Per Shri M.C. Agarwal, Judicial Member - This is an assessee’s appeal against an order dated 26th December, 1986 passed by the Commissioner of Income-tax, Meerut, under section 263 of the Income-tax Act, 1961 holding that the ITO wrongly allowed a deduction of Rs. 1,47,05,868 in computing the assessee’s income for assessment year 1984-85 and directing the ITO to make a fresh assessment withdrawing the said deduction.

2. We have heard the learned counsel for the assessee and the learned departmental representative and have perused the material placed before us.

3. The assessee is a manufacturer of computers and for that purpose it imports certain components on which it pays customs duty. The assessee has also to pay excise duty on the computers manufactured by it. In the year under consideration the accounting year for which ended on the 30th June, 1983, the assessee paid Rs. 3,38,96,607 towards custom duty and Rs. 58,90,731 towards excise duty. At the end of the accounting year the assessee had a closing stock valued at Rs. 4,36,41,459. In this valuation was included customs duty amounting to Rs. 1,24,31,024 in respect of imported components included in the closing stock and exc