Sanjay Trade Corporation, Ahmedabad V. The Jt.CIT, Bhavnagar Range- I, Bhavnagar

ITA 1158/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8583 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B R PAPAT
• Keywords: Rejection of books of accounts; Business income

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM , BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI, MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 1158/ AHD/201 4 ( / ASSESSMENT YEAR: 2009-10) SANJAY TRADE CORPORATION, 321, MADHAV DARSHAN WAGHAWADI ROAD, BHAVNAGAR / VS. JCIT, BHAVNAGAR RANGE 1, BHAVNAGAR. ./ ./ PAN/GIR NO. : AAHFS 4739 F ( !' / APPELLANT ) .. ( #' / RESPONDENT ) !' $ / APPELLANT BY : SHRI B. R. PAPAT, A.R. #' % $ / RESPONDENT BY : SHRI V. K. SINGH, SR. D.R. & '( % )* / DATE OF HEARING 03/04/2018 +,-. % )* / DATE OF PRONOUNCEMENT 09/04/2018 / / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMISS IONER OF INCOME TAX(APPEALS)-XX, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-XX/296/11-12 DATED 28/03/2014 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 26/12 /2011 RELEVANT TO ASSESSMENT YEAR (AY) 2009-10. ITA NO.1158/AHD/14 SANJAY TRADE CORPORATION VS. JCIT ASST.YEAR 2009-10 - 2 - 2. THE SUBSTANTIVE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN 1. CONFIRMING THE ACTION OF THE AO IN REJECTING THE BO OKS OF ACCOUNT; 2. PARTLY CONFIRMING THE ORIGINAL ADDITION OF RS.20,00 ,000/- WHICH WAS MADE BY THE AO ON ACCOUNT OF ALLEGED SUPPRESSED INCOME, AT RS.10,00,000/-. CONSIDERING THE FACTS IN ITS TOT ALITY HE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS IN THE BUSINESS OF SHIP BREAKING. DURING YEAR UNDER CONSID ERATION, THE ASSESSEE HAS DISCLOSED TOTAL SALES OF RS.12,87,33,2 58/- ON WHICH HE HAS DISCLOSED GROSS PROFIT OF RS.1,29,20,813 /- WHI CH GIVE RISE THE G.P. RATE OF 10.04%. THE GROSS PROFIT DECLARED WAS ON HI GHER SIDE AS COMPARED TO LAST YEAR'S GROSS PROFIT RATE OF 3.03% WHICH WAS DECLARED BY HIM ON TOTAL SALE OF RS.13,06,21,516/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE STATED THAT HE HAS DECLARED GROSS PROFIT MORE THAN THREE TIMES THEREFORE, THE S AME COULD BE ACCEPTED. IT WAS FOUND BY THE LD. AO THAT ASSESSEE WAS NOT MAINTAINING DETAILS OF DAY TO DAY OF CONSUMPTION AS WELL AS PRODUCTION OF THE RAW MATERIAL / FINISHED GOODS. IN THE ABSENCE OF DETAILS OF DAY TO DAY CONSUMPTION AS WELL AS PRODUC TION OF RAW MATERIAL SHOWN BY THE ASSESSEE REMAINED UN VERIFIAB LE. THE ASSESSEE WAS REQUIRED TO FURNISH THE BASIS OF SHOWING OF UNC UT SHIP AT 1500 MT. BUT THE ASSESSEE FAILED TO FURNISH THE SAME. 