Pratik Processors Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 165/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6460 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 16-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 07/06/2011 DRAFTED ON: 08 /06/2011 ITA NO.165/AHD/2009 ASSESSMENT YEAR : 2005-06 PRATIK PROCESSORS PVT.LTD. 522, GIDC PANDESARA SURAT VS. THE DCIT CIRCLE-1 SURAT PAN/GIR NO. : AABCP 4205 A ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : NONE (WRITTEN SUBMISSION) RESPONDENT BY: SHRI B.L. YADAV, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-I, SURAT DATED 14/11/2008 AND T HE SUBSTANTIVE GROUND WHICH IS ARGUED BEFORE US IS GROUND NO.1; REPRODUCED BELOW:- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,97,841 /- IN RESPECT OF ESTIMATED WORK-IN-PROGRESS IN THE ACTIVITY OF JO B WORK OF MAN MADE FABRICS, WITHOUT APPRECIATING THE FACT THAT - THE APPELLANT COMPANY IS EXCLUSIVELY ENGAGED IN THE ACTIVITY OF JOB-WORK I.E. IT IS A SERVICE PROVIDER. - AS PER ACCOUNTING STANDARD (AS) -2 NO INVENTORY O F WIP CAN BE CONSIDERED IN THE CASE OF SERVICE PROVIDERS. ITA NO .165/AHD/2009 M/S.PRATIK PROCESORS PVT.LTD. VS. DCIT ASST.YEAR - 2005-06 - 2 - - AS PER ACCOUNTING STANDARD (AS)-9 NO REVENUE IS TO BE RECOGNIZED UNLESS THE RENDERING OF SERVICES UNDER A CONTRACT IS COMPLETED OR SUBSTANTIALLY COMPLETED, AND - METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED AND EV EN ACCEPTED BY THE DEPARTMENT CANNOT BE DEPARTED. 2. AT THE OUTSET, IT IS WORTH TO MENTION THAT ON TH E DATE OF HEARING, NO ONE HAS APPEARED FROM THE SIDE OF THE A PPELLANT-ASSESSEE, HOWEVER, WRITTEN SUBMISSIONS WERE PLACED ON RECORD WITH A REQUEST TO DECIDE THIS APPEAL ACCORDINGLY. 3. FROM THE SIDE OF THE REVENUE, LD.DR MR.B.L. YADA V, APPEARED AND PLACED RELIANCE ON THE ORDER OF THE AS SESSING OFFICER. 4. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING AS SESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATE D 24/12/2007 WERE THAT THE ASSESSEE-COMPANY IS IN THE BUSINESS OF PROCESSING OF MAN-MADE FABRICS ON JOB WORK BASIS. THE ASSESSING OFFICER HAS MADE A COMPARABLE STATEMENT ABOUT THE PROFIT DECLAR ED AND HAVE FOUND THAT ON THE TURNOVER OF RS.8,86,82,838/-. GR OSS PROFIT WAS DECLARED AT RS.1,31,68,560/- GIVING GROSS PROFIT RA TIO AT 14.85% AS AGAINST THAT IN THE IMMEDIATE PRECEDING YEAR THE GR OSS PROFIT WAS AT 14.09%. 4.1. THE REASON FOR THE ADDITION WAS THAT NO WORK- IN-PROGRESS WAS DISCLOSED BY THE ASSESSEE IN THE BALANCE SHEET. TH E EXPLANATION OF ITA NO .165/AHD/2009 M/S.PRATIK PROCESORS PVT.LTD. VS. DCIT ASST.YEAR - 2005-06 - 3 - THE ASSESSEE WAS THAT THE ASSESSEE WAS IN THE BUSIN ESS ONLY ON JOB- WORK BASIS. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED AND COMPUTED THE WORK-IN-PROGRESS AT RS.1,97,841/- AND TAXED ACCORDINGLY. THE MATTER WAS CARRIED BEFORE THE FI RST APPELLATE AUTHORITY AND THE LD.CIT(A) HAS AFFIRMED THE ORDER OF THE ASSESSING OFFICER IN THE FOLLOWING MANNER:- 2.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. AS PER THE ACCOUN TING PRINCIPLES AS WELL AS THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUP RA), CLOSING STOCK HAS TO BE SHOWN IN WORKING OUT THE CORRECT PR OFIT. HAVING SAID THAT THE CALCULATION MADE BY THE A.O. I S REASONABLE BY ADOPTING AVERAGE PRODUCTION PER DAY A ND AVERAGE COST OF PROCESSING, HENCE THE ADDITION MADE BY THE A.O. IS CONFIRMED AND THIS GROUND OF APPEAL IS DISM ISSED. 5. UNDISPUTEDLY, THE ORDER OF THE FIRST APPELLATE A UTHORITY WAS CRYPTIC, HOWEVER, IT HAS BEEN PLACED ON RECORD THAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05, AN APPEAL WAS DE CIDED BY THE RESPECTED ITAT AHMEDABAD BENCH (CAMP AT SURAT) IN I TA NO.1956/AHD/2007 (FOR A.Y. 2004-05) VIDE AN ORDER D ATED 15/01/2010, WHEREIN AN ANOTHER DECISION OF THE TRIB UNAL WAS QUOTED, NAMELY, VIPUL INDUSTRIES PVT.LTD. VS. ACIT (ITA NO.2649/AHD/2006) DATED 17/09/2009 AND THEREAFTER CONCLUDED AS UNDER:- 7. WE ALSO FIND THAT ONLY REASON FOR REJECTING TH E BOOK RESULT IS THAT WORK-IN-PROGRESS IS NOT CORRECTLY DECLARED WHILE FRAMING ASSESSMENT, THE INCOME IS COMPUTED AS DECLA RED BY ITA NO .165/AHD/2009 M/S.PRATIK PROCESORS PVT.LTD. VS. DCIT ASST.YEAR - 2005-06 - 4 - THE ASSESSEE ON THE BASIS OF BOOK AGAINST THE ESTIM ATED EXCEPT THAT THE VALUE OF CLOSING STOCK OF WORK IN PROGRESS IS ADDED, IT IS TO BE HELD THAT BOOK RESULT HAS TO BE ACCEPTED W HICH IS BETTER RESULT THAN THE DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THEREFORE, NO GROUND TO REJECT THE BOOK RESU LT. 6. SINCE IN ASSESSEES OWN CASE ON IDENTICAL FACTS AND CIRCUMSTANCES THE RESPECTED CO-ORDINATE BENCH HAS T AKEN A VIEW, THEREFORE, WE FIND NO REASON TO DIFFER WITH THE SAI D VIEW, HENCE, FOLLOWING THE SAME FOR THIS YEAR AS WELL, WE HEREBY DIRECT TO DELETE THE ADDITION. GROUND IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 10/ 06 /2011. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED / /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DE PARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT( APPEALS)-I, SURAT 5. THE DR, AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO .165/AHD/2009 M/S.PRATIK PROCESORS PVT.LTD. VS. DCIT ASST.YEAR - 2005-06 - 5 - 1. DATE OF DICTATION.. 07/06/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 08/06/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S10/06/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 10/06/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER