Inventory Valuation Under Income Tax Act by Cost Accountants Inquiry Before Assessment: Amendment in Section 142(2A) of Income Tax Act

Abstract

For the first time ever recognition to Cost Accountants has been given for inventory valuation under Income Tax Act.

Budget 2023 introduced the concept of Inventory Valuation by Cost Accountants under Section 142(2A) of the Income Tax Act as part of assessment proceedings whenever required. The purpose of the introduction of new provision is to ensure that assessees work out the Inventory valuation in a systematic & transparent manner and do not defer the payment of due taxes. Having a robust costing system would certainly help the assesses from any complications in future in case any such Inventory Valuation exercise is undertaken by the income tax department. Undoubtedly, regular monitoring of the costing and inventory valuation system in terms of ICDS 2 and other relevant ICDS should be undertaken for an effective inventory valuation.