TaxTMI 
TaxTMI 
2011 (5) TMI 1000
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.... 2. Thus the only issue involved in the appeal is that the ld. CIT(A) has confirmed the addition of Rs. 2,67,740/- made by AO in the closing stock on account of work in progress. 3. The facts relating to the issue are that the assessee is a private limited company engaged in the business of processing of art silk cloth on job work basis. During the course of assessment proceedings the AO found that assessee company has not shown any work in progress as on 31.3.2006 i.e. at the end of the accounting period. It was explained to the AO that basic raw material i.e. grey cloth received for processing rests with the parties who give the same for processing. The AO, however, did not agree and calculated work in progress at Rs. 2,67,740/- as und....
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....e AO to consider whether or not the books disclose the true state of accounts and the correct income can be deducted therefrom. It is incorrect to say that the Officer is bound to accept the system of accounting regularly employed by the assessee the correctness of which had not been questioned in the past. There is no estoppel in these matters and the officer is not bound by the method followed in the earlier years." 5. Before us, only written submissions are filed by the assessee and the ld. DR had supported the orders of authorities below. In the written submissions the assessee made following points:- (1) The assessee is engaged in the business of dyeing and printing of art silk cloth on job work basis, therefore, the raw ma....
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.... under :- "2. The facts of the case are that the assessee is engaged in business of Dyeing & Printing of Art Silk Cloth. Return of income declaring total Income at Rs. nil was filed. During the course of assessment proceedings, Assessing Officer noticed that assessee has not shown work-in-progress in the closing stock as on 31-03-2003. When asked, it was explained that it is consistently following a accounting method in which goods dispatched after considering job charges are accounted for. However, Assessing Officer was of the view that assessee had claimed all the expenses made during the year under consideration on un-dispatched gray cloth laying at different stages of processing, which should have been shown as work-in-progress....
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....f estimated work in progress, it is seen that the appellant in the instant case is a job-worker and process gray 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 the cust....
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.... rendering of services for processing of gray cloth for its customers, the principles laid down in AS-2 for the "valuation of Inventories" were not applicable in its case in accordance with item 1(b) thereof. However, the materials or supplies to be consumed in the production process or in the rendering of services would evidently fall in category (c) of the aforesaid "definitions" provided in item 3 of the Accounting principles laid down in AS-2, and the same would be required to be accounted for by it in the form of stock, which has been done in the instant case. The method of accounting followed by the appellant is thus seen to be in accordance with the Accounting Principles laid down by the ICAI. 13. It is further seen that the....