9911796707
TMI Blog2023 (9) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is an individual and is the proprietor of M/s Jeevat Construction and this concern was undertaking construction contract works from Indian Railways. The assessee had executed certain projects and the amount spent on those projects was shown as Closing work in progress (closing stock) of Rs. 49,44,536/- in the preceding year, which was brought forward as opening stock during the year under consideration. It is pertinent to note that the assessee did not execute any project during the year under consideration. With regard to the above said work executed, it was submitted that it was executed in part only in the preceding years. Since the Railways did not approve the same, it was not continued and the matter was referred to Arbitration. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) also held that the assessee has failed to produce any evidence to justify the value of closing stock adopted by him. Accordingly, the Ld CIT(A) upheld the addition made by the AO. 5. We heard the parties and perused the record. There is no dispute with regard to the fact that the assessee was undertaking construction contracts obtained from Railways. It is the submission of the assessee that he had executed a contract partially in the earlier years and due to dispute with the Railways, the same was not completed and the matter has been referred to arbitration. We notice from the submissions made before ld CIT(A) that the assessee has received arbitration award of Rs. 24,88,231/- and Rs. 6,16,571/- during the years relevant to the AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, there was no option for the assessee to pursue the matter with Railways only and accordingly, the dispute has been referred to Arbitration. From the table shown above, it could be seen that the assessee is yet to recover Rs. 7,95,000/- even after expiry of six years from the end of the year under consideration. 8. Valuing the closing stock at cost or market value is a recognized accounting principle. There is one more principle, i.e., the Principle of Prudence, as per which, all known losses should be provided for, even if it is not actually incurred. In our view, the wisdom of the assessee in reducing the value of closing stock (work in progress) could be covered under the Principle of Prudence also and the said action of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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