Manish Dyeing and Printing Mills Pvt.Ltd., Surat V. The ACIT.,(OSD-II)Range-I, Surat

ITA 2234/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6245 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 20-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHRY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI D K TYAGI,JM & SHRI A N PAHUJA, AM ITA NO.2234/AHD/2009 (ASSESSMENT YEAR:-2006-07) MANISH DYEING & PRINTING MILLS PVT. LTD., PLOT NO. 429, GIDC, PANDESARA, INDUSTRIAL ESTATE, SURAT V/S ASST. COMMISSIONER OF INCOME-TAX (OSD-II), RANGE-1, SURAT PAN: AABCM 6020 A [APPELLANT] [RESPONDENT] ASSESSEE BY :- NONE [WRITTEN SUBMISSIONS] REVENUE BY:- SHRI M R CHAUDHRY, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 29-05-2009 OF THE LD. CIT(APPEALS)-I, SURAT, FOR TH E ASSESSMENT YEAR 2006-07, RAISES THE FOLLOWING GROUNDS:- [1] THAT HONBLE CIT(A) HAS ERRED IN CONFIRMING ADDITIO N OF RS.5,68,845/- ON ACCOUNT OF CLOSING STOCK OF WORK I N PROGRESS (WIP) OF JOB WORK. [2] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELET E OR MODIFY ANY GROUND OF APPEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL INCOME FILED ON 14-12-2006 BY THE ASSESSEE, ENG AGED IN THE BUSINESS OF DYEING & PRINTING OF TEXTILE FABRICS ON JOB WORK, WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF NOTICE U/ S 143(2) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT] ISSUED ON 10-09-2007. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER [AO FOR SHORT] NOTICED THAT THE ASSESSEE REFLECTED THE FOLLOWING INVENTORY OF CLOSING STOCK IN SCHEDUL E-8 TO THE BALANCE-SHEET:- [1] COLOUR & CHEMICALS RS.27,84,068/- [2] STORES & SPARES RS. 53,160/- [3] SOFTENING MATERIAL RS. 10,860/- 2 ITA NO.2234/AHD/2009 [4] COAL & LIGNITE RS. 68,680/- [5] PRINTING DESIGN MATERIAL RS. 40,830/- [6] OIL & LUBRICANTS RS. 24,230/- [7] STOCK-GREY RS. 30,480/- ----------------- RS.30,12,308/- 2.1 SINCE THE ASSESSEE DID NOT REFLECT ANY WORK- IN-PROGRESS [WIP] IN THE AFORESAID INVENTORY, THE AO ASKED THE ASSESS EE WHY ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK OF WIP SHO ULD NOT BE MADE TO THE TOTAL INCOME. TO A QUERY BY THE AO, THE ASS ESSEE REPLIED THAT THE COMPANY WAS PROCESSING FABRICS ON JOB WORK BASI S TO MAKE DYED AND PRINTED SAREES. FABRICS WERE NOT OWNED BY THE A SSESSEE BUT BELONGED TO THE CUSTOMERS FOR WHOM JOB WORK HAD BEE N DONE. THE ASSESSE POINTED OUT THAT COLOUR & CHEMICALS IN PROC ESS WERE NOT CONSIDERED FOR THE PURPOSES OF VALUATION OF CLOSING STOCK ON FOLLOWING GROUNDS:- [I] SUCH COLOUR CHEMICALS ARE ALREADY APPLIED ON CU STOMERS FABRICS NOT OWNED BY THE COMPANY. [II] SUBSTANTIAL PART OF SUCH COLOUR CHEMICALS GETS MELTED, WASHED OUT OR EVAPORATED