Aaiswarya Prints Dyeing and Printing Mills Pvt.Ltd., Surat V. The Addl.CIT.,Range-1, Surat

ITA 1954/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1845 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAMES KUREIN
• Assessee Lawyers: MEHUL R SHAH
• Section: 143(3); 145; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.1954/AHD/2012 ASST. YEAR:2009-10 AAISWARYA PRINTS DYEING & PRINTING MILLS PVT. LTD., PLOT NO.24-27, BLOCK NO.72, BHIRUGAM VARELI, TALUKA PALSANA, SURAT -395317. VS. ADDL. CIT, RANGE-1, SURAT APPELLANT RESPONDENT PAN AACCA 4770A APPELLANT BY SHRI MEHUL R. SHAH, AR RESPONDENT BY MR. JAMES KUREIN, SR. DR DATE OF HEARING: 11/2/2016 DATE OF PRONOUNCEMENT: 5/4/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER OF LD. CIT(A)-1, SURAT DATED 1.6.2012. ASSESSMENT WAS FRAM ED UNDER SECTION 143(3) OF THE IT ACT, 1961 (IN SHORT THE AC T) FOR ASST. YEAR 2009-10, BY ADD. CIT, RANGE-1, SURAT ON 29.9.2011. ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL :- I. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT( A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 15,56,197/-, AS MADE BY THE AO ALLEGING UNDERVALUATION IN CLOSING STOCK OF WORK-IN-PROGRESS IN THE ACTIVITY OF DYEING AND PRINTING JOB WORK OF GREY CLOTH, WITHOUT APPRECIATING THAT THE SAID ADDITION HAS BEEN MADE BY THE AO PURELY ON ESTIMATED BASIS AS AGAINST THE PARTY-WISE AND STAGE-WISE ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 2 DETAIL OF WORK-IN-PROGRESS MAINTAINED BY THE APPELLANT, W HICH EVEN STANDS PHYSICALLY VERIFIED BY THE MANAGEMENT AT THE YEAR END. HENCE, THE IMPUGNED ADDITION OF RS. 15,56,197/- NEEDS TO BE DELETED AS BEING ABSOLUTELY E RRONEOUS. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, SUBSTITUTE, MODIFY IN ANY OR ALL THE ABOVE GROUNDS OF APPEAL, IF NECESSARY, ON THE BASIS O F SUBMISSIONS TO BE MADE AT THE TIME OF PERSONAL HEARING. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS THAT ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DYEING AND PRINTING OF CLOTH ON JOB WORK BASIS. IT FILED ITS E-RETURN OF INCOME ON 23.09.2009 DECLARING TOTAL INCOME AT RS.3 ,33,69,066/- WHICH WAS REVISED ON 28.11.2009 SHOWING TOTAL INCOM E AT RS.3,34,76,405/-. THE CASE WAS SELECTED FOR SCRUTIN Y ASSESSMENT AND NOTICE 143(2) OF THE ACT WAS ISSUED ON 24.8.2010 AN D DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE COMPANY HA S SHOWN TOTAL TURNOVER OF RS.68.99 CRORES AND GP AT 13.99 CRORES AND GP RATE INCREASED TO 20.28% AS AGAINST GP RATE OF 19.13% IN THE IMMEDIATELY PRECEDING YEAR. LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN CLOSING STOCK WORK IN PROGRESS AT RS.30,57,65 4/-, WHICH AS PER HIS VIEW WAS SHOWN ON LOWER SIDE AND ASSESSEES REP LY WAS FOUND NOT SATISFACTORY RELATING TO