TMI Blog2017 (1) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No. 127/Hyd/2013 - - - Dated:- 28-10-2016 - Smt P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member Assessee by : Shri S. Rama Rao Revenue by : Shri P. Chandra Sekhar ORDER Per S. Rifaur Rahman, A. M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertain the appeals beyond the period of limitation as a matter of course, but equally the Tribunal would not defeat the ends of justice merely because the parties failed to resort to proper procedure in filing the appeals. In my judgment, the Tribunal ought to have condoned the delay in filing the appeals in the facts and circumstances of the case. Once it is found that the appeals against the order of the revisional authority should have been entertained and it is further found that the order of the revisional authority was wholly without jurisdiction, then the sequitur is that the appeals filed against the revisional authority must be allowed. Shri Jetly did not seriously dispute that if the appeals were maintainable and were entertained, the order of the revisional authority could not be sustained. In these circumstances, in my judgment, the petitioner is entitled to succeed. Shri Jetly submitted that the petitioner had an alternate remedy of seeking reference against the order of the Tribunal and as the petitioner has failed to adopt that remedy, the relief should not be granted. Normally, I would not have permitted the petitioner to approach the writ Court for relief, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue relating to the valuation of closing stock and completed the assessment without application of mind on the valuation of closing stock . The closing stock requires to be valued at cost price or market price whichever is lower. In 3CD report prepared under section 44AB, filed along with the return of income, it is stated that the assessee is a trading concern and there was no shortage or loss of tobacco in processing. The quantity of tobacco traded and reflected in the 3CD report (against column 28(a)), is reproduced as under: (i) Opening stock 5,84,742 kgs (ii) Purchases during the previous years 10,83,480 kgs (iii) Sales during the previous year 7,91,451 kgs (iv) Closing stock 8,76,771 kgs 6.2 CIT observed that the Assessing Officer ought to have called for the details of closing stock and he should have verified the value of closing stock. Thus, non-enquiry into the valuation of closing stock by the Assessing Officer, the assessment order has become erroneous and prejudicial to the interests of revenue. On going through the assessment record of the assessee, CIT noticed that closing stock was under-valued and a notice dated 09/11/2011 was issued u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on the average cost of closing stock. The value of closing stock is based on the actual qualities and quantities of tobacco leaf, bits, stems, elimination etc. and there was very little market price. The assessee has dealt with various grades of tobacco such as VFC, VAC, NAATU, BURLY, HDBR, LSB etc. The market price fluctuates. (ii) For the first time, the assessee has furnished the details of closing stock which are reproduced as under: Particulars Qty (kgs) Price Amount VFC/Leaf 158,935 40.00 6,357,400 VFC/Stripes 61,274 46.00 2,818,604 VFC/RTL 163,884 61.00 9,996,924 VAC/Leaf 57,458 30.00 1,723,740 VAC/Stripes 9,908 35.00 346,780 VAC/RTL 4,485 45.00 201,825 BITS 60,058 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a matter of fact, the assessee did not disclose the fact of 'loss in processing of Tobacco' before the Assessing Officer and the assessment record does not contain any details of loss on processing of tobacco. The details of purchases of tobacco were furnished during the course of assessment proceedings. In the details furnished before the Assessing Officer, the assessee did not inform that there were by-products such as scrap, elimination, SLS, LS2 etc. 6. The details available on the assessment record indicate that the assessee had purchased tobacco of the following varieties only: (a) VFC/Leaf, (b) VFC / STRIPES (c) VAC/STRIPES (d) VFC/RTL (e) BITS' The quantity of tobacco and varieties of tobacco purchased by the assessee are on assessment record and the same are reflected in the following table for convenience: Sl.No Month Variety of tobacco Quantity Price 1 April,2006 VFC/Leaf 798 30,087 2 May,2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out any processing of tobacco as claimed by the Learned Authorised Representative because the contention of the learned Authorised representative is contrary to the facts reported in 3CD report u/s.44AB. The Assessing Officer should apply the principle of 'cost price or market price' whichever is less for the valuation of closing stock and he should also examine the claim of the assessee whether there was any loss of tobacco to the tune of 62,117 kgs. Thus, the assessment order passed u/s.143(3) is set aside and the Assessing Officer has to value the closing stock of the assessee after thorough examination of the facts and pass the assessment order denovo in accordance with the provisions of law. 7. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The order of the learned Commissioner of Income-Tax passed u/s 263 of the LT. Act is erroneous both on facts and in law. 2. The learned Commissioner of Income-Tax erred in holding that there is any error which is prejudicial to the interest of the Revenue in the assessment order passed u/s 143(3) dated 30.6.2009 passed by the lncome-Tax office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparately for manufacturing company and trading company. He pointed out that the assessee has shown closing stock only as trading company wherein it has not given the valuation as per the manufacturing company. He submitted that it clearly shows that the assessee has not submitted the information properly. He further submitted that loss of tobacco was not brought on record by the assessee before the AO, but, only on enquiry u/s 263, assessee has submitted all the information before the CIT. The basis of loss was also not properly explained by the assessee. Ld. DR relied on the following case law: 1. CIT Vs. Infosys Technologies Ltd., [2012 341 ITR 0293) 10. In rebuttal, the AR of the assessee submitted that assessee is not in the manufacturing business, it does only buying and processing and selling of tobacco leaves, that is the reason assessee has given information in form 3CD relating to trading business only. He further submitted that stock registers are part of book keeping, all the stock registers were submitted before the AO and all these were already examined by the AO. He contended that there is no new material was found by the CIT in the revisionar ..... 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