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TMI Blog2009 (7) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... or closing stock of work in progress made by the Assessing Officer. 3. Assessing Officer erred in making valuation of work in progress on estimated basis on assumption presumption, same may be deleted. 4. Without prejudice to the above CIT(A) should have directed the Assessing Officer to work out value of opening stock of work in progress and should have allowed the same. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before of during the course of hearing of the appeal. 2. Since the facts and issues involved in the above grounds of appeal are identical, they are being decided by this common order for the sake of convenience. 3. The brief facts of the case are that the Assessing Officer found that the assessee is engaged in the business of dyeing and printing of cloths on job work basis. There was a survey operation U/S.133A dated 16.02.2004. As a result of survey, the assessee surrendered income of ₹ 55 lacs. The Assessing Officer found that the assessee had not shown any work-in-progress in the closing stock. On being asked why the assessee stated that there was no practice to show work-in-progress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be lying on the machine. The Assessing Officer computed the average cost of processing charges at ₹ 7.66 per meter. He adopted 50% of this amount as cost of work-inprogress. He, therefore, made an addition of ₹ 5,38,976/- on this issue. 5. Similarly, in Assessment Year 2005-06, the Assessing Officer adopted 312 working days in a year and computed the average processing of cloth per day at 31,947 meters by taking average of 312 working days for whole year. The Assessing Officer, therefore, stated that the fabric for five days would be 159735 meters, which would be lying on the machine. The Assessing Officer computed the average cost of processing charges at ₹ 7.88 per meter. He adopted 50% of this amount as cost of work-in-progress. He, therefore, made an addition of ₹ 6,29,355/- on this issue. 6. We find from the order of the ld. CIT(Appeals) that in appeal before the ld. CIT(Appeals), the assessee submitted as under:- 2.2 During the appellate proceedings, the appellant has stated that no addition should be made because the assessee has been following this method from earlier years. The assessee stated that it has inventorised all the items ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Brief facts of the case are as follows : On facts, the assessee is a company engaged in the manufacturing of electronic induction heating equipment. The Tribunal found that the assessee had admittedly been manufacturing goods which were tailor-made for the specific requirements of its customers and unless the whole of the machinery was complete, the work-inprogress by itself had no other utility. The assessee had shown value of work-in-progress at ₹ 11,37,495. The work-in-progress was valued by the assessee at cost of raw material used. The overhead expenditure attributable to the machinery components under fabrication were not proportionately included while the alleged expenses had been charged to the P L a/c. Consequently the AO, while framing the assessment, came to the conclusion that the real value of work-inprogress was not shown and thereby a sum of ₹ 9,78,000 was added. 4. In appeal, the learned CIT(A) vide his order dt. 16th March, 1990 confirmed the order of the AO in principle but reduced the addition with a finding that overhead expenses were only to the extent of around 25.2 per cent of the raw material consumed and, thus, sustained an addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia Asari Sons (supra). Even Cochin Bench of the Tribunal has also followed the same in the case of Sree Padmanabha Jewellery Mart (supra). The decision relied by the learned Departmental Representative does not apply to the present case as in the case of British Paints India (supra). The articles prepared were standard goods while in the present case the goods manufactured were tailor-made and could not find a market except the customer who has placed the order. Besides that, disturbing the system of valuation in this case will create further complications in the maintenance of accounts. Admittedly the assessee has been following this system for the last 7 years and no objection raised by the Revenue and he has also been following the same in the subsequent years. The assesseecompany being a progressive one and admittedly giving out profits on progressive scale from year to year, cannot escape from the clutches of the Revenue and the said value has to be reflected in his accounts in the subsequent years and thereby paid the tax as well. In view of the special facts and circumstances we feel that it will be an exercise in futility to change the whole system of valuation of the clo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of raw-material does not include the value of chemicals consumed in respect of the fabric lying on the machine. The Assessing Officer finding the above estimated the value of Chemicals and Colours used by the assessee in respect of fabric lying on the machine as at the end of the year and added the same to the income of the assessee. Consequently, ₹ 5,38,976/- was added to the income of the assessee in Assessment Year 2004-05 and ₹ 6,29,355/- was added to the income of the assessee in Assessment Year 2005-06. On appeal, the ld. CIT(Appeals) confirmed the addition of ₹ 5,38,976/- for Assessment Year 2004-05 and also confirmed addition of ₹ 6,29,355/- Assessment Year 2005- 06, but directed the Assessing Officer to allow deduction of ₹ 5,38,976/- as opening work-in-progress. The main contention raised by the assessee before us is that the closing stock is to be valued at cost or market value whichever is less. He explained that the colours and chemicals in respect of fabric on machine are already consumed and the same is not in stock with him. The fabric lying on machine belongs to other parties and the assessee is not the owner of the same. Further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that the stock can be valued at the cost or at market rate. Admittedly the assessee had been manufacturing the goods, which were tailor-made for specific requirements of its customers and unless the whole of the machinery is complete, work-in-progress by itself has no other utility. Assessee has valued the work-in-progress on the basis of raw material consumed at cost price. This method has been adopted since last seven years and also in subsequent years. No objection has been raised by the Revenue in the previous years to such valuation. It was found that assessee-company was a progressive company and shown out profits on progressive scale from year to year and cannot escape from the clutches of the Revenue. The closing stock of this year is the opening stock of subsequent year and, hence, a consistent method adopted for valuation by the assessee should not be disturbed. Therefore, the same method adopted in the year under consideration for valuing the stock, as has been adopted in the previous years, cannot be said to be unjustified. 11. In view of the above decision, in our considered opinion on the facts and circumstances mentioned above, we do not find any error in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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