CALCULATION OF CLOSING WORKING IN PROGRESS AND HE ON THE BASIS OF PREVAILING MARKET SYSTEM OF MANUFACTURING, CALCULATED THE WORK IN PROGRESS AT RS.46,13,851/- A ND ACCORDINGLY ADDED THE DIFFERENCE OF RS.15,56,197/- (RS.46,13,85 1 RS.30,57,654/-) TO THE TOTAL INCOME OF THE ASSESSEE . LD. ASSESSING OFFICER MADE DISALLOWANCE OF RS.50,000/- TOWARDS FA CTORY EXPENSES. IN TOTAL OUT OF THE ADDITION OF RS.16,60,197/- (RS. 15,56,197/- + RS.50,000) AFTER ALLOWING A DEDUCTION ON ACCOUNT OF CLOSING STOCK OF ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 3 WORK IN PROGRESS FOR PREVIOUS ASST. YEAR AT RS.3,39 ,944/- MADE A NET ADDITION OF RS.12,66,253/- AND ASSESSED THE INCOME AT RS.3,47,42,658/-. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) WHO DISMISSED THE GROUND OF ASSESSEE RELATING TO ADDITI ON OF RS.15,56,197/- ON ACCOUNT OF HIGHER VALUATION OF CL OSING STOCK WORK IN PROGRESS AND WHILE CONFIRMING THE ADDITION OBSERVED AS BELOW :- 7.1 AS REGARDS ADDITION OF RS 3, 39, 944/- MADE I N ASSTT YEAR 2008-09, ISSUE DOES NOT DIRECTLY ARISE FROM PRESENT APP EAL THE ASSESSING OFFICER VERIFY THE RECORDS AND IF AN ADDITION WAS MADE IN THE CLOSING STOCK LAST EFFECT OF THE SAME IS TO BE GIVEN IN THE OPENING ST OCK OF THIS YEAR UNDER 54, THE APPELLANT MAY MOVE AN APPLICATION U/S 154 OF THE ACT , HOWEVER, IT IS CLARIFIED THAT THIS ISSUE CANNOT BE DECIDED DOES NOT DIRECTLY ARISE FROM THE ASSESSMENT ORDER, COMING TO THE ADDITION OF RS, 15,56,197/- IN WIP, THE A.O, HAS GIVEN DETAILED REASONING AND WORKING FOR ARRIVING AT THE VALUATION OF WIP. THE APPELLANT HAS BEEN ABLE TO CO NTROVERT THE SAID FINDINGS. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. LD. AR SUBMITTED THAT ASSESSEE IS MAINTAINING RE GULAR BOOKS OF ACCOUNT AND THE SAME HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER U/S 145(3) OF THE ACT. LD. AR FURTHER SUBMI TTED THAT GP RATE IN THE YEAR UNDER APPEAL HAS BEEN SHOWN AT 20.28% WHIC H IS HIGHER THAN 19.13% SHOWN IN THE IMMEDIATELY PRECEDING YEAR . LD. AR ALSO REFERRED TO THE COMPLETE MONTH-WISE DETAIL OF WORK IN PROGRESS AND SUBMITTED THAT THEY HAVE BEEN DULY MAINTAINED AND N O MISTAKE HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. LD. AR A LSO SUBMITTED THAT ASSESSEE COMPANY IS CONSISTENTLY FOLLOWING ACCOUNTI NG PRINCIPLES ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 4 RELATING TO VALUATION OF WORK IN PROGRESS, AS PER A CCOUNTING STANDARD -1 OF DISCLOSURE OF ACCOUNTING POLICY AND PHYSICAL INVENTORY WAS ALSO TAKEN AND CLOSING WORK IN PROGRESS WAS CALCULATED A S PER SOFTWARE DEVELOPED FOR DETERMINING THE SAME AND SO WORKING I N PROGRESS CANNOT BE BRUSHED ASIDE BY WAY OF ESTIMATING WORK I N PROGRESS. LD. AR ALSO REFERRED AND RELIED ON THE DECISION OF CO-O RDINATE BENCH IN THE CASE OF KRISHNA ART SILK CLOTH P. LTD. VS. DCIT , CIR-1, SURAT IN ITA NO.1264/AHD/2010 FOR ASST. YEAR 2007-08 DATED 16.7. 