2011 (5) TMI 997

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....ing and printing of art silk cloth. The AO noticed that the assessee has not shown any closing stock of work-in-progress. The AO proposed addition of workin- progress for the following reasons:- (i) The dyeing and printing process of five days and the fabric under process bears various expenses in the form of colour, chemicals, wages, power and fuel, cost of which has been debited to Profit & Loss account but the corresponding income has not been shown. (ii) As per the accounting principle, the closing stock has to be correctly shown including that of work-in-progress. (iii) The Hon'ble Supreme Court also stated in the case of British Paints India Ltd. (188 ITR 44) that unless the closing stock is correctly disclo....

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....se to the above, the assessee replied that addition should not be made because the assessee company is a service industry and cost of input for colour and chemicals, etc. were very nominal. There is no tax effect as this will become opening stock in the next year. The assessee has been following this method continuously and the department had earlier accepted this method. The AO did not accept this explanation and made addition of Rs. 4,11,335/- on account of suppressed value of work-in-progress. 4. On appeal, in the impugned order, the ld. CIT(A) upheld the action of the AO following the decision of Hon'ble Supreme Court in the case of British Paints India Ltd. (supra). Aggrieved with the order of the ld. CIT(A), the assessee is in appe....