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2015 (8) TMI 1497 - AT - Income TaxRevision u/s 263 - understatement in the value of closing stock because the appellant has not debited the value of excise duty to Profit & Loss Account at the time of accounting purchases - assessment order being erroneous and prejudicial to the interest of the Revenue or not? - HELD THAT:- The assessee has stated before the ld.Pr.CIT which is not rebutted by the Revenue that there is no understatement in the value of closing stock because the appellant has not debited the value of excise duty to Profit & Loss Account at the time of accounting purchases and the excise duty component has been accounted and recognized separately in the financial statements as current assets for the year under consideration. There is another aspect of the matter also, the contention of the assessee is that MODVAT Scheme provides for instant credit of the input only on the raw-material consumed. The credit has a direct linkage with the consumption of the raw-material. It is obtained on the date when the raw material is purchased. Hence, it is clear that whether one applies the net method or the gross method the gross profit remains the same. Assessment order is not erroneous. Moreover, it is undisputed fact that the Assessing Officer raised a specific query and reached to a conclusion that method adopted by the assessee has not caused any prejudicial to the Revenue since there is no understatement of closing stock. This conclusion of AO is not absurd or erroneous. Therefore, the exercise of Jurisdiction u/s.263 of the Act by ld.Pr.CIT fails. In the case of Malabar Industrial Co.Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME COURT] has held that the CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent, if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue, recourse cannot be had to s.263(1). It is not pointed out by the ld.Pr.CIT as to what prejudice has caused to the Revenue. In the absence of specific finding by the ld.Pr.CIT, we cannot confirm his order revising the assessment order. Therefore, in our considered view twin conditions as laid down in Section 263 of the Act, i.e. order being erroneous so far it is prejudicial to the interest of Revenue are not satisfied - unable to sustain the findings of ld.Pr.CIT, same are hereby quashed. Therefore, the impugned order is set aside and quashed. Thus, grounds raised in the appeal are allowed.
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