2010 AND IN THE CASE OF BHAGWATI SYNTEX (P) LTD. VS. ITO IN ITA NO. 3249/AHD/2009 FOR ASST. YEAR 2006-07 DATED 27.5.2011. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF LD. CIT(A) SUSTAINING ADDITION OF RS.15,56,197/- MADE BY ASSES SING OFFICER ALLEGING UNDER VALUATION OF CLOSING STOCK OF WORKIN G IN PROGRESS WITHOUT APPRECIATING THAT THE SAID ADDITION HAS BEE N MADE BY THE ASSESSING OFFICER PURELY ON ESTIMATE BASIS EVEN WHE N PARTY-WISE WORK IN PROGRESS HAS BEEN GIVEN AS PER SOFTWARE MAI NTAINED BY THE ASSESSEE. ON GOING THROUGH THE RECORDS, WE OBSERVE THAT ASSESSEE COMPANY HAS ACHIEVED TOTAL TURNOVER OF RS.68.99 CRO RES IN COMPARISON TO TURNOVER OF RS.62.96 CRORES IN THE IM MEDIATELY PRECEDING YEAR AND GP RATE HAS ALSO IMPROVED TO 20. 28% AS AGAINST 19.13%. WE ALSO OBSERVE THAT LD. ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT U/S 145(3) AND HAS MADE ADDITI ON PURELY ON ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 5 ESTIMATE BASIS BY APPLYING HIS OWN METHODOLOGY OF W ORKING OUT VALUATION OF CLOSING WORK IN PROGRESS WITHOUT POINT ING OUT ANY SPECIFIC DEFECT IN THE WORKING OF ASSESSEE COMPANY. FROM PER USAL OF THE ASSESSMENT ORDER WE OBSERVE THAT LD. ASSESSING OFFI CER HAS GIVEN FOLLOWING DETAILS TO SUPPORT HIS VIEW OF MAKING ADD ITION OF RS.15,56,197/- :- THEREFORE, THE CORRECT VALUE OF CLOSING STOCK OF WI P HAS TO BE WORKED OUT AND ADDED TO THE TOTAL INCOME. THE ASSESSEE HAS PRO CESSED 207756558 METRES DURING THE YEAR UNDER CONSIDERATION. TAKING INTO CONSIDERATION 26 DAYS AS WORKING DAYS PER MONTH, THE TOTAL WORKING D AYS OF THE YEAR WORKS OUT TO 312 DAYS, THE AVERAGE OF PROCESS OF CLOTH PE R DAY WORKS OUT TO 665886 METERS. IT IS COMMON KNOWLEDGE THAT TO COMPL ETE A CIRCLE OF PROCESS IN TEXTILE PROCESSING UNIT, IT TAKES AT LEA ST FIVE DAYS THEREFORE A LOT OF GREY CLOTH PUT TO PROCESS ON FIRST DAY COMES OUT ON THE 6 !H DAY DULY PROCESSED. THEREFORE, IT CAN BE PRESUMED THAT THE A SSESSEE MUST HAVE FIVE DAYS WORK-IN-PROCESS AS ON 31,03.2009. THIS WO RKS OUT TO 3329432 RNETERS (665886 METRES X 5 DAYS) THE AVERAGE COST O F PROCESSING CHARGES PER METER AS SUBMITTED BY THE ASSESSEE IS RS 2.31 ( COST OF MATERIAL + MANUFACTURING EXPENSES LESS VAT. DISCOUNT, CLAIM ET C. -R METER PROCESSED). CONSIDERING THE VARIOUS STAGES OF PROCE SS, IT WOULD BE REASONABLE TO ADOPT 60% I.E. RS.1.39 PER METER FOR ARRIVING AT VALUE OF WORK-IN-PROCESS. THEREFORE, THE CLOSING STOCK OF WO RK-IN-PROCESS IN THIS CASE IS WORKED OUT AT RS.46.13.851/- (3329432 METER S X RS 1.39) SINCE THE WORK-IN-PROGRESS SHOWN BY THE ASSESSEE IS ON LO WER SIDE AND PROFIT TO THAT EXTENT IS SUPPRESSED, IT IS NECESSARY TO