DURING THE DYEING PRINTING PROCESS. T HEREFORE FROM THE COMPANY'S POINT OF VIEW SAME IS ALREADY CONSUME D IN THE PROCESS. [III] THE ACCOUNTING STANDARDS MENTIONS THAT VALUE OF WORK IN PROCESS SHOULD BE DERIVED AFTER COMPARISON BETWEEN COST AND NET REALIZABLE VALUE. SINCE COLOUR CHEMICALS ONCE SENT FROM THE ST ORE ROOM TO THE MACHINES AND WASH AREA, IT WOULD BE IRRETRIEVABLY L OST AFTER USE. COLOUR CHEMICALS ON MACHINES AND WASHING AREAS COUL D NOT BE QUANTIFIED EVALUATED OR RETRIEVED THEREFORE HAVING NIL VALUE THE SAME IS EXCLUDED WHILE VALUING THE CLOSING STOCK. [IV] MADRAS HIGH COURT HAS IN THE CASE OF CIT VS. A NDHRA PRABHA LIMITED [1998] 231 ITR 81 HAS OBSERVED THAT WHEN TH E MATERIAL SENT TO PROCESS HAS LOST IT S REALIZABLE VALUE THEN THER E IS NOTHING WRONG IN EXCLUDING THE VALUE OF SUCH MATERIAL WHILE CALCU LATING CLOSING STOCK. [V] THE COMPANY HAS, BY ADOPTING THIS SYSTEM OF VAL UATION, MADE NO REDUCTION IN TAX LIABILITY AS THE EFFECT OF WORK IN PROGRESS IS EXCLUDED AT BOTH THE LEVELS OF STOCK OPENING AS WELL AS CLOS ING. 3 ITA NO.2234/AHD/2009 2.2 SINCE THE ASSESSEE WAS BEING ASSESSED TO TAX F OR SEVERAL ASSESSMENT YEARS, HE PLEADED THAT THE METHOD OF ACC OUNTING ADOPTED BY THE ASSESSEE HAVING BEEN ACCEPTED IN THE PAST, NO ADDITION SHOULD BE MADE. INTER ALIA, THE ASSESSEE R ELIED UPON THE DECISIONS IN BALAPUR VIBHAG JUNGLE KAMDAR MANDALI L TD. VS. CIT [1982] 135 ITR 91 (GUJ); CIT VS. TATA IRON & STEEL CO. LTD. [1977] 106 ITR 363 (BOM); CIT VS. K. SANKARAPANDIA ASARI & SONS [1981] 130 ITR 541, 544 (MAD); MANILAL KHER AMBALAL & CO. VS. ITO [1989] 176 ITR 253, 259 (BOM), SPECIAL LEAVE PE TITION DISMISSED BY THE SUPREME COURT [1991] 188 ITR (ST.) 85 (SC); CIT VS. AHMEDABAD NEW COTTON MILLS CO. LTD. [1930] 4 IT C 245, 246 (PC); CIT VS. BENGAL JUTE MILLS CO. LTD. [1992] 107 CTR (CAL) 34, 38; RADHESHYAM AGRAWAL & CO. VS. CIT [1974] 119 CTR (MP) 263, 265 ANDK G KHOSLA & CO. P. LTD. VS. CIT [1975] 99 I TR 574, 577-8 (DEL). 2.2 HOWEVER, THE AO DID NOT ACCEPT THE AFORESAID SUBMISSIONS OF THE ASSESSEE AND ADDED AN ESTIMATED AMOUNT OF RS.5, 68,845/- TOWARDS WIP WHILE RELYING UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA L TD., 188 ITR 44. THE DETAILED WORKING OF WIP IS MENTIONED IN PARA-8 OF THE ASSESSMENT ORDER. 3. ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITIO N IN THE FOLLOWING TERMS:- 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUP RA) THE CORRECT PROFIT CAN ONLY BE ASCERTAINED IF THE CLOSING STOCK IS CORRECT LY SHOWN. ADMITTEDLY, THE COST OF VARIOUS INPUTS LIKE COLOUR & CHEMICALS, LAB OUR, POWER, FUEL, COAL, ETC. HAVE BEEN PUT ON THE FABRIC LYING ON THE MACHI NE UNDER VARIOUS STAGES OF COMPLETION FOR FIVE DAYS. THESE COSTS HAVE BEEN DEBITED TO THE PROFIT &. LOSS ACCOUNT BUT CORRESPONDING WORK-IN-PROGRESS HAS NOT BEEN SHOWN WHICH LEADING TO DISCLOSURE OF LESS PROFIT. HENCE, THE ADDITION MADE BY THE A.O. IS CORRECT AND, THEREFORE, THIS GROUND OF APPE AL IS DISMISSED. 