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2010 (5) TMI 858 - AT - Income TaxAddition on Work in progress - defective method of accounting - business of Dyeing and printing of cloth - job work basis - During assessment proceedings, AO noticed that assessee has not shown work-in-progress in the closing stock as on 31-03-2003. AO held that assessee had claimed all the expenses made during the year under consideration on un-dispatched gray cloth laying at different stages of processing, which should have been shown as work-in-progress as on 31-03- 2003. AO accordingly calculated work-in-progress. The Ld. CIT(A) deleted the addition on the ground that assessee is engaged in processing of material for outside parties and does not have stock of its own. Further, assessee is following the same method of accounting year-after-year. There is no justification in disturbing this method. HELD THAT:- we are of the view that issue is now covered in favour of the assessee by the decision of Tribunal in the case of Pratik Processors Pvt. Ltd. wherein Tribunal has held that there cannot be any work in- progress in a case where business of Dyeing and printing of cloth is done on job work basis. He referred to para from that order as under:- ''At the time of hearing both the Representatives agreed the similar issue arose in an appeal by the revenue in the case of Vipul Industries Pvt. Ltd. V/s ACIT[1996 (1) TMI 144 - ITAT AHMEDABAD-C] held that the assessee which is engaged in the business of dyeing and printing of cloth on job work basis and where the assessee had not shown any work-in-progress at the year end, the same was estimated to be 50% of the job receipt of the likely stock remaining in process. However was deleted by the learned CIT(A).deletion was confirmed by the Tribunal.'' Disallowance of 25% on purchase price - purchases from Min Chemicals - HELD THAT:- In our considered view there is no case for interference in the order of Ld. CIT(Appeals). In the case of first two purchases Ld. CIT(A) has given finding that goods have actually come but from other parties but bills are procured from first two parties. This finding is not controverted. We also hold that assessee has obtained goods from other parties but to what extent is not known. The quantity and quality of the goods purchased from other parties and, what price was paid is also not known. Therefore, there is no co-relation of quality and quantity of goods brought by the assessee, for which payment was made. In view of this we confirm the order of Ld. CIT(A) in disallowing 25% of purchase price. In respect of purchases from Min Chemicals it was not even established that any goods had actually come in respect of which the assessee had procured bills from this party. In view of this disallowance of purchase from this party is also confirmed. As a result, we confirm the order of Ld. CIT(A) and dismiss appeal filed by Revenue and that of CO filed by assessee.
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