Tribunal deletes work-in-progress addition for assessment year 2004-05

The Tribunal allowed the appeal filed by the assessee, deleting the addition of closing work-in-progress for the assessment year 2004-05. The Tribunal considered the assessee's regular accounting system and a previous decision in their favor, concluding that the addition was not justified as the assessee was not engaged in manufacturing activities. The Revenue did not counter the assessee's arguments, leading to the deletion of the addition.

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Issues involved: Addition of closing work-in-progress for the assessment year 2004-05.

Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax(Appeals) confirming the addition of closing work-in-progress for the assessment year 2004-05. The assessee, engaged in dyeing and printing of fabrics on a job work basis, contested the addition made by the Assessing Officer. The ld. CIT(A) upheld the addition, prompting the assessee to refer to a previous decision by ITAT in their own case for the assessment year 2003-04, where it was held that since the assessee is not engaged in manufacturing activities of its own, the addition on account of work-in-progress cannot be made. The Revenue did not counter the submissions made by the assessee's counsel. After considering the arguments and the previous decision of ITAT, the Tribunal concluded that the addition of closing work-in-progress should be deleted. It was noted that the assessee follows a regular system of accounting based on accepted principles, and therefore, the addition was not justified. The Tribunal allowed the appeal filed by the assessee, deleting the addition of closing work-in-progress.

The Order was pronounced in the Court on 28.05.2010.

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