4 ITA NO.2234/AHD/2009 4. NONE APPEARED ON BEHALF OF THE ASSESSEE; INSTEAD WRITTEN SUBMISSIONS HAVE BEEN FILED. WHILE DISTINGUISHING T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BRITISH PAINTS INDIA LTD. (SUPRA), AND RELYING UPON THE DECISIONS IN THE CAS E OF CIT VS. BILHARI INVESTMENT (P) LTD. [2008] 299 ITR 1 (SC), BALAPUR VIBHAG JUNGLE KAMDAR MANDALI LTD. VS. CIT [1982] 135 ITR 9 1 (GUJ) AND MANILAL KHER AMBALAL & CO. VS. ITO [1989] 176 ITR ( ST.) 85 (SC) [SLP DISMISSED BY THE SUPREME COURT IN [1991] 188 I TR (ST.) 85 (SC)], IT IS CONTENDED IN THE WRITTEN SUBMISSIONS T HAT THE ASSESSEE HAVING CONSISTENTLY FOLLOWED THE METHOD OF VALUATIO N OF STOCK OF WIP OF JOB WORK, THE ADDITION UPHELD BY THE LEARNED CIT (A) WAS NOT WARRANTED. IT IS FURTHER MENTIONED THAT IN RESPECT OF GOODS IN PIPELINE AT THE BEGINNING OF YEAR SOME PORTION OF E XPENSES LIKE COLOURS & CHEMICALS, LABOUR, POWER, ETC. MIGHT HAVE BEEN INCURRED IN LAST YEAR BUT THE JOB CHARGE BILLS WERE RAISED ONLY IN CURRENT YEAR ON FINAL FINISHING OF CLOTH. SIMILARLY, IN RESPECT OF GOODS IN PIPELINE AT THE END OF THE YEAR CERTAIN EXPENSES MIGHT HAVE BEE N INCURRED IN THIS YEAR BUT JOB CHARGE BILLS WERE RAISED IN NEXT YEAR ON FINAL FINISHING OF GOODS. SINCE POSITION AT THE BEGINNING AND END OF THE YEAR REMAINED ALMOST SAME, IT WAS NOT POSSIBLE TO A CCURATELY MEASURE THE COST INCURRED ON GOODS IN PIPELINE AT D IFFERENT STAGES OF PROCESSING. ONLY A ROUGH ESTIMATION COULD BE MADE. THE ASSESSEE FURTHER MENTIONED THAT THE COLOURS & CHEMICALS UTIL IZED IN PROCESS DID NOT HAVE ANY REALIZABLE VALUE. IT IS NOT CERTAI N THAT FINALLY PROCESSED GOODS WILL BE UP TO THE MARK AND THESE WI LL NOT REQUIRE SOME RE-PROCESSING. THERE BEING NO REALIZABLE VALUE OF COLOURS AND CHEMICALS IN PROCESS, NO MATCHING PRINCIPLE WAS APP LICABLE IN THIS CASE. EVEN OTHERWISE, THE AO ADDED THE AMOUNT BY E STIMATING THE GOODS EQUAL TO FIVE DAYS PRODUCTION, APPLYING 50% O F AVERAGE COST INCURRED IN LAST YEAR WHICH IS PURELY A ROUGH ESTIM ATE. SINCE THE METHOD OF ACCOUNTING FOLLOWED RIGHT SINCE AY 1995-9 6, HAD NOT BEEN DISTURBED IN THE PAST, THE ADDITION MADE ON ROUGH B ASIS, WAS NOT 5 ITA NO.2234/AHD/2009 WARRANTED, THE ASSESSE POINTED OUT. ON THE OTHER HA ND, THE LEARNED DR SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 5. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE F ACTS OF THE CASE AS ALSO THE WRITTEN SUBMISSIONS ON BEHALF OF T HE ASSESSEE AND THE AFORESAID DECISIONS OF THE ITAT. WE FIND THAT WHILE ADJUDICATING AN IDENTICAL ISSUE, A CO-ORDINATE BENCH IN THEIR D ECISION DATED 28.5.2010 IN THE CASE OF ITO VS. M/S RISHABH DYEI NG & PRINTING MILLS (P) LTD. IN ITA NO. 1823/AHD./2007 HELD AS U NDER :- 3. AGAINST THIS LD. AR SUBMITTED THAT SIMILAR ISSU E HAD COME BEFORE THE TRIBUNAL IN THE CASE OF PRATIK PROCESSOR S PVT. LTD V DCIT IN ITA NO.1956/AHD/2007, WHEREIN TRIBUNAL HAS HELD THAT THERE CANNOT BE ANY WORK-IN-PROGRESS IN A CASE WHERE BUSI NESS OF DYEING AND PRIMING OF CLOTH IS DONE ON JOB WORK BASIS. HE REFERRED 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 ORDER DATED 17.9.2003 IN THE SAID CASE, WHEN IN THE SAID CASE THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF DY EING AND PRINTING OF CLOTH ON JOB WORK BASIS AND WHERE THE A SSESSES HAD NOT SHOWN ANY WORK-IN-PROGRESS AT THE YEAR END, THE SAME WAS ESTIMATED TO BE 50% OF THE JOB RECEIPT OF THE LIKEL Y 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 C ASE AND SUBMISSIONS MADE BY THE ID AR. AS REGARDS THE ADDIT ION MADE IN RESPECT OF ESTIMATED WORK IN PROGRESS, IT IS SEE N THAT THE APPELLANT IN THE INSTANT CASE IS A JOB-WORKER AND P ROCESS GREY CLOTH FOR ITS CUSTOMERS ACCORDING TO THEIR REQUIREM ENT. THE APPELLANT NOT ENGAGED IN ANY MANUFACTURING ACTIVITI ES OF ITS OWN. THE CLOTH PROCESSED BY THE APPELLANT THUS BELO NG TO ITS CUSTOMERS IS PROCESSED BY THE APPELLANT AND. AFTER PROCESSING THE SAME IN ACCORDANCE WITH THE CUSTOMERS REQUIREME NT, IT IS RETURNED. IN THE ABOVE FACTS OF THE CASE THE QUES TION OF SHOWING ANY WORK IN PROGRESS IN THE BOOKS OF ACCOUN T 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 6 ITA NO.2234/AHD/2009 CLOSING STOCK OF THE CONCERNED CUSTOMERS. ON T HE BASIS OF THE COMPLETION OF WORK ON THE CUSTOMERS CLOTH, THE APPELLANT IS ENTITLED TO RECEIVE ITS WORK CHARGES. NO INTERIM P AYMENTS OR ADVANCES PAYMENTS ARE RECEIVED BY THE APPELLANT F ROM ITS CUSTOMERS DURING THE PENDENCY OF THE JOB WORK. THE RECEIPTS FROM THE JOB WORK ARE BEING ACCOUNTED FOR BY THE AP PELLANT 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 ADDIT ION MADE BY THE APPELLANT ON THE CUSTOMER'S CLOTH, WHICH MAY HAVE BEEN AT DIFFERENT INTERMEDIATE STAGES OF PROCESSING AS ON 31.3.2003, NEITHER ANY OPENING STOCK NOR CLOSING ST OCK WAS EVER SHOWN BY THE APPELLANT. AS PER THE PRINCIPLES OF AC COUNTING LAID DOWN BY THE ICAI, UNDER THE SCOPE OF VALUATION OF INVENTORIES IN ITEM 1 (SUB-ITEM (B) OF AS-2 (R EVISED) THE 'WORK-IN-PROGRESS ARISING IN THE ORDINARY COURSE O F BUSINESS OF SERVICE PROVIDER' HAS BEEN SPECIFICALLY SCOPED OUT OF THE SAID STATEMENT. FURTHER, IN THE DEFINITIONS PROVIDED UND ER ITEM 3 OF THE AS-2 