Kul Bharat, Judicial Member - The Revenue and the assessee have filed appeal and cross-objection respectively against the order of the learned Commissioner of Income-tax (Appeals)-V, Surat, dated October 21, 2008, passed in appeal No. CAS-V/302/2007-08.

First we take up the appeal of the Revenue

2. In this appeal the Revenue has raised the following grounds of appeal :

"1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred, in deleting the addition of Rs. 1,24,012 made by the Assessing Officer on account of work-in-progress, without appreciating the facts of the case.

2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in deleting the addition of Rs. 4,45,327 made by the Assessing Officer on account of bogus purchases, without appreciating the facts of the case.

3. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred, in deleting the addition of Rs. 1,10,125, made by the Assessing Officer on account of rebate and discount, without appreciating the facts of the case."

3. The facts, in brief, are that in this case return of income for the assessment year 2005-06 declaring nil income was filed on October 24, 2005. The assessee is engaged in the business of dying, finishing and printing work of art silk grey fabrics. The case was picked up for scrutiny and the assessment was framed under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). Thereby the Assessing Officer, after discussing the case and examining the details filed by the assessee, made additions on account of disallowance under section 40(a)(ia) of the Act of Rs. 2,64,101, addition of Rs. 1,24,012 on account of work-in-progress and purchases treated as bogus of Rs. 5,55,415. The assessee, feeling aggrieved by the order of the Assessing Officer carried the matter before the learned Commissioner of Income-tax (Appeals), who confirmed the disallowance of Rs. 2,64,101 as was made on account of disallowance under section 40(a)(ia) of the Act. However, the learned Commissioner of Income-tax (Appeals) deleted the addition made on account of work-in-progress to the extent of Rs. 1,10,125 and also deleted the addition made on account of bogus purchase totalling to Rs. 5,55,452 including the amount of rebate and discount amounting to Rs. 1,10,155. The first ground is against deletion of addition made on account of work-in-progress.

4. The learned Departmental representative vehemently argued that the order of the learned Commissioner of Income-tax (Appeals) is erroneous. He strongly supported the order of the Assessing Officer. On the contrary the learned authorised representative supported the order of the learned Commissioner of Income-tax (Appeals) and submitted that the assessee has been following the same method from the inception. He submitted that work-in-progress is not shown in the books of account and this practice was being followed. It is submitted that if the work-in-progress is recorded as on March 31, 2005, the assessee should get the benefit of the same in the next financial year, i.e., on April 1, 2006. It is the submission that while calculating work-in-progress, the Assessing Officer ought to have considered the opening stock work-in-progress also. The Assessing Officer did not consider the work-in-progress in opening stock. The learned authorised representative submitted that the Assessing Officer has wrongly applied the decision of the hon'ble Supreme Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 44/54 Taxman 499. The learned authorised representative relied upon the judgment of the hon'ble High Court of Delhi in the case of CIT v. Mahavir Alluminium Ltd. [2008] 297 ITR 77/168 Taxman 27 (Delhi).

5. We have heard the rival submissions and perused the material available on record. We find that the Assess