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAS PURCHASED THREE SHIPS. ON VERIFICATION OF THE DETAI LS, IT WAS FOUND THAT SHIP M.V. NOOR AL HUDA, WHICH WAS OF 1121 MT AND WA S PURCHASED ON 12/04/2008 WAS COMPLETELY UTILIZED FOR PRODUCTIO N AND NO CLOSING STOCK FOR THIS SHIP HAS BEEN DISCLOSED AT T HE END OF THE YEAR. ITA NO.1158/AHD/14 SANJAY TRADE CORPORATION VS. JCIT ASST.YEAR 2009-10 - 3 - ON VERIFICATION OF THE SALES, IT WAS NOTICED THAT D URING THE YEAR THE ASSESSEE HAS NOT SOLD ANY SHIP ENGINE, DG SETS AND OTHER MACHINERY. ASSESSEE HAS ALSO FAILED TO DISCLOSE THE WORK IN PR OGRESS OR STOCK OF FINISHED GOODS OF M.V. NOOR AL HUDA AT THE END OF T HE YEAR FROM THE SHIP, ITS ENGINES, DG SETS AND OTHER MACHINERY ARE REMOVED INTACT AND BEING SOLD AS IT IS IN THE MARKET FOR A VERY HA NDSOME PRICE. AS PER AO A ENGINE CAN FETCH A SELLING PRICE OF RS.20/ -LACS TO RS.50 LACS. SIMILARLY, DG SETS MAY HAVE COST UP TO RS.10 LACS, BESIDES OTHER MACHINERY ALSO REMOVED FROM THE VESSEL SUCH AS MOTO RS, PUMPS ETC. THE ASSESSEE HAS NOT DISCLOSED A SINGLE SALE OF SHI P ENGINE, DG SET OR ANY OTHER MACHINERY. THESE ARE BEING SOLD IN MARKET ON NUMBER BASIS. 5. APPELLANT HAS NOT DISCLOSED A SINGLE SALE OF SHI P ENGINE, DG SET BESIDES SOME OTHER MACHINERY. THESE ARE BEING SOLD IN MARKET ON NUMBER BASIS. HOWEVER, AFTER CONSIDERING THE FACT T HAT ASSESSEE WAS HAVING ATLEAST ONE SHIP ENGINE BESIDES SOME OTHER M ACHINERY WITH HIM AS PRODUCED M.V. NOOR AL HUDA. NO SALE OF WHICH OR CLOSING STOCK HAS BEEN DISCLOSED. HOWEVER, AFTER CONSIDERING THE FACT THAT M. V. NOOR AL HUDA WAS COMPARATIVELY SMALL SHIP AND THE E NGINE, DG SETS ETC, MAY BE OF SOME LESSER CAPACITY. THEREFORE, CON SIDERING ALL THESE FACTS ADDITION OF RS.20,00,000/- (RS.15,00,000/- FO R ENGINE, RS.3,00,000/- FOR DG SET AND OTHER MACHINERY OF RS. 2,00,000/-) IS BEING MADE TO THE DECLARED INCOME OF THE ASSESSEE A ND AO REJECTED THE BOOKS OF ACCOUNTS AND ADDITION WAS MADE. 6. AGAINST THE SAID ORDER ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 7. NOW APPEAL IS BEFORE US. ITA NO.1158/AHD/14 SANJAY TRADE CORPORATION VS. JCIT ASST.YEAR 2009-10 - 4 - 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. IN THIS CASE, APPELLANT IS ENGAGED IN THE BU SINESS OF SHIP BREAKING, WHEREIN OLD AND DISCARDED MARINE VESSELS ARE IMPORTED FROM INTERNATIONAL MARKET. THE VESSELS SO PURCHASED ARE DISMANTLED AND THE PRODUCTS OBTAINED THEREFROM ARE SOLD IN THE MARKET. SINCE THE SHIP BREAKING INDUSTRY IS SUBJECTED TO THE LEVY OF EXCISE DUTY, COMPLETE QUANTITATIVE RECORDS ARE MAINTAINED IN THE REGISTERS PRESCRIBED UNDER THE CENTRAL EXCISE LAW. THE AO SHO ULD HAVE APPRECIATED THE FACT THAT THERE WAS THE SHIP SETTLE S ON THE SEA BED, THERE WAS NO MECHANISM INVENTED IN THIS WORLD WHICH MAY ENABLE A PERSON TO ACTUALLY WEIGH THE SHIP OR PART THEREOF, WHICH MAY IN TURN, ENABLE THE APPELLANT TO PRECISELY WORK OUT THE EXAC T QUANTITY OF SHORTAGE AND OF THE CORRESPONDING STOCK OF UNCUT PO RTION OF SHIP ON ANY PARTICULAR DAY. THESE HAVE TO BE ESTIMATED BY T AKING A LOGICAL BASE AS VERY MUCH EXPLAINED BY THE APPELLANT BEFORE THE LOWER AUTHORITIES. IT IS POSSIBLE FOR APPELLANT TO PRECIS ELY WORK OUT THE EXACT QUANTITY OF DAY TO DAY BASIS IN THE SHIP