ADD T HE CORRECT VALUE OF WORK- IN-PROGRESS TO ARRIVE AT THE CORRECT PROFIT OF THE BUSINESS OF THE ASSESSEE THE ASSESSEE HAS SHOWN WORK-IN-PROGRESS OF RS 30,57 .654/- AND THEREFORE THE DIFFERENCE AMOUNT OF RS. 15.56.197/- [RS. 46,13.851 - RS.30,57,654] IS ADDED TO THE TOTAL INCOME OF THE A SSESSEE PENALTY PROCEEDINGS U/S 271(1)(C ) OF THE I.T. ACT ARE BEIN G INITIATED FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. ON THE OTHER HAND, ASSESSEE APART FROM SUBMITTING Q UANTITATIVE AND FINANCIAL DATA DURING THE COURSE OF ASSESSMENT PROC EEDINGS HAS ALSO FURNISHED SYNOPSIS SHOWING DETAILS OF JOB WORK DONE DURING THE FINANCIAL YEAR 2008-09 AS BELOW :- ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 6 SL. NO. MONTH OPENING CLOSING MONTHLY JOB WORK DETAIL G.P.NO G.P.NO. FINISHED MTR AMOUNT CLAIM/DISS. NE T AMOUNT 1 APRIL-08 1 3718 19089787.30 43952593.00 5031828.00 38920765.00 2 MAY 08 3719 7030 20024268.80 51434737.00 3186428.00 48248309.00 3 JUNE 08 7031 10142 15240178.80 38644405.00 4676135.00 33968270.00 4 JULY 08 10143 14128 19059547.92 56753502.00 2928888.00 ! 53824614.00 5 AUG 08 14129 19368 15393281.52 52220588.00 6750474.00 45470114.00 6 SEPT 08 19369 23695 18182979.57 65115678.00 4966957.00 60148721.00 7 OCT 08 23696 27326 14445411.21 58022788.00 5229791.00 52792997.00 8 NOV 08 27327 29713 9592613.03 43541837.00 2642994.00 40898843.00 9 DEC 08 29714 33539 17227677.18 79866912.00 4272353.00 75594559.00 10 JAN 09 33540 36806 15706995.61 57616907.00 3547727.00 5406S180.00 11 FEB 09 36807 40338 20565719.38 68681721.00 5249777.00 63431944.00 12 MARCH 09 40339 43839 22228097.18 72847440.00 12969290.00 59878150.00 TOTAL 207756557.56 688699108.00 61452642.00 627246466.00 8. LOOKING TO THE ABOVE OBSERVATION OF THE ASSESSIN G OFFICER AND THE SYNOPSIS OF THE DATA OF THE ASSESSEE WE FIND TH AT LD. ASSESSING OFFICER HAS RESORTED TO A COMPLETELY NEW METHODOLOG Y OF ESTIMATING THE MANUFACTURING PROCESS OF THE ASSESSEE COMPANY O N HIS OWN FORMULA AND PROCESS CYCLE AND ESTIMATING CLOSING WO RK IN PROGRESS AT RS. 46,13,851/-. WE ARE UNABLE TO UNDERSTAND THAT I N THE GIVEN CIRCUMSTANCES WHERE THE ASSESSEE COMPANY IS HAVING HUGE TURNOVER OF RS.68.99 CRORES WITH IMPROVED GP AND ALL QUANTIT ATIVE DETAILS WERE FURNISHED THEN HOW THE ASSESSING OFFICER CAN RESORT TO HIS OWN ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 7 ESTIMATION WITHOUT POINTING OUT ANY SINGLE DEFECT I N THE RECORDS, REGULARLY MAINTAINED BY THE ASSESSEE. IT IS WELL KN OWN FACT THAT A CERTAIN TYPE OF BUSINESS CANNOT BE RUN ON THE SAME BENCH MARK FORMULA OR PROCESS CYCLE AND THERE OUGHT TO HAVE BE EN CERTAIN CHANGES AND VARIATION DUE TO AVAILABLE INPUTS AND C IRCUMSTANCES. 8.1 WE FURTHER OBSERVE THAT ASSESSMENT UNDER SEC.14 3(3) OF THE ACT, OF ASSESSEE IN ASST. YEAR 2010-11 WAS FRAMED BY THE SAME ASSESSING OFFICER AND NO SUCH ADDITION RELATING TO ESTIMATION OF WORK IN PROGRESS WAS MADE IN HIS ASSESSMENT ORDER DATED 11.12.12 WHICH MEANS THAT THE REVENUE HAS ACCEPTED THE VALUATION O F WORK IN PROGRESS OF THE ASSESSEE FOR ASST. YEAR 2010-11. 9. WE ALSO OBSERVE THAT LD. ASSESSING OFFICER HAS R EFERRED AND RELIED ON THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF KRISHNA ART SILK CLOTH (P) LTD. VS. DCIT IN ITA NO.1264/AHD /2010 FOR ASST. YEAR 2007-08 WHEREIN ISSUE HAS BEEN DECIDED IN FAVO UR OF ASSESSEE DEALING WITH SIMILAR ISSUE OF CLOSING WORK IN PROGR ESS BY OBSERVING AS UNDER :- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, THE CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE LATEST DECISION IN THE CASE OF ITO VS. M/S RISHABH DYEING & PRINTING MILLS (P) LTD. (SUPRA). IN THAT JUDGMENT THE TRIBUNAL HAS HELD AS UNDER :- 3. AGAINST THIS LD. AR SUBMITTED THAT SIMILAR ISS UE HAD COME BEFORE THE TRIBUNAL IN THE CASE OF PRATIK PROCESSORS PVT. LTD V DCIT IN ITA NO.1956/AHD/2007, WHEREIN TRIBUNAL HAS HELD THAT TH ERE CANNOT BE ANY WORK-IN-PROGRESS IN A CASE WHERE BUSINESS OF DY EING AND PRIMING OF CLOTH IS DONE ON JOB WORK BASIS. HE REFE RRED TO PARA-6 FROM THAT ORDER AS UNDER:- '6. AT THE TIME OF HEARING BOTH THE REPRESENTATIVES AGREED THE SIMILAR ISSUE AROSE IN AN APPEAL BY THE REVENUE IN ITA NO. 2649/AHD/2006 IN THE CASE OF VIPUL INDUSTRIES PVT. LTD. V/S ACIT ORD ER DATED 17.9.2003 ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 8 IN THE SAID CASE, WHEN IN THE SAID CASE THE ASSESSE E WHICH IS ENGAGED IN THE BUSINESS OF DYEING AND PRINTING OF C LOTH ON JOB WORK BASIS AND WHERE THE ASSESSES HAD NOT SHOWN ANY WORK -IN-PROGRESS AT THE YEAR END, THE SAME WAS ESTIMATED TO BE 50% OF T HE JOB RECEIPT OF THE LIKELY STOCK REMAINING IN PROCESS. HOWEVER WAS DELETED BY THE LD. CIT(A) BY OBSERVING AS UNDER: 12 I HAVE CAREFULLY CONSIDERED THE FACT OF THE CAS E AND SUBMISSIONS MADE BY THE ID AR. AS REGARDS THE ADDITION MADE IN RESPECT OF ESTIMATED WORK IN PROGRESS, IT IS SEEN THAT THE APP ELLANT IN THE INSTANT CASE IS A JOB-WORKER AND PROCESS GREY CLOTH FOR ITS CUSTOMERS ACCORDING TO THEIR REQUIREMENT. THE APPELLANT NOT E NGAGED IN ANY MANUFACTURING ACTIVITIES OF ITS OWN. THE CLOTH PROC ESSED BY THE APPELLANT THUS BELONG TO ITS CUSTOMERS IS PROCESSED BY THE APPELLANT AND. AFTER PROCESSING THE SAME IN ACCORDANCE WITH T HE CUSTOMERS REQUIREMENT, IT IS RETURNED. IN THE ABOVE FACTS OF THE CASE THE QUESTION OF SHOWING ANY WORK IN PROGRESS IN THE BOOKS OF ACC OUNT 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 COMPLE TION OF WORK ON THE CUSTOMERS CLOTH, THE APPELLANT IS ENTITLED TO R ECEIVE ITS WORK CHARGES. NO INTERIM PAYMENTS OR ADVANCES