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Issues:
Claim for revision of value of opening stock in assessment year 1982-83. Whether the value of opening stock can be revised based on revaluation of closing stock in a continuing business. Impact of ownership change on valuation of opening stock. Applicability of consistent valuation principle in business continuation. Effect of revision in assessment of firm on inter se adjustment of accounts among partners and company shareholders. Analysis: The case involves appeals related to the claim by the assessee for the revision of the value of the opening stock in the assessment year 1982-83. The firm, which included the assessee as a partner, was dissolved, and the business was taken over by the company, with the other partners granted shares in the company based on the book value of assets and liabilities. The controversy arose when the Income Tax Department revised the value of the closing stock in the firm's assessment for the previous year, leading to the assessee seeking a similar revision for the opening stock in its assessment. However, the claim was rejected by the Income Tax Officer and on appeal, which led to further appeal before the Tribunal. In the appeal, the assessee contended that in a continuing business, the value of the opening stock should not differ from the closing stock of the preceding year, which was revalued by the Income Tax Department. On the contrary, the revenue argued that in cases of ownership change where the assessee did not pay more than the book value, the opening stock value should be based on the actual payment made, not the market value. The Tribunal considered the submissions and observed that the assessee, as the successor to the firm's business, could not seek the revision based on the revaluation of the closing stock by the Income Tax Department. The Tribunal referred to the decision of the Madras High Court and the Supreme Court, emphasizing the principle that valuation must be on a real basis, not a notional one. The Tribunal highlighted that the revision in the assessment of the firm did not affect the inter se adjustment of accounts among the partners and that the privilege of valuing opening and closing stocks consistently applies only to continuing businesses, not to businesses coming to an end. The Supreme Court's observations were cited to support the position that revaluation of closing stock could not be justified in the case of a business closure. The Tribunal further noted that any adjustment made in the firm's assessment resulted in taxing notional profit, while the real profit accrued to the company, especially considering that the shareholders of the company were different from the partners of the firm. Ultimately, the Tribunal dismissed the appeals, confirming the orders of the authorities below, and rejected the claim for revaluing the opening stock based on the principles discussed and the specific circumstances of the case.
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