effect if prices rise again, of attributing to following year's result greater amount of profit than difference between actual sale price and actual cost price of goods in question." Their Lordships then explained that: "While anticipated loss is thus taken into account, anticipated profit in shape of appreciated value of closing stock is not brought into account, as no prudent trader would care to show increased profit before its actual realisation. This is theory underlying rule that closing stock is to be valued at cost or market price whichever is lower, and it is now generally accepted as established rule of commercial practice and accountancy. As profits for income-tax purposes are to be computed in conformity with ordinary principles of commercial accounting, unless of course, such principles have been superseded or modified by legislative enactments unrealised profits in shape of appreciated value of goods remaining unsold at end of accounting year and carried over to following year's account in business that is continuing are not brought into charge as matter of practice, though, as already stated, loss due to fall in price below cost is allowed even if such loss has not been actually realised. " 13. above principle was illustrated by their Lordships in its practical working with reference to facts of case of CIT v. Chengalvaraya Chetti, 1925 ILR 48 Mad. 836. In that case assessee had purchased large stock of piece goods at Rs. 13-8-0 piece. At end of year market value fell to Rs. 6 piece, and he made out loss by valuing whole stock at market rate including unsold pieces in hand at end of year. loss was allowed in his assessment of income-tax. In following year (1922), however, he entered same unsold goods as opening stock at cost price o f Rs. 13-8-0. Some of those pieces remained unsold at end of 1922 also and he credited their value at Rs. 8-8-0 piece, market rate then prevailing, and showed loss on year's trading. income-tax authorities refused to allow loss thus calculated, and assessed him as having made profit on footing that opening stock of 1922 should have been valued at Rs. 6 piece and unsold pieces at Rs. 8-8-0. assessment was upheld as properly made, though it will be seen, transactions of 1922, or even of two years taken together, ended actually in loss. Thus, while valuation of unsold stock at end of each year at market rate which was less than cost was accepted, valuation of unsold goods carried over as opening stock of 1921 at Rs. 6 piece consistently with their valuation at closing stock of 1921 was insisted upon in order to rectify distorted picture of trading results of 1921 which were not correctly reflected in accounts by reasons of assessee having adopted lower market rate instead of cost as value of closing stock in 1921. Their Lordships pointed out that if market had risen in 1922, to say. Rs. 15 instead of to Rs. 8-8-0 piece at end of 1922, then, on principles indicated above, it would have been open to assessee to value closing stock at cost (Rs. 13-8-0), and income-tax authorities could not have claimed to bring into assessment appreciated value of unsold goods. It will thus be seen that no question of charging appreciated value of closing stock as "notional profits" can really arise. Their Lordships also explained that it was misconception to think that any profit 'arises out of valuation of closing stock', that is in fact not true purpose of bringing value of closing stock into trading account. 13.1 From aforesaid judgment of Hon'ble Supreme Court, following points clearly emerge: (i) That true purpose of valuing stock and bringing it in accounts, both at beginning of year and at end of year, is not to bring into charge any profits, arising out of valuation of closing. stock. Its mere purpose is to neutralize in accounts, entries regarding purchases which have earlier been debited, but large part of which remained in hand and have not been sold at end of accounting period. profit arises from purchases and sale and not from holding of stock. (ii) To this principle, as explained by their Lordships, there is one exception, namely, that anticipated losses can be brought into account even though real purpose of bringing value of stocks into account is to neutralise earlier debit entries with regard to goods which remained in hand. When this anticipated loss is brought into account, apparently true profits of year are distorted and lesser amount is taken into account, but it is permitted by usuage and custom and so on. Their Lordships held that anticipated losses may be allowed provided they are based on principle of valuing stock at cost price or market price, whichever is lower. (iii) One more thing which is clear from observations of their Lordships, is that opening stock's valuation may be on one basis, namely, market price and closing stock valuation may be, on other basis, namely, cost price and that it is not necessary to have same principle of valuing opening stock and closing stock. In example given by their Lordships goods were purchased at Rs. 13-8-0 per piece, market price at end of year had gone down to Rs. 6 piece, thus bringing into account actual losses in respect of goods in hand. 13.2 If above is permissible in first year of trading, it is not understood as to why in any subsequent year of trading assessee cannot be allowed to value its closing stock at cost price or market price or whichever is lower. It is recognised principle of valuation of stock and it cannot be refused to assessee merely on ground that by doing these, profits of year are transferred to next year. distortion in accounts from point of view of true profits is embedded in commercial practice of valuing stock at cost or market price or whichever is lower. said distortion was elaborately illustrated by their Lordships in example given by them at page 486, when they pointed out that even though as result of trading for years 1921 and 1922, there would be net loss, yet on account of method of valuation adopted by assessee, namely, cost price or market price, whichever is lower, trading results of first year were distorted in sense that actual losses are exaggerated, next year's profits were also distorted. In sense that even though there was really loss, some profit arose to assessee by taking closing stock of 1921 as opening stock of 1922. Thus distortion in course of time will cancel each other out and that was purpose of insisting that closing stock of one year should be opening stock of following that closing stock of one year should be opening stock of following year, for, that way alone distorted picture of 1921 would, according to their Lordships, be rectified. Their Lordships of Hon'ble Madras High Court have brought into sharp focus above principle enunciated by their Lordships of Hon'ble Supreme Court reported as Carborandum, Universal Ltd.'s case (supra) at page 766. Their Lordships of Hon'ble Allahabad High Court also emphasised this point when they held that closing stock of one year should be opening stock of following year. 14. With regard to aforesaid insistance, namely, closing stock of one year should be opening stick of next year, aforesaid judgments do make departure from implications (not principle explicitly stated) of facts and ratio of Privy Council judgment in case of Ahmedabad New Cotton Mills Co. Ltd. (supra). In that case their Lordships had directed that opening stock figure should also be revalued to remove element of under- valuation, because under-valuation of closing stock, similarly made, was sought to be eliminated by revenue. If opening stock of year in question was allowed to be disturbed, as indeed their Lordships directed, value of opening stock of current year would naturally be different from that of closing stock of immediately preceding pre- vious year. Thus, their Lordships of Privy Council were prepared to contemplate situation, where closing stock of earlier year would not be opening stock of following year. But their Lordships of Hon'ble Supreme Court did not countenance such situation in Chainrup Sampatram's case (supra). To this extent, therefore, Privy Council ratio would stand modified by judgment of Hon'ble Supreme Court. It is true that there is no reference to Judgment of Hon'ble Privy Council in case of Ahmedabad New Cotton Mills Co. Ltd. (supra), in judgment of Chainrup Sampatram (supra), yet principle had been laid down by their Lordships in no ambiguous terms and, therefore, principle laid down by Privy Council can no more be regarded good law in India. 15. Apart from it we notice that facts in case of Privy Council judgment, referred to above, were different. In that case question referred to their Lordships of Privy Council did not concern itself with problem of change in system of accounting with regard to valuation of closing stock. method remaining same and both opening stock and closing stock having been under-valued, question for determination was, as to whether it was correct for ITO to merely correct closing stock figure by removing under-valuation therefrom and to Ignore under-valuation of opening stock. method of valuation for opening stock and closing stock was otherwise same and no change was being sought in system of valuation. question was-whether ITO was justified in removing element of under-valuation from closing stock only, or, whether, he should also remove element of undervaluation from opening stock, in order to arrive at correct and real profits of business of assessee. It was in that context that their Lordships of Privy Council had held that real profits of assessee could not be ascertained by merely raising valuation of closing stock not taking into consideration similar under-valuation of opening stock. Derivation of general principle of uniform applicability will not in circumstances be justified. 16. judgment of Hon'ble Delhi High Court, relied upon by learned departmental representative, K.G. Khosla & Co. (P.) Ltd.'s case (supra), also does not help department's case, for, there also question for determination was not as to whether opening stock should be revalued, if change in system of valuation of closing stock was contemplated, but in that case also method of valuation of stock was same both with regard to opening stock and closing stock, namely, cost price. But while opening stock was worked out with reference to cost price plus customs duty and charges, value of closing stock was worked out only o n basis of cost price, ignoring customs duty and charges. This distortion in valuation (the method of valuation remaining same for both opening and closing stock) was removed by income-tax authorities in that case and it was held to be justified. In present case, we are not concerned with such situation. Here assessee is keeping opening stock at figure at which earlier year's closing stock stood and with reference to closing stock he is changing valuation by adopting principle of cost price or market price, whichever is lower. Thereby no doubt some anticipated losses are brought into account this year and in this sense real profits are being distorted, yet this distortion, as pointed out by their Lordships of Hon'ble Supreme Court in Chainrup Sampatram's case (supra) would get rectified over number of years and this should not therefore be basis for rejecting assessee's accounts and valuing opening stock in manner by IAC (Asst.). 