PAYMENTS A RE RECEIVED BY THE APPELLANT FROM ITS CUSTOMERS DURING THE PENDENC Y OF THE JOB WORK. THE RECEIPTS FROM THE JOB WORK ARE BEING ACCOUNTED FOR BY THE APPELLANT ON COMPLETED CONTRACT METHOD AS PER AS-9. THE CLOSING STOCK OF MATERIALS USED FOR PROCESSING OF CLOTH, I. E. COLOUR, CHEMICALS ETC. HAVE BEEN DULY ACCOUNTED FOR BY THE APPELLANT IN ACCORDANCE WITH AS-9 IN REGARD TO THE VALUE ADDITION MADE BY THE AP PELLANT ON THE CUSTOMER'S CLOTH, WHICH MAY HAVE BEEN AT DIFFERENT INTERMEDIATE STAGES OF PROCESSING AS ON 31.3.2003, NEITHER ANY O PENING STOCK NOR CLOSING STOCK WAS EVER SHOWN BY THE APPELLANT. A S PER THE PRINCIPLES OF ACCOUNTING LAID DOWN BY THE ICAI, UNDER THE SCOPE O F VALUATION OF INVENTORIES IN ITEM 1 (SUB-ITEM (B) OF AS-2 (REVISE D) THE 'WORK-IN- PROGRESS ARISING IN THE ORDINARY COURSE OF BUSINES S OF SERVICE PROVIDER' HAS BEEN SPECIFICALLY SCOPED OUT OF THE S AID STATEMENT. FURTHER, IN THE DEFINITIONS PROVIDED UNDER ITEM 3 O F THE AS-2 'INVENTORIES' HAVE BEEN DEFINED AS 'ASSETS (A) HELD FOR SALE M THE ORDINARY COURSE OF BUSINESS (B) IN THE PROCESS OF P RODUCTION, FOR SUCH SALE' OR (C) IN THE FORM OF MATERIALS OR SUPPLIES T O BE CONSUMED IN THE PRODUCTION FOR SALE' OR IN THE RENDERING OF SERVICE S. SINCE THE APPELLANT WAS NOT ENGAGED IN THE BUSINESS OF SALE OF THE PROC ESSED CLOTH OR IN THE PRODUCTION FOR SALE OF THE PROCESSED CLOTH BUT WAS ENGAGED IN THE BUSINESS OF RENDERING OF SERVICES FOR PROCESSING OF GREY CLOTH FOR ITS CUSTOMERS THE PRINCIPLES LAID DOWN IN AS-2 FOR ;HE 'VALUATION OF INVENTORIES' WERE NOT APPLICABLE IN ITS CASE IN ACC ORDANCE WITH ITEM(B) THEREOF. HOWEVER, THE MATERIALS OR SUPPLIES TO BE C ONSUMED IN THE PRODUCTION PROCESS OR IN THE RENDERING OF SERVICES WOULD EVIDENTLY FAIL IN CATEGORY (C) OF THE AFORESAID DEFINITIONS' PROV IDED IN ITEM 3 OF THE ACCOUNTING PRINCIPLES LAID DOWN IN AS-2, AND THE SA ME WOULD BE ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 9 REQUIRED TO BE ACCOUNTED FOR BY IT IN THE FORM OF S TOCK, 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 AFORESAID METHOD OF ACCOUNTING OF OPENING/CLOSING STOCK HAS BEEN REGULARLY AND CONSIS TENTLY FOLLOWED BY THE APPELLANT COMPANY SINCE THE BELONGING THE APPEL LANT HAS ALSO CONSISTENTLY FOLLOWED, THE ACCOUNTING POLICY OF REC OGNIZING REVENUE OF COMPLETED CONTRACT METHOD. WHILE THE PRINCIPLES OF RES-JUDICATA ARE NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS, IT HAS BE EN HELD BY THE COURTS IN SEVERAL JUDGMENTS: THAT, WHERE THE APPELL ANT HAS BEEN FOLLOWING REGULAR SYSTEM OF ACCOUNTING SINCE THE LA ST SO MANY YEARS AN SUCH METHOD WAS BASED ON ACCEPTED PRINCIPLES OF ACC OUNTING THERE WAS NO JUSTIFICATION FOR REJECTING THE SAID METHOD FOR VALUATION OF STOCK. THIS WOULD ESPECIALLY HOLD IN A CASE WHERE THE PROP OSED CHANGE IN THE METHOD OF VALUATION IS FOUND TO HAVE NO IMPACT, AS IN THE INSTANT CASE, IF THE CHANGED METHOD ADOPTED BY THE ASSESSING OFFI CER WERE APPLIED FOR VALUATION OF THE OPENING AS WELL AS THE CLOSING STOCK. 