'INVENTORIES' HAVE BEEN DEFINED AS 'ASSETS (A) HELD FOR SALE IN THE ORDINARY COURSE OF BUSINESS (B) IN THE PROCESS OF PRODUCTION, FOR SUCH SALE' OR (C) IN THE FORM OF MA TERIALS OR SUPPLIES TO BE CONSUMED IN THE PRODUCTION FOR SALE' OR IN THE RENDERING OF SERVICES. SINCE THE APPELLANT WAS NOT ENGAGED IN THE BUSINESS OF SALE OF THE PROCESSED CLOTH OR IN T HE PRODUCTION FOR SALE OF THE PROCESSED CLOTH BUT WAS ENGAGED IN THE BUSINESS OF RENDERING OF SERVICES FOR PROCESSING OF GREY CLO TH 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 L(B) THEREOF. HOWEVER, THE MATERIALS OR SUPPLI ES TO BE CONSUMED IN THE PRODUCTION PROCESS OR IN THE RENDER ING OF SERVICES WOULD EVIDENTLY FAIL IN CATEGORY (C) OF TH E AFORESAID DEFINITIONS' PROVIDED IN ITEM 3 OF THE ACCOUNTING PRINCIPLES LAID DOWN IN AS-2, AND THE SAME WOULD BE REQUIRED T O BE ACCOUNTED FOR BY IT IN THE FORM OF STOCK, WHICH HAS BEEN DONE IN THE INSTANT CASE. THE METHOD OF ACCOUNTING FOLLO WED 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 BELONGI NG THE APPELLANT HAS ALSO CONSISTENTLY FOLLOWED, THE ACCOU NTING POLICY OF RECOGNIZING REVENUE OF COMPLETED CONTRACT METHOD . WHILE THE PRINCIPLES OF RES-JUDICATA ARE NOT APPLICABLE T O THE INCOME- TAX PROCEEDINGS, IT HAS BEEN HELD BY THE COURTS IN SEVERAL 7 ITA NO.2234/AHD/2009 JUDGMENTS: THAT, WHERE THE APPELLANT HAS BEEN FOLLO WING REGULAR SYSTEM OF ACCOUNTING SINCE THE LAST SO MANY YEARS AN SUCH METHOD WAS BASED ON ACCEPTED PRINCIPLES OF ACC OUNTING THERE WAS NO JUSTIFICATION FOR REJECTING THE SAID M ETHOD FOR VALUATION OF STOCK. THIS WOULD ESPECIALLY HOLD IN A CASE WHERE THE PROPOSED CHANGE IN THE METHOD OF VALUATION IS F OUND TO HAVE NO IMPACT, AS IN THE INSTANT CASE, IF THE CHAN GED METHOD ADOPTED BY THE ASSESSING OFFICER WERE APPLIED FOR V ALUATION OF THE OPENING AS WELL AS THE CLOSING STOCK. 14 FOR REASONS DISCUSSED ABOVE IN DETAIL, IN MY OPI NION THERE WAS NO BASIS OR JUSTIFICATION IN MAKING THE ANY EST IMATED ADDITION ON ACCOUNT OF WORK-IN-PROGRESS IS THIS CAS E. THE ADDITION OF RS.12.56.970/- MADE BY THE AO IN RESPEC T OF ESTIMATED WORK IN PROGRESS IS THEREFORE DELETED. TH IS GROUND OF APPEAL IS ALLOWED ' THUS DELETION WAS CONFIRMED BY THE TRIBUNAL. THER EFORE 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. 5.1 FOLLOWING THE VIEW TAKEN IN THE AFORCITED DEC ISION, THE ITAT IN THEIR DECISION DATED 16-07-2010 IN THE CASE OF KRI SHNA ART SILK CLOTH (P) LTD. VS. DCIT IN ITA NO.1264/AHD/2010, IN WHICH CASE ALSO, THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO IN THE LIGHT OF DECISION DATED.26.10.2007 IN THE CASE OF AKRUTI DY EING & PRINTING MILLS PVT. LTD. IN ITA NO.2551/AHD/2006, ALLOWED TH E CLAIM OF THE ASSESSEE. 5.2 IN ANOTHER DECISION DATED 13-05-2011,FOLLOW ING THE VIEW TAKEN BY THE ITAT IN THEIR DECISION DATED 3.04.09 IN ITA NO. 167/AHD/2009 IN THE CASE OF KANHAIYA PROCESSORS PVT. LTD. VS. IT O , WE CONCLUDED AS UNDER: 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE TRIBUNAL I N THE CASE OF KANHAIYA PROCESSORS PRIVATE LTD. (SUPRA) OBSERVED T HAT THE AO COULD NOT BE ABLE TO APPRECIATE THE TRUE NATURE OF THE BUSINESS OF A PROCESSING HOUSE. HE UNDERTOOK THE JOB WORK. THE FA BRIC DOES NOT BELONG TO THE ASSESSEE. THERE IS DIFFERENCE IN RAW MATERIAL AND THE 8 ITA NO.2234/AHD/2009 CONSUMABLES. RAW MATERIAL ONCE CONSUMED DOES NOT LO SE ITS IDENTITY, IT ONLY GETS ITS UTILITY TRANSFERRED. WHI LE THE CONSUMABLES, ONCE CONSUMED, CANNOT BE SEPARATELY IDENTIFIED AND IT LOSES ITS IDENTITY. WHEN THE ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF DYEING AND PRINTING OF ART-SILK CLOTH ON JOB WORK B ASIS, THE RAW MATERIAL DOES NOT BELONG TO THE ASSESSEE. THE ASSES SEE HAS SIMPLY TO INCUR THE EXPENDITURE ON COLOUR, CHEMICAL, WAGES , POWER AND FUEL. COLOUR AND CHEMICALS ARE CONSUMABLES AND ONCE THESE ARE APPLIED TO THE FABRIC UNDER PROCESS, THEY LOSE THEIR IDENTI TY AND CANNOT BE PART OF THE STOCK IN PROCESS. THE ASSESSEE IS VALUI NG THE STOCK BY FOLLOWING THE SAME METHOD CONSISTENTLY IN WHICH THE RE IS NO ILLEGALITY. ON THIS BASIS, ADDITION MADE ON ACCOUNT OF SUPPRESSED WORK-IN- PROGRESS IS DELETED BY THE TRIBUNAL, 'D' B ENCH VIDE ORDER DATED 3RD APRIL, 2009 IN THE OF KANHAIYA PROCESSORS PVT. LTD. (SUPRA). 7.1 THE SIMILAR VIEW HAS BEEN TAKEN IN OTHER CASES RELIED ON BY THE ID. COUNSEL OF ASSESSEE. UNDER THE FACTS AND CI RCUMSTANCES, WE ARE OF THE VIEW THAT THE AO WAS MOT CORRECT IN LAW IN VALUING THE WORK-IN-PROGRESS IN RESPECT OF VARIOUS EXPENSES INC URRED BY THE ASSESSEE RELATING TO FABRIC WHILE IN PROCESS FOR DY EING AND PRINTING. WE. ACCORDINGLY, DELETE THE ADDITION OF RS.4,11,335 /-. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 5.3 IN THE LIGHT OF CONSISTENT VIEW TAKEN IN TH E AFORESAID DECISIONS ON IDENTICAL FACTS AND CIRCUMSTANCES, WE HAVE NO AL TERNATIVE BUT TO ALLOW THE CLAIM OF THE ASSESSEE IN THE INSTANT CASE . THEREFORE, GROUND NO.1 IN THE APPEAL IS ALLOWED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS DISMISSED. 7. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 30-06-2011 SD/- SD/- (D K TYAGI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 30-06-2011 COPY OF THE ORDER FORWARDED TO: 9 ITA NO.2234/AHD/2009 1. MANISH DYEING & PRINTING MILLS PVT. LTD., PLOT N O. 429, GIDC, PANDESARA, INDUSTRIAL ESTATE, SURAT 2. ASST. COMMISSIONER OF INCOME-TAX (OSD-II), RANG E-1, SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD