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2017 (1) TMI 1253 - ITAT HYDERABADRevision u/s 263 - whether the closing stock valued are proper and if so, how it is prejudicial to the interests of revenue - Held that:- Looking at the business model of the assessee, he procures the leaves and process the leaves. Based on the result of processing, it sells the same to the vendors. The valuation of stock depends on the results of the processing. The assessee will adjust the standard loss on the marketable products and the balance of the cost will be appropriated to the balance of the inferior quality of the leaves, which are also marketable, but, not at the same at par with the superior quality. This is nothing but the actual result of the processing. What is left after selling to vendors are valued at market price or cost, whichever is less. The closing stock submitted before the AO on the same principle. The stock left over cannot be equated with the purchase price. We observe that the AO has recorded the business of the assessee as “engaged in business of procurement, processing and selling of tobacco products”, which is matching with the 3CD report submitted by the assessee. Whereas the CIT recorded as “engaged in the business of purchase and selling of tobacco and tobacco products”. There is difference of perception in the mind of CIT. CIT has found out that the order passed by the AO is erroneous, but, could not be quantified how it is prejudicial to the interests of revenue. The assessee has bought the tobacco leaves and sold the leaves as per the processing result. That means the cost of the purchase was apportioned and adjusted in the selling price. The left over of the stock was valued as per market price. This will be the opening value for the following year. There is no loss to the revenue as presumed by the ld. CIT. In the absence of any finding as loss to the revenue, we find it appropriate to adjudicate that the order of the AO is not prejudicial to the revenue and accordingly the order of CIT is quashed. - Decided in favour of assessee.
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