17. Revenue's reliance on order of Tribunal in case of Goodlass Nerolac Paints Ltd. (supra) does not appear to be advancing Revenue's case. In case of Goodlass Nerolac Paints Ltd. (supra), Department had interfered with valuation of closing stock and no attempt was made to interfere with valuation of opening stock. In present case, facts are just reverse of what they were in case of Goodlass Nerolac Paints Ltd. (supra). No doubt there are some stray observations in that order to effect that, even assuming that assessing officer was justified in making additions in closing stock, still it was incumbent on assessing officer to evaluate both opening and closing stock on same principles. Admittedly that had not been done in present case. aforesaid stray observations, which are made on basis of assumption, cannot be regarded as laying down law on point, more particularly when law has already been explicitly explained in judgment of Hon'ble Allahabad High Court and Madras High Court, and earlier by Hon'ble Supreme Court in cases, referred to above. We do not consider it necessary to change our observations as above in light of stray comments made by Tribunal in above case. 18. In case of Sandvik Asia Ltd. (supra), there are certain observations of Hon'ble Third Member, contained in paragraphs 22, 23, 24 and 25, which g o to lend some support to Revenue's case. relevance of said observation should, however, be judged in context of said case. In that case assessee- company was following practice of valuing inventories at lower of direct cost and net realisable value from year to year. During relevant year company changed its method of valuing closing stock from aforesaid method to last in first out (LIFO) method on ground that this method produced more realistic statement of earnings in view of spiralling inflation. revaluation of closing stock resulted in reduction of closing stock of Rs. 58,46,535 compared to figure of closing stock if earlier method had been followed. Rejecting assessee's grounds for adopting aforesaid change in method of valuation IAC added sum of Rs. 58,46,535 to assessee's total income. On second appeal, while Judicial Member held that addition of impugned sum was not justified, Accountant Member held that assessee was not entitled to change over to LIFO method and, therefore, addition was justified. On reference to Third Member, it was held that assessee could change its method of valuation from earlier one, followed by it to LIFO method, but Hon'ble Third Member held that, "If for one year he changes method of stock valuation, profit of that year has to be recomputed by either revaluing closing stock adopting same method as opening stock or revaluing opening stock by following same method as valuing closing stock. If this is not done profit of that year cannot be ascertained. This in congruency cannot be explained away by saying that over years total profit would be same if subsequent to change same changed method of closing stock valuation is continued. profits up to year prior to change for each year would be correctly determined. profit for years subsequent to change of year could also be determined correctly. But profit of year where change in valuation of closing stock is made cannot be determined. Therefore, in applying various principles as above, they have to be properly reconciled with each other for purpose of arriving at profit of current year, and, therefore, according to Third Member opening stock should also be revalued on same principle of LIFO as closing stock was done. 19. above observations of Third Member run contrary to observations of Hon'ble Madras High Court, Hon'ble Allahabad High Court and Hon'ble Supreme Court in cases, cited above. It is not that aforesaid judgments were not brought to attention of Third Member, but he somehow felt that said judgments were not relevant for determination of question before him. His observations with regard to same are contained in para 26. In his opinion: "None of these decisions can be regarded as authority for proposition that suddenly method of stock valuation can be altered even if it involves some amounts of income altogether escaping tax." above observation naturally runs counter to following observations o f their Lordships of Hon'ble Madras High Court, who noted above possibility and dealt with it in following words: "Thus, according to learned counsel for Revenue, whatever be method of valuation adopted by assessee, it should be applied to both opening and closing stock, as otherwise it will give distorted picture of assessee's income. Tribunal's reasoning for rejecting this contention of Revenue is that so far as first year when change is introduced is concerned, there is bound to be slight distortion in profits but that will get adjusted in course of time as new method of valuation of stock is going to be applied on permanent basis year after year. On due consideration of matter, we are inclined to agree with view of Tribunal." Even their Lordships of Hon'ble Supreme Court had, as noted earlier, visualised above situation and illustrated it by specific example discussed by us at great length above, while explaining ratio of Chengalvaraya Chetti (supra). Their Lordships observed, inter alia, as below: "Thus, while valuation of unsold stock at end of each year at market rate which was less than cost was accepted, valuation of unsold goods carried over as opening stock of 1921 at Rs. 6 piece consistently with their valuation as closing stock of 1921 was insisted upon in order to rectify distorted picture of trading results of 1921, which were not correctly reflected in accounts by reasons of assessee having adopted lower market rate instead of cost as value of closing stock in 1921." principle of real income being reflected as result of valuation of stock was negatived by their Lordships who themselves noted distortion in real profits and they pointed out that to principle of neutralization function of valuation of stock, there was one exception, namely, that anticipated losses could be brought into account through valuation of closing stock, even though it distorted true trading result of that year. argument, therefore, that trading result should be so ascertained as would be free of distortion on account of change of system of valuation of closing stock do not find favour with Hon'ble Madras High Court in case of Carborandum Universal Ltd. (supra), nor with Allahabad High Court in case of Ram Luxman Sugar Mills (supra), nor with their Lordships of Supreme Court in case of Chainrup Sampatram (supra). When there be conflict between observations by Member of Tribunal and that made by High Courts and he Supreme Court, it is latter which would prevail and therefore respectfully following authority of Hon'ble Allahabad High Court by which in present case, in any case we are bound, we uphold order of CIT (Appeals) and thereby we dismiss departmental appeal. *** INSPECTING ASSISTANT COMMISSIONER v. BAREILLY COPORATION BANK