M/s. P.Patel Ship Breaking CO., Bhavnagar V. The Jt.CIT, Range-2, Bhavnagar

ITA 2102/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6213 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 06-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Rejection of books of accounts; Business income; Assessment record
• Section: 143(3); 145; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 2102/AHD/2014 (ASSESSMENT YEAR: 2010-11) M/S. P. PATEL SHIP BREAKING CO., 203/B, LEELA EFFCE, WAGHAWADI ROAD, BHAVNAGAR - 364001 APPELLANT VS. THE JCIT, RANGE 2, BHAVNAGAR RESPONDENT & ITA NO. 2276/AHD/2014 (ASSESSMENT YEAR: 2010-11) ACIT, CIRCL-2, BHAVNAGAR APPELLANT VS. M/S. P. PATEL SHIP BREAKING CO., 203/B, LEELA EFFCE, WAGHAWADI ROAD, BHAVNAGAR - 364001 RESPONDENT PAN: AACFP5853A /BY ASSESSEE : SHRI T. P. HEMANI, A.R. /BY REVENUE : SHRI PRASOON KABRA, SR. D.R /DATE OF HEARING : 16.11.2017 /DATE OF PRONOUNCEMENT : 31.01.2018 ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 2 - ORDER PER S. S. GODARA, JUDICIAL MEMBER THE ASSESSEE AND REVENUE HAVE FILED THEIR INSTANT C ROSS APPEALS FOR ASSESSMENT YEAR 2010-2011 AGAINST THE CIT(A)-XX, AH MEDABADS ORDER DATED 02.05.2014, IN CASE NO. CIT(A) -XX/47/13-14, IN PRO CEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILES PERUSED. 2. WE COME TO ASSESSEES APPEAL ITA NO.2102/AHD/201 4 SUFFERING FROM 11 DAYS DELAY IN FILING. THE ASSESSEE HAS PLACED ON R ECORD ITS ACCOUNTANTS CONDONATION AFFIDAVIT DATED 08.05.2017 SOLