ASST CIT CIR 43, KOLKATTA V. ZENSTAR IMPEX, MUMBAI

ITA 2067/KOL/2013

• Counselvise Citation: 206719914 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KARDA M
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Business expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDI CIAL MEMBER . / ITA NO. 2067 / KOL ./ 2013 ( / ASSESSMENT YEAR : 2007 08 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 43, KOLKATA .. / APPELLANT V/S ZENSTAR IMPEX 192, D.N. ROAD FORT, MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAAFZ1038M / ASSESSEE BY : SHRI VIJAY MEHTA / REVENUE BY : SHRI A.K. KARDAM / DATE OF HEAR ING 06 .08.2014 / DATE OF ORDE R 14.08.2014 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER DATED 25 TH JANUARY 20 10 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXX, KOLKATA, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3), OF THE INCOME TAX ACT, 1961 ZENSTAR IMPEX 2 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR 2007 08 , ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION IN VIEW OF TH DECISION OF HON'BLE SUPREME COURT IN BHARAT EARTH MOVERS V/S CIT, BUT THE FACTS AND CIRCUMSTANCES IN THIS CASE IS DIFFERENT FROM THE PRESENT CASE. HENCE THE ADDITION MADE BY THE ASSESSING OFFICER FOR ` 9,22 ,777 AS PROVISIONAL COMMISSION IS NOT ASCERTAINED AND IT IS TREATED AS CONTINGENT LIABILITY AND RIGHTLY DISALLOWED. IN THE CASE OF SHRI SAJJAN MILLS LTD. V/S CIT, IT IS SAID THAT MERE PROVISION WITHOUT FINALIZATION AND QUANTIFICATION NOF EXPENSES DOES NOT CONSTITUTE AN ASCERTAINED LIABILITY, FOR WHICH NO DEDUCTION IS ALLOWABLE. HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER IS JUSTIFIABLE IN THIS CASE. 2. THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION ON THE GROUND THAT THE ASSESSING OFFICER HAS NEITHER BROUGHT ANY MATERIAL FACTS ON RECORD TO SHOW THAT THE APPELLANT WAS SUPPRESSING ITS BURNING LOSS NOR ANY DEFECTS HAS BEEN POINTED OUT. THE ASSESSEE HAS CLAIMED 5.43% BURNING LOSS IN WHICH THE ASSESSING OFFICER HAS DISALLOWED ONLY 0.74% AMOUNTS TO 9,76,821. THE ASSESSEE AND THE LEARNED CIT(A) ALSO NOT GIVEN ANY SPECIFIC REASON FOR ALLOWING FULL BURNING LOSS @ 5.43% AS CLAIMED BY THE ASSESSEE. HENCE, DISALLOWANCE OF 0.74% IS VERY NOMINAL AND JUSTIFIED ADDITION MADE BY THE ASSESSING OFFICER. 2 . FAC TS IN BRIEF : THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURING AND EXPORT OF STEEL PRODUCTS VIZ. S.S. BI LLETS, BARS AND S.S. WIRES, ETC. THE ASSESSING OFFICER, ON A PERUSAL OF DETAILS OF COMMISSION, NOTICED THAT A SUM OF ` 9,22,777, HAS BEEN INCLUDED IN THE FORM OF PROVISION FOR THE MONTH OF MARCH 2007. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE HAD SUBMITTED AS UNDER: PLEASE NOTE THAT THE PROVISION FOR COMMISSION ON EXPORT SALES IS BASED ON ACTUAL EXPORT THAT HAVE TAKEN PLACE DURING THE F.Y. ZENSTAR IMPEX 3 20006 07. THE PROVISION HAS BEEN MADE ON FIRM AND REALISTIC BASIS. THE ACTUAL PAYMENT OF COMMISSION HAS TAKEN PLACE DURING THE FINANCIAL YEAR AND THE DOCUMENTARY EVIDENCE AGAINST THE SAME (BANK ADVISE FOR PAYMENT MADE TO TH E AGENT, M/S. ZENSTAR IMPEX COVERING LETTER FOR PAYMENT. FROM A2 AGENTS DEBIT NOTE) HAS ALREADY BEEN SUBMITTED TO YOU. NATURE OF THIS COMMISSION CANNOT BE CONSIDERED AS CONTINGENT LIABILITY. 3 . THE ASSESSING OFFICER, HOWEVER, REJECTED THE ASSESSEES EXPLANA TION AND HELD THAT MERE PAYMENT WITHOUT FINALISATION / DETERMINATION OF ALL EXPENSES DOES NOT CONSTRU E ASCERTAINED LIABILITY AND THEREFORE, DISALLOWED THE SAME AS CONTINGENT LIABILITY. WHILE DOING SO, THE ASSESSING OFFICER RELIED UPON THE HON'BLE SUPREME C OURT IN SHREE SAJJAN MILLS LTD. V/S CIT, [ 1985] 156 ITR 585 (SC). 4 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ASSESSEE HAD MADE THE PROVISIONS OF COMMISSION OF ` 9,22,777, BASED ON MERCANTILE SYSTEM OF ACCOUNTING ONLY AND THE EXPE NDITURE IS ALLOWABLE IF IT BECOMES DUE DURING THE PREVIOUS YEAR , IRRESPECTIVE OF THE FACT WHETHER IT HAS BEEN PAID DURING THE YEAR OR NOT. THE SAID AMOUNT OF PAYMENT OF COMMISSION HAVE BEEN PAID IN THE SUBSEQUENT ASSESSMENT YEAR IN 2008 09, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE ASSESSEE HAS ALSO SUBMITTED BANK ADVICE FOR COMMISSION PAID TO THE AGENTS AND ALSO LETTER TO THE BANK BY THE ASSESSEE FOR MAKING THE COMMISSION PAYMENT TO THE AGENT, ETC., AND THE SAME HAS NOT BEEN REBUTTED. IN SUPPORT OF TH E CONTENTION, THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME ZENSTAR IMPEX 4 COURT IN BHARAT EARTH MOVERS V/S CIT, [2010] 245 ITR 428 (SC). THE LEARNED COMMISSIONER (APPEALS) CALLED FOR THE REMAND REPORT OF THE ASSESSING OFFICER AND ALSO THE COUNTER SUBMISSIONS BY THE ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) , A FTER CONSIDERING THE ENTIRE MATERIAL ON RECORD, HELD THAT THE PAYMENT OF COMMISSION TO THE AGENT BECOMES PAYABLE ON THE EXPORT MADE BY THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR AND THE AM OUNT OF COMMISSION IS ASCERTAINED LIABILITY. HE HELD THAT SUCH A PAYMENT CANNOT BE HELD TO BE CONTINGENT LIABILITY AND, THEREFORE, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN BHARAT EARTH MOVERS (SUPRA) SUCH A LIABILITY IS TO BE ALLOWED ON ACCR UAL BASIS. HE FURTHER NOTED THAT THE ASSESSEE HAS GIVEN DETAIL WORKING OF COMMISSION PAYABLE WHICH WAS AROUND 2% OF SALE BILL RAISED BY THE ASSESSEE AND IN THE NEXT FINANCIAL YEAR SUCH PAYMENT HAS BEEN MADE. THUS, HE DELETED THE SAID DISALLOWANCE. 5 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SO LONG AS THE PAYMENTS ARE IN THE NATURE OF PROVISIONS, THE SAME SHOULD NOT BE ALLOWED. HE THUS STRONGLY RELIED UPON THE REASONING GIVEN BY THE ASSESSING OFFICER. 6 . BEFORE US, THE LEARNED COUNSEL S UBMITTED THAT THE DETAILS OF PROVISION FOR EXPORT COMMISSION WHICH PROVIDES THE INVOICE NUMBER, DATE, NAME OF CUSTOMER, VALUE OF SALE AND THE RATE OF COMMISSION PAYABLE. HE SUBMITTED THAT SUCH A SYSTEM OF ACCOUNTING HAS BEEN ZENSTAR IMPEX 5 ALLOWED IN ALL THE YEARS. IN AN Y CASE, HE SUBMITTED THAT SUCH A PAYMENT HAS ALREADY BEEN MADE IN THE EARLIER PART OF THE IMMEDIATE FINANCIAL YEAR, THEREFORE, NO DISALLOWANCE SHOULD BE MADE. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS, IT IS EVIDENT THAT THE ASSESSEE HAS BEEN PAYING COMMISSION ON A CERTAIN PERCENTAGE TO THE AGENTS ON THE EXPORTS SALES MADE. ON SUCH SALES, THE ASSESSEE HAS BEEN PAYING COMMISSION @ 2% TO 3%. FOR MOST OF T HE INVOICES THE COMMISSION HAS BEEN PAID BEFORE 31 ST MARCH 2007. ONLY FOR THE PA S T OF THE SUM AGGREGATING ` 9,22,777, THE COMMISSION ON THE SALE MADE REMAINED PAYABLE FOR WHICH THE ASSESSEE HAS MADE A PROVISION , WHICH TOO HAS BEEN QUANTIFIED ON THE BASIS O F FIXED RATE AND PART PRACTICE. OTHERWISE ALSO, I T IS A GENUINE BUSINESS EXPENDITURE WHICH IS ALLOWABLE AS DEDUCTION AND THE SAME HAS BEEN QUANTIFIED ON THE BASIS OF CERTAIN PERCENTAGE EVEN THOUGH IT HAS BEEN DISCHARGED IN A NEAR FUTURE DATE. THERE IS A RE ASONABLE CERTAINTY IN THE QUANTIFICATION OF THE COMMISSION PAYABLE AND, THEREFORE, SUCH A PROVISION IS TO BE ALLOWED IN THIS YEAR ONLY . MOREOVER, IT IS SEEN THAT IN THE SUBSEQUENT YEAR SUCH A PAYMENT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IN VIEW OF T HESE FACTS, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING RECORDED BY THE LEARNED ZENSTAR IMPEX 6 COMMISSIONER (APPEALS) AND THE SAME IS AFFIRMED. GROUND NO.1, RAISED BY THE DEPARTMENT IS DISMISSED. 8 . GROUND NO.2, RELATES TO ADDITION OF ` 9,76,821, ON ACCOUNT OF WA STAGE / SHORTAGE CLAIMED BY THE ASSESSEE IN THE PROCESS OF MANUFACTURING OF S.S. BILLETS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS BEEN USING S.S. BILLETS AS PRINCIPAL RAW MATERIAL AND AT THE TIME OF CONVERSION OF S.S. BILLETS THROUGH ROLLING P ROCESS, THERE SHOULD HARDLY BE ANY SHORTAGE OR LOSS, BECAUSE THE SCRAP / RESIDUAL PART OF S.S. BILLET IS AGAIN USED FOR RE ROLLING. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY THE WASTAGE / SHORTAGE OF S.S. BILLETS. THE ASSESSEE FURTHER SUBMITTE D THAT DURING THE ROLLING PROCESS, THE WASTAGE OCCURRED DUE TO BURNING LOSS AND SCRAP DUE TO END CUTTING COBLES , WHICH ARE KEPT BY THE JOB WORKERS . THE BURNING LOSS AMOUNTS TO APPROXIMATELY 3.74%. THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION AN D HELD THAT THE BURNING LOSS AND LOSS DUE TO CUT END SCRAP SHOULD BE VERY NEGLIGIBLE AND THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO PROVE THAT ITS CLAIM FOR CUT ENDS SCRAP IS RETAINED BY THE JOB WORKERS. AFTER DETAIL REASONING, THE ASSESSING OFFICER HE LD THAT SUCH A SHORTAGE WASTAGE OR BURNING LOSS SHOULD BE ALLOWED AT 3% AND 0.75% CANNOT BE ALLOWED. SUCH A REASONING BY THE ASSESSING OFFICER HAS BEEN GIVEN AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER. ZENSTAR IMPEX 7 9 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMI TTED THAT DURING THE ROLLING PROCESS, FOLLOWING TYPES OF WASTAGE IS GENERATED. BURNING LOSS (IRRECOVERABLE IN NATURE) COBBLES (SALEABLE AS SUCH) RE HEAT BILLETS (REUSABLE/SALEABLE AS SUCH) SCRAP AND END CUTTING (METALLIC LOSS RECOVERABLE IN THE FORM OF S CRAP SALES) 10 . FURTHER, THE ASSESSEE DOES NOT OWN MANUFACTURING ACTIVITY AND ALL THE WORK ARE DONE ON JOB WORK BASIS OUTSIDE THE PREMISE. THE SCRAP WHICH IS GENERATED IN THE PRODUCTION PROCESS IN THE FACTORY OF JOB WORKERS ARE KEPT BY THEM AND THE VALUE OF SCRAP SALE IS INCLUDED IN THE LOCAL SALES ON WHICH EXCISE DUTY HAS BEEN PAID. THE OBSERVATION OF THE ASSESSING OFFICER THAT THE SCRAP RETAINED BY THE JOB WORKERS IS EXCESSIVE IS NOT CORRECT. THE LOSS OF 3.74% IS AN ACCOUNT OF BURNING LOSS AS WELL AS THE SC RAP IN THE FORM OF CUT END WHICH ARE RETAINED BY THE JOB WORKERS. THE ASSESSEE HAD GIVEN A WORKING OF LOSS IN THE FOLLOWING MANNER: PARTICULARS QTY (MT) QTY (MT) CONSUMPTION DURING THE YEAR BILLETS CONSUMED 5588.48 REHEAT CONSUMED 222.98 5811.463 PRODUCTION DURING THE YEAR ROLLED PRODUCTION 5284.20 ZENSTAR IMPEX 8 REHEAT GENERATE 208.20 COBBLES GENERATE 101.90 5594.298 LOSS ON PRODUCTION (MT) 217.165 LOSS ON PRODUCTION (%) (BURNING LOSS & END CUT SCRAP) 3.74% ITEM QTY (MT) PRODUCED DURING THE YEAR ALL OCATION OF SCRAP ON PRO RATA BASIS OF PRODUCTION (MT) ROLLED 5284.20 99.57 ANNEALED & PICKLED 171.28 3.23 BRIGHT BARS 5859.06 110.39 WIRES 1461.37 27.53 TOTAL 12775.91 240.72 11 . THE LEARNED COMMISSIONER (APPEALS), AFTER CALLING FOR THE REMAND REPORT AN D ALSO INVITING THE ASSESSEES OBJECTION, HELD THAT THE ASSESSEES CONTENTION THAT CUT END SCRAP GENERATED IN THE PROCESS HAVE BEEN SOLD AS SCRAP AND DULY DISCLOSED IN THE BOOKS OF ACCOUNT APPEARS TO BE CORRECT ON RECORD AND ALSO INCORPORATED THE DETAILS O F SUCH SALES AT PAGE 13 OF THE ORDER. THE LEARNED COMMISSIONER (APPEALS) ALSO PERUSED THE BILLS RELATING TO SALE OF SCRAP FROM THE PREMISE OF THE JOB WORKERS AND FOUND THAT THE ASSESSEE HAS VALUED THE SCRAP SALES OF 240.740 MTS AT ` 62,29,172, WHICH HAS BE EN DISCLOSED IN LOCAL SALES AND, THEREFORE, THE SAME HAS BEEN REDUCED FROM THE ZENSTAR IMPEX 9 SHORTAGE SHOWN. THUS, THE ASSESSEES LOSS WHICH IS RECOVERABLE WILL COME DOWN TO 117.590 MTS WHICH COME S TO 2 . 0 2%. THUS, HE HELD THAT EVEN IF IT IS ASSUMED THAT SCRAP RELATED RO LL WAS LOSS, THEN WHAT IS BEING SHOWN BY THE ASSESSEE IS STILL L A ST AND IT IS MUCH LOWER THAN 3.75% AS CALCULATED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS BEEN UNABLE TO CONTRADICT THE ASSESSEES CONTENTION REGARDING SCRAP SALES INCLUDING SCRAP GENERATED FROM THE ROLLING PROCESS IN THE REMAND REPORT . FURTHER, HE HELD THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT OR THE PRODUCTION OF RECORD BEFORE REJECTING THE BURNING LOSS. ACCORDINGLY, HE DELETED THE ADDITION . FOR THE SAKE OF PROPER APPRECIATION, THE RELEVANT FINDING OF THE LEARNED COMMISSIONER (APPEALS) IS REPRODUCED HERE BELOW: 2.3 T H E S U BM I SS I ONS OF T HE APPE L LANT AND THE REMAND REPORT OF THE A . O . H A VE B OTH BE E N CO N S I DERED . IT I S SEEN THAT THE A . O . HAS E X AMINED THE B URN I NG LOSS / CUT END W ASTAGE I N PRODUCT I ON ' RO L LING ' PRODUCT I ON PROCESS W H I CH H AS B EEN SHOWN BY THE APPEL L ANT AT 3.74 % AS MENTIONED IN THE ASSESSMENT ORD ER I S REPRODUCED AS UNDER : ROLLING PROCESS COBBLES REHEAT PARTICULARS OPENING STOCK 6 6.01 81.30 PRODUCTION 101.90 208.20 CONSUMPTION 222.98 SALE 75.39 19.18 CLOSING STOCK 92.52 47.33 ZENSTAR IMPEX 10 PARTICULARS QUANTITY BILLET CONSUMED 5588.48 M.T RE HEAT CONSUMED 222.98 M.T 8511.463 M.T PRODUCTION QUALITY ROLLED PRODUCTION 5284.20 M.T RE HEAT GENERATE 208.20 M.T COBBLES GENERATE 101.90 M.T 5594.298 M.T LOSS ON PRODUCTION 217.16 M.T (3.74%) THE EXPLANATION OF THE APPELLANT REGARDING THE LOSS IN PRODUCTION OF 3.74% WAS NOT ACCEPTED BY THE A.O. AND RESTRICTED TO 3% BASICALLY ON THE G ROUND THAT THE APPELLANT'S LOSS DUE TO CUT END/SCRAP SHOULD BE VERY NEGLIGIBLE AND THAT THE CUT ENDS AND SCRAPS WERE RETAINED BY THE JOB WORKERS RESULTING IN THE SHORTAGE OF 3 . 4%. THE A.O. ALSO HELD THAT THE APPELLANT'S CLAIM THAT CUT ENDS AND SCRAP RETAIN ED BY THE JOB WORKERS. THE A.O. HELD THAT THE APPELLANT CAN CLAIM REVISED BACK OF CERTAIN CUT END AND SCRAP FROM THE JOB WORKERS WHICH HAS BEEN DONE AND THIS IS SO CALLED CHARITABLE ACT OF THE APPELLANT I N ALLOWING THE JOB WORKERS TO RETAIN SALEABLE SCRAP AND CUT ENDS IS NOT BELIEVABLE AND THEREFORE RESTRICTED THE APPELLANT'S CLAIM OF LOSS FROM SHORTAGE AT 3.74% TO 3%. NOW IN APPEAL IT HAS BEEN SUBMITTED THAT THE CUT ENDS AND SCRAP GENERATED IN THE PROCESS WAS NOT RETAINED BY THE JOB WORKERS BUT ACTUALLY S OLD AS SCRAP AND DISCLOSED BY THE APPELLANT IN FACT ON WHICH EXCISE DUTY HAS ALSO BEEN PA I D. THE DETAILS OF SUCH SALES GIVEN BY THE APPELLANT ARE REPRODUCED AS UNDER: ITEM QTY (MT) PRODUCED ALLOCATION OF SCRAP ON PRO RATA BASIS OF PRODUCTION (MT) ROLLE D 5284.20 99.57 ANNEALED & PICKLED 171.28 3.23 BRIGHT BARS 5859.06 110.39 WIRES 1461.37 27.53 TOTAL 12775.91 240.72 ZENSTAR IMPEX 11 THUS ACCO R D I NG TO THE APPE L LANT SCRAP SA L ES OF 240.74 M T V A L UED AT R S . 62 , 29 ,1 72 / - H AD BEE N D I SC L OSED IN THE L OCA L SA L ES AND T H EREFO R E T HE SAME R EDUCED FROM THE SHORTAGE SHOWN . THE APPE LL ANT ' S L OSS WHIC H I S I RRECOVERAB L E W OU L D COME DOWN TO 117.59 MT I . E . 2 . 02% . THE EV I DENCE REGARD I NG SCRAP SA L E IN THE FOR M O F T H E I N V O I CES AND T H E CERTIF I CATE OF T HE J OB W ORKER M / S. I ND I A STEE L WORKS LTD . WH I CH HAS BEEN SUBM I TTED TO SUBSTANTIATE THE CLA I M TH AT THE SCRAP WAS SO L D F R OM THE PREM I SES OF TH I S CONCERN HAS BEEN CON S I DERED . T H E A.O. HAS ON LY C L A I MED THAT THE DETA IL S H A V E N O T BEEN SUBM I T T ED DUR I NG THE COURSE OF ASSESSMENT PROCEED I NGS , HO W EVE R C ONS I DER I NG THE FACTS THA T THIS SALE HAD ALREADY BEEN REF L ECTED BY THE A P PE LL AN T IN THE P R O FIT & LOSS ACCO UNT, THE E VI DENCES A R E ADM I TTED U N DER RU L E 4 6A . T H E DETAI L S OF L O C A L SA L ES HAVE BEE N F IL ED IN ASSESSMENT PROCEED I NGS AND I T I S CLA I MED THAT TH I S SCRAP SA L ES O F 240.72 MT . FOR RS . 