TMI Blog2011 (5) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not shown any closing stock of work-in-progress. The AO proposed addition of workin- progress for the following reasons:- (i) The dyeing and printing process of five days and the fabric under process bears various expenses in the form of colour, chemicals, wages, power and fuel, cost of which has been debited to Profit Loss account but the corresponding income has not been shown. (ii) As per the accounting principle, the closing stock has to be correctly shown including that of work-in-progress. (iii) The Hon ble Supreme Court also stated in the case of British Paints India Ltd. (188 ITR 44) that unless the closing stock is correctly disclosed correct profit cannot be obtained. In this case, the Hon ble Supreme Court stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is a service industry and cost of input for colour and chemicals, etc. were very nominal. There is no tax effect as this will become opening stock in the next year. The assessee has been following this method continuously and the department had earlier accepted this method. The AO did not accept this explanation and made addition of ₹ 4,11,335/- on account of suppressed value of work-in-progress. 4. On appeal, in the impugned order, the ld. CIT(A) upheld the action of the AO following the decision of Hon ble Supreme Court in the case of British Paints India Ltd. ( supra ). Aggrieved with the order of the ld. CIT(A), the assessee is in appeal before the Tribunal. 5. At the time of hearing before us, on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity. When the assessee has been engaged in the business of dyeing and printing of art-silk cloth on job work basis, the raw material does not belong to the assessee. The assessee has simply to incur the expenditure on colour, chemical, wages, power and fuel. Colour and chemicals are consumables and once these are applied to the fabric under process, they lose their identity and cannot be part of the stock in process. The assessee is valuing the stock by following the same method consistently in which there is no illegality. On this basis, addition made on account of suppressed work-in progress is deleted by the Tribunal, D Bench vide order dated 3rd April, 2009 in the case of Kanhaiya Processors Pvt. Ltd. ( supra ). 7.1 The simila ..... X X X X Extracts X X X X X X X X Extracts X X X X
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