BREAKING I NDUSTRY. THE APPELLANTS CONTENTION WAS WHENEVER AN OLD AND DISC ARDED MARINE VESSEL IS IMPORTED FOR BREAKING, THE SAME IS BEING NEGOTIATED AND DOCUMENTED ON THE BASIS OF HER WEIGHT AS MENTIONED IN VARIOUS CONSTRUCTION AND OWNERSHIP DOCUMENTS THAT MAY BE AV AILABLE EITHER WITH THE SELLER OF THE SHIP OR IN THE RECORDS OF LL OYDS, AN INTERNATIONAL AGENCY OPERATING IN THIS REGARD. EVERY SINGLE DOCUM ENT INVARIABLY MENTIONS THE WEIGHT OF THE SHIP WHEN SHE WAS BUILT A FEW DECADES BACK. AS AGAINST THIS, THE ACTUAL WEIGHT OF THE SHI P IS SUBSTANTIALLY LESS, WHEN SHE IS IMPORTED AND BEACHED IN THE SHIP BREAKING PLOT FOR BREAKING. 9. APPELLANT CITED AN ORDER OF ITAT, AHMEDABAD BENC H IN ITA NOS.1963 & 2274/AHD/2014 FOR ASST YEAR 2010-11, IN SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE, RELIEF WAS GIVEN TO THE APPELLANT. IN ITA NO.1158/AHD/14 SANJAY TRADE CORPORATION VS. JCIT ASST.YEAR 2009-10 - 5 - THE SAID CASE, ASSESSEE IS ENGAGED IN SHIP BREAKING INDUSTRY, WHEREBY OLD AND USED VESSELS ARE DISCARDED, GENERATING MOST LY OLD & USED PLATES, MELTING SCRAP ETC. OLD & DISCARDED SHIPS AR E BOUGHT BY THE ASSESSEE FOR DISMANTLING PURPOSE. THE SHIPS ARE PUR CHASED ON THE WEIGHT BASIS, FOR WHICH, THE REFERENCE WAS MADE TO THE WEIGHT WHEN IT WAS MANUFACTURED AND CHANGES IF ANY, MADE DURING ITS LIFE CYCLE. MOST OF THESE RECORDS ARE MAINTAINED IN THE TRIM & STABILITY BOOK OF THE VESSEL. THOUGH, THE SHIPS ARE PURCHASED ON WEIG HT BASIS, IT IS NOT POSSIBLE TO WEIGH THE SHIP BEFORE OR WHILE TAKING T HE DELIVERY. HENCE, THE SHIP IS PURCHASED ASSUMING THE WEIGHT MENTIONED IN THE MEMORANDUM OF AGREEMENT AS CORRECT. 10. APPELLANT HAS ALSO FILED AUDITED ACCOUNT IN WHI CH WE DO NOT FIND ANY INFIRMITY AND CONSIDERING THE CO-ORDINATE BENCHS JUDGMENT AND FACTS AND CIRCUMSTANCES OF THE CASE, WE ALLOW A PPEAL OF THE APPELLANT AND DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. 11. IN THE RESULT, APPEAL FILED BY THE APPELLANT IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09/04/2018 SD/- SD/- EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EKUHK CKSJM EGKOHJ EGKOHJ EGKOHJ EGKOHJ IZLKN IZLKN IZLKN IZLKN YS[KK LNL; U;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; YS[KK LNL; U ;KF;D LNL; ( MANISH BORAD ) (MAHAVIR PRASA D) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/04/2018 PRITI YADAV, SR. PS ITA NO.1158/AHD/14 SANJAY TRADE CORPORATION VS. JCIT ASST.YEAR 2009-10 - 6 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #' / THE RESPONDENT. 3. 012) & 3) / CONCERNED CIT 4. & 3) ( !) / THE CIT(A)-XX, AHMEDABAD. 5. 678 )'12 , !* 12. , 0 / DR, ITAT, AHMEDABAD 6. 89 :( / GUARD FILE. % & / BY ORDER, #6!) ) //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 04/04/2018 (DICTATION-PAD 5 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05/04/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER .. 10. DATE OF DESPATCH OF THE ORDER