2009 (7) TMI 1214

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....essment Year 2004-05) and Rs. 6,29,355/- (for Assessment Year 2005-06) for 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 Rs. 55 lacs. The Assessing Officer found that the assessee had not shown any work-in-progress in the closing stock. On be....

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....The Assessing Officer, therefore, stated that the fabric for five days would be 140725 meters, which would be lying on the machine. The Assessing Officer computed the average cost of processing charges at Rs. 7.66 per meter. He adopted 50% of this amount as cost of work-inprogress. He, therefore, made an addition of Rs. 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 Rs. 7.88 per meter. He adopted 50% of this amount as cost of work-in-progress. He, therefore, made an addition of Rs. 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 followin....

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.... (1991) 188 ITR 44 (SC) did not apply to the case ?" 2. The present reference relates to the asst. yr. 1986-87. 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 Rs. 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 Rs. 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 overhe....

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....ly deduced thereform. The said principle has also been followed by the Hon 'ble Madras High Court in the case of CIT vs. K. Sankarapandia 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....

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....b-work, fabric is supplied by the parties. The undisputed facts are that the assessee while following its consistent method of valuation of closing stock 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, Rs. 5,38,976/- was added to the income of the assessee in Assessment Year 2004-05 and Rs. 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 Rs. 5,38,976/- for Assessment Year 2004-05 and also confirmed addition of Rs. 6,29,355/- Assessment Year 2005- 06, but directed the Assessing Officer to allow deduction of Rs. 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....