TMI Blog2011 (5) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed the addition of ₹ 2,67,740/- made by AO in the closing stock on account of work in progress. 3. The facts relating to the issue are that the assessee is a private limited company engaged in the business of processing of art silk cloth on job work basis. During the course of assessment proceedings the AO found that assessee company has not shown any work in progress as on 31.3.2006 i.e. at the end of the accounting period. It was explained to the AO that basic raw material i.e. grey cloth received for processing rests with the parties who give the same for processing. The AO, however, did not agree and calculated work in progress at ₹ 2,67,740/- as under :- Total meters processed during the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the canceling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realized on the year s trading . It is not only the right, but the duty of the AO to consider whether or not the books disclose the true state of accounts and the correct income can be deducted therefrom. It is incorrect to say that the Officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and the officer is not bound by the method followed in the earlier years. 5. Before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is now directly covered by the decision of the Tribunal in the cases of Pratik Processors (P) Ltd. vs. DCIT (supra) and ITO vs. M/s Rishabh Dyeing Printing Mills (P) Ltd. (supra). The Tribunal in the case of ITO vs. M/s Rishabh Dyeing Printing Mills (P) Ltd. has observed as under :- 2. The facts of the case are that the assessee is engaged in business of Dyeing Printing of Art Silk Cloth. Return of income declaring total Income at Rs. nil was filed. During the course of assessment proceedings, Assessing Officer noticed that assessee has not shown work-in-progress in the closing stock as on 31-03-2003. When asked, it was explained that it is consistently following a accounting method in which goods dispatched after considering j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the likely stock remaining in process. However was deleted by the learned CIT(Appeals) by observing as under:- 12. I have carefully considered the facts of the case and the submissions made by the ld. AR. As regards the addition made in respect of estimated work in progress, it is seen that the appellant in the instant case is a job-worker and process gray cloth for its customers according to their requirement. The appellant not engaged in any manufacturing activities of its own. The cloth processed by the appellant thus belong to its customers is processed by the appellant and, after processing the same in accordance with the customers requirement, it is returned. In the above facts of the case, the question of showing any w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplies to be consumed in the production for sale or in the rendering of services. Since the appellant was not engaged in the business of sale of the processed cloth or in the production for sale of the processed cloth but was engaged in the business of rendering of services for processing of gray cloth for its customers, the principles laid down in AS-2 for the valuation of Inventories were not applicable in its case in accordance with item 1(b) thereof. However, the materials or supplies to be consumed in the production process or in the rendering of services would evidently fall in category (c) of the aforesaid definitions provided in item 3 of the Accounting principles laid down in AS-2, and the same would be required to be accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed. Thus deletion was confirmed by the Tribunal. Therefore, in the present case also following the decision of the Tribunal confirm the order of the CIT(A), the addition on account of estimated value of work-in-progress is required to be deleted. 4. Ld.SR-DR on the other hand submitted that if assessee has spent money which has been debited in the profit loss a/c. and to the extent the assessee does not get receipt from the principle, work-in-progress should be estimated. 5. After considering the rival submissions of the parties, 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. (supra) pronounced on 15-01-2010. Respectfully following ..... X X X X Extracts X X X X X X X X Extracts X X X X
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