62 , 29 , 172 / - WERE P AR T OF T H E SA M E . I T I S THE R EFO R E C L EAR THAT THE A . O . HAS NOT CO N S I DE R ED THE V A L UE OF S U CH SCRAP SA L ES W H IL E WOR KI NG OUT THE BUR NI NG L OSS /W ASTAGE I N THE C ASE OF THE APPELLANT AND THE BENEFIT OF TH I S SCRAP SALE I S TO BE ALLOWED FOR WO RK IN G O U T THE BU R N I NG L OSS . THE APPE LL ANT H AS WORKED OUT T H E BURN I NG L OSS AT 2.02 % AF T ER CONS I DE RI NG T H E SCRAP GE N ERATED OUT OF P R ODUCT I ON O F RO LL ED F ROM SS BILLETS TO THE E X TENT OF 99.57 MT . WHICH HAS BEEN SOLD. THEREFORE, EVEN IF I T I S ASS U MED THAT T H E SCRAP RE L ATED TO RO LL ED WAS L ESS THAN W HAT I S B E I NG S H O WN B Y T H E APPE LL A NT ST ILL THE L OSS W OULD BE MUCH L OWE R THAN 3 . 74 % A S CA L CULATED BY THE A . O. IN FACT THE A.O. H AS NOT BEEN ABLE TO CONTRADICT THE CON TE N T I O N O F THE APPE LL AN T REGA R D I NG SC R A P SA L E I N C L UD I NG SC R AP GENERATED F ROM R O LL ED AS ABO V E , IT I S FU RT H E R SEE N T H AT THE A . O . APART F R OM Q U EST I ON IN G T HE RECOVE R Y OF SCRAP , HAS NOT BROUGHT ANY DEFECTS I N THE BOO K S OF ACCOUNTS OR T HE PRODUC TI O N R ECORD O F T H E APPE LL ANT BEFORE REJECT I NG T HE BURN I N G L OSS WHI C H I S N E I T H E R J US TIFI ED N OR B ASED ON MATER I AL FACTS . FURT H E R AS MENT I ONED ABOVE EVE N THE CA L CU L AT I ON OF BURN I NG LOSS TAKEN BY THE A.O. I S NOT SUBST A NT I A LL Y BASED ON THE COR R ECT FACTS AND F I GURES. THERE F ORE , CONS I DER I NG THE TOTA LI T Y OF C IRC U M STANC ES A N D THE EV I DENCES SUBM I TTED , I T I S H E L D T H AT T H E A.O . W AS NOT J UST I F I ED I N D I SA LL O WI NG BURN I NG LOSS/WASTAGE TO THE E X TENT O F 12 . BEFORE US, BOTH THE PARTIES RELIED UPON THE RESPECTIVE ORDERS. 13 . AFTER HEARING THE RIVAL SUBMISSIONS AND ALSO ON A PERUSAL OF T HE IMPUGNED ORDER, WE FIND THAT THE ASSESSEES CONTENTION THAT IT HAS SHOWN THE SALE OF SCRAP GENERATED DURING THE COURSE OF PROCESS HAS ZENSTAR IMPEX 12 NOT BEEN REBUTTED AND SUCH A SALE HAS BEEN ALLOCATED ON PRO RATA BASIS ON PRODUCTION. THE FINDING OF THE LEARNED COMMIS SIONER (APPEALS) THAT IF THE SCRAP SALE OF 240.740 MTS IS REDUCED FROM THE SHORTAGE SHOWN THEN THE ASSESSEES IRRECOVERABLE LOSS IS ONLY 2.02% WHICH IS MUCH BELOW THE 3.74% WORKED OUT BY THE ASSESSING OFFICER HAS NOT B EEN DISPUTED BEFORE US . FURTHER, SUCH AN ADDITION CANNOT BE SUSTAINED WITHOUT FINDING ANY DEFECT EITHER IN THE PRODUCTION RECORD OR IN THE BOOKS OF ACCOUNT OR IN THE SCRAP SALES SHOWN AND ADJUSTED BY THE ASSESSEE, THEN THERE IS NO JUSTIFICATION OF MAKING ANY ADDITION SIMPLY ON AD HOC MANNER AS DONE BY THE ASSESSING OFFICER BY HOLDING THAT 0.74% OF THE LOSS CLAIMED BY THE ASSESSEE IS EXCESSIVE. ACCORDINGLY, THE ADDITION OF ` 9,76,821, DELETED BY THE LEARNED COMMISSIONER (APPEALS) IS AFFIRMED. THUS, GROUND NO.2, RAISED BY THE DEPARTMENT IS DISMIS SED. 14 . 14 . IN THE RESULT, REVENUES APPEAL IS DISMISSED . 14 TH AUGUST 2014 ORDER PRONOUNCED IN THE OPEN COURT O N 14 TH AUGUST 2014 SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 14 TH AUGUST 2014 ZENSTAR IMPEX 13 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI