GEORGE CHERIYAN, A.M. ORDER This appeal is by assessee. appeal relates to asst. yr. 1980-81. 2 . ITO originally made assessment on 18th Nov., 1980 on entire income of firm from 1st Nov., 1978 to 20 th Oct., 1979. One of partners had died on 25th Aug., 1979 and assessee had pleaded that two separate assessments should be made which was eventually upheld in appeal and, consequently, ITO made revised assessment for period 1st Nov., 1978 to 25th Aug., 1979 in conformity with appellate decision. firm had dissolved on day partner Shri K. Sankarappa died. ITO was of view that since firm had dissolved, value of stocks which were valued at cost should be taken at market price. For this proposition, he relied on decisions in cases ofG.R. Ramachari & Co. vs. CIT(1961) 41 ITR 142 (Mad) andA.L.A. Firm vs. CIT(1976) 102 ITR 622 (Mad). To evaluate market value what ITO did was to take value of stock on hand and make addition equivalent to percentage of gross profit disclosed in trading accounts to which such closing stock pertained. On this basis, ITO computed addition as under: . Rs. closing stock of wholesale cloth is Rs. 2,91,587 Rs. and gross profit at 8.6 per cent works out to Rs. 25,100 25,100 Closing stock of handloom cloth is Rs. 32,358 and 4,165 gross profit at 12.9 per cent works out to Rs. 4,165 Closing stock of banians is Rs. 12,756 and gross profit 2,175 at 17 per cent works out to Rs. 2,175 . 31,440 Thereafter ITO gave relief of Rs. 6,000 which it was stated was towards overhead expenditure and brought to tax balance of Rs. 25,440. 3 . assessee appealed and it was contended that there was no justification to value closing stock at market rate. assessee also emphasised that succeeding partners took over stock only at cost price. Since, therefore, stock was taken over at lower price, it was contended that valuation was not proper. AAC did not agree. In particular he also referred to decision of Tribunal in case ofV.C. Venkata Subbaiah Shetty & Sons (IT Appeal No. 1068 (Hyd) of 1981, dt. 22nd Sept., 1982) which, according to him, supported stand of ITO. AAC confirmed order of ITO and dismissed appeal. 4. assessee is in appeal before us and ld. Counsel reiterated that any change in valuation was not permissible because stock was taken over by successor firm at same value. ld. Counsel submitted that even if revaluation was permissible, market value alone had to be taken for stock. He submitted that assessee-firm had been in existence for several years. At no stage dead stock had been written off. Business done was in cut-pieces. He stated that where cut-pieces remained unsold for any length of time, value would even come below cost of stock. Therefore, he stated that adopting uniform rate of gross profit in valuation of closing stock with reference to cost would be most unrealistic. He further submitted that for determining market value, price of each item was not to be taken but what entire stock would fetch if put for sale then and there in which case only others dealing on wholesale basis would have made purchases. Therefore, market rate, he submitted, would not be individual selling prices. For all these reasons he stated that on facts also no addition was warranted. 5. ld. departmental representative submitted that ITO had already given deduction of Rs. 6,000 though it was stated deduction was with reference to overheads. He, therefore, stated that in any view of matter no further deduction was warranted. 6 . We have considered rival submissions. When firm is dissolved even if stock was earlier valued at cost price, ratio of decisions referred to go to show that market value of stock would have to be taken. What ITO did was to apply rate of gross profit of year to entire closing stock. points emphasised by ld. Counsel, viz., this does not make allowance for dead stock, etc., in business particularly because value of closing stock was in excess of Rs. 3 lakhs whereas turnover was in region of about Rs. 7 lakhs. There is bound to be some amount of dead stock in business of this type. Straightway adopting rate of gross profit disclosed in relevant trading account in respect of value of closing stock disclosed would not be indicative of trade and also trade being cut-piece business, there is also no facts available of nature of stock. But still some appreciable discount has to be made for factors emphasised by ld. Counsel. With reference to aggregate figure of addition of Rs. 31,440, we consider that deduction of about 50 per cent would be realistic appraisal of market value of stock giving due consideration for factors urged and fact that value taken originally was only cost price. In round figures deduction to be given would be Rs. 15,000. Since ITO has already given Rs. 6,000, we would allow further deduction of Rs. 9,000. 7. result is appeal is allowed in part. *** K.P. YERISWAMY & SONS v. INCOME TAX OFFICER