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TMI Blog2016 (5) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... or Asst. Year 2009-10, by Add. CIT, Range-1, Surat on 29.9.2011. Assessee has raised following grounds in this appeal :- I. That on facts and circumstances of the case, the Id. CIT(A) has grossly erred in sustaining the addition of ₹ 15,56,197/-, as made by the AO alleging undervaluation in closing stock of work-in-progress in the activity of dyeing and printing job work of grey cloth, without appreciating that the said addition has been made by the AO purely on estimated basis as against the party-wise and stage-wise detail of work-in-progress maintained by the appellant, which even stands physically verified by the management at the year end. Hence, the impugned addition of ₹ 15,56,197/- needs to be deleted as being absolutely erroneous. 2. The appellant craves leave to add, amend, alter, substitute, modify in any or all the above grounds of appeal, if necessary, on the basis of submissions to be made at the time of personal hearing. 2. Briefly stated facts as culled out from the assessment records that assessee is a private limited company engaged in the business of dyeing and printing of cloth on job work basis. It filed its e-return of income on 23.09.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. 4. Aggrieved, assessee is now in appeal before the Tribunal. 5. Ld. AR submitted that assessee is maintaining regular books of account and the same have not been rejected by the Assessing Officer u/s 145(3) of the Act. Ld. AR further submitted that GP rate in the year under appeal has been shown at 20.28% which is higher than 19.13% shown in the immediately preceding year. Ld. AR also referred to the complete month-wise detail of work in progress and submitted that they have been duly maintained and no mistake has been pointed out by the Assessing Officer. Ld. AR also submitted that assessee company is consistently following accounting principles relating to valuation of work in progress, as per Accounting Standard -1 of disclosure of accounting policy and physical inventory was also taken and closing work in progress was calculated as per software developed for determining the same and so working in progress cannot be brushed aside by way of estimating work in progress. Ld. AR also referred and relied on the decision of co-ordinate bench in the case of Krishna Art Silk Cloth P. Ltd. vs. DCIT, Cir-1, Surat in ITA No.1264/Ahd/2010 for Asst. Year 2007-08 dated 16.7.2010 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 60% i.e. ₹ 1.39 per meter for arriving at value of work-in-process. Therefore, the closing stock of work-in-process in this case is worked out at ₹ 46.13.851/- (3329432 meters x ₹ 1.39) Since the work-in-progress shown by the assessee is on lower side and profit to that extent is suppressed, it is necessary to add the correct value of workin- progress to arrive at the correct profit of the business of the assessee The assessee has shown work-in-progress of ₹ 30,57.654/- and therefore the difference amount of ₹ 15.56.197/- [Rs. 46,13.851 - ₹ 30,57,654] is added to the total income of the assessee Penalty proceedings u/s 271(1)(c ) of the I.T. Act are being initiated for furnishing inaccurate particulars and concealment of income. On the other hand, assessee apart from submitting quantitative and financial data during the course of assessment proceedings has also furnished synopsis showing details of job work done during the financial year 2008-09 as below :- Image No. 1 8. Looking to the above observation of the Assessing Officer and the synopsis of the data of the assessee we find that ld. Assessing Officer has resorted to a completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which is engaged in the business of dyeing and printing of cloth on job work basis and where the assesses 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 ld. CIT(A) by observing as under: 12 I have carefully considered the fact of the case and submissions made by the Id 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 grey 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 work in progress in the books of account of the appellant in respect of the cloth belonging to its customers did not arise as such cloth was required to be shown in the closing stock of the concerned customers. On the basis of the completion of work on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has also consistently followed, the accounting policy of recognizing revenue of completed contract method. While the principles of res-judicata are not applicable to the Income tax proceedings, it has been held by the courts in several judgments: that, where the appellant has been following regular system of accounting since the last so many years an such method was based on accepted principles of accounting there was no justification for rejecting the said method for valuation of stock. This would especially hold in a case where the proposed change in the method of valuation is found to have no impact, as in the instant case, if the changed method adopted by the Assessing Officer were applied for valuation of the opening as well as the closing stock. 14 For reasons discussed above m details, m my opinion there was no basis or justification in making the any estimated addition on account of work-in progress is this case. The addition of ₹ 12.56.970/- made by the AO in respect of estimated work in progress is therefore deleted. This ground of appeal is allowed Thus deletion was confirmed by the Tribunal. Therefore in, the present case also following the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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