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Valuation of unsold snake skins for income tax assessment. Analysis: The assessee, engaged in the business of buying and selling snake skins, faced an addition of &8377; 96,028 to his income due to the estimated value of unsaleable stock of snake skins. The Appellate Assistant Commissioner upheld this addition, emphasizing that the time factor determines the value of unsold stocks and that the assessee's explanation for purchasing these skins was unsatisfactory. Upon further appeal to the Tribunal, it was argued that the mercantile practice of valuing closing stock at market rate or cost, whichever is lower, had been overlooked. The Tribunal acknowledged the fall in turnover and the lack of demand for certain varieties of snake skins, ultimately valuing the unsold stock at a reduced amount of &8377; 43,708. The High Court scrutinized the Tribunal's reasoning and found it difficult to accept the justification for the addition. It highlighted that the assessee could reduce the value of the stock to nil when it became clear that the skins were unsellable dead stock. The Court also emphasized the accepted principle of valuing stock at cost or market value, whichever is lower, citing precedents such as Commissioner of Income-tax vs Chari and Ram and Ramswarup Bengalimal vs Commissioner of Income-tax. The Court rejected the Tribunal's assertion that the assessee's method could lead to concealed profits, noting that any future sale of the valued stock would result in taxable profits. Additionally, the Court emphasized that the assessee's right to value closing stock at market price, which in this case was nil, was well-established. Consequently, the Court answered the question in the negative, in favor of the assessee, allowing him to value the unsold snake skins at nil and awarding costs to the assessee. The judgment reaffirmed the assessee's right to value closing stock at market price or cost, whichever is lower, and criticized the Tribunal's unwarranted doubts about the assessee's integrity.
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