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2018 (4) TMI 447 - AT - Income TaxAddition on account of prior period expenses in respect of closing stock of raw materials and work in progress - Held that:- The undisputed facts are that the over valuation of stock and WIP was revealed on the basis of physical verification carried out by the firm of chartered accountants. The amount of over valuation of stock & WIP was duly debited in the profit and loss account of the assessee. As per the AO the over valuation of stocks & WIP represents the prior period items, therefore the same have been debited in the profit and loss account of the respective years to which it pertains. The fact of over valuation of closing stock was crystallized in the year under consideration therefore the same has to be written off in the current year only. In holding so, we find support and guidance from the order of ITAT Cuttack Bench in the case of National Aluminium Co Ltd (2005 (11) TMI 483 - ITAT CUTTACK). We are of the view that the loss on account of over valuation of closing stock/WIP is liable for deduction under section 37(1) of the Act. There is neutral effect of writing off the closing stock & WIP on the profitability of the assessee as it has consequential effect. Indeed the profit of the current year shall come down by the amount written off during the year on account of over valuation of closing stock - Decided against revenue
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