14 FOR REASONS DISCUSSED ABOVE M DETAILS, M MY OPIN ION THERE WAS NO BASIS OR JUSTIFICATION IN MAKING THE ANY ESTIMATED ADDITION ON ACCOUNT OF WORK-IN PROGRESS IS THIS CASE. THE ADDITION OF R S.12.56.970/- MADE BY THE AO IN RESPECT OF ESTIMATED WORK IN PROGRESS IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ALLOWED ' THUS DELETION WAS CONFIRMED BY THE TRIBUNAL. THEREF ORE IN, THE PRESENT CASE ALSO FOLLOWING THE DECISION OF THE TRI BUNAL CONFIRM THE ORDER OF THE CIT(A), THE ADDITION ON ACCOUNT OF EST IMATED VALUE OF WORK-IN-PROGRESS IS REQUIRED TO BE DELETED. 4. LD SR. DR ON THE OTHER HAND SUBMITTED THAT IF AS SESSES HAS SPENT MONEY WHICH HAS BEEN DEBITED IN THE PROFIT & LOSS A CCOUNT AND TO THE EXTENT THE ASSESSEE DOES NOT GET RECEIPT FROM T HE PRINCIPLE, WORK-IN-PROGRESS SHOULD BE ESTIMATED. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE P ARTIES, WE ARE OF THE VIEW THAT ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN THE CASE OF PRATIK PROCESSO RS PVT. LTD. (SUPRA) PRONOUNCED ON 15.01.2010. RESPECTFULLY FOLLOWING TH E ABOVE ORDER WE DISMISS THE GROUND NO.1 & 2 OF THE REVENUES APP EAL. RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ALLOW THE APPEAL FILED BY THE ASSESSEE. ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 10 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. 10. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH ABOVE, AS THE FACTS ARE SIMILAR AND ALSO IN THE GIVEN CIRC UMSTANCES WHEREIN ASSESSEES BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED U/S 145 OF THE ACT, NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE QUANTITATIVE RECORDS MAINTAINED BY THE ASSESSEE AND ABOVE ALL LD . ASSESSING OFFICER HAS MADE ADDITION JUST ON THE ESTIMATE BASI S AND ALSO DUE TO THE FACT THAT IN THE NEXT ASST. YEAR 2010-11 NO ADD ITION HAS BEEN CALLED FOR BY THE SAME ASSESSING OFFICER ON THIS GR OUND ON VALUATION OF WORK IN PROGRESS, WE ARE OF THE VIEW THAT ADDITI ON OF RS. 15,56,197/- NEEDS TO BE DELETED AND, WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND ALLOW THE GROUND OF ASSESSE E. 11. OTHER GROUND IS OF GENERAL NATURE. 12. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/04/ 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 5/4 /2016 MAHATA/- ITA NO. 1954/AHD/2012 ASST. YEAR 2009-10 11 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 31/3/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 5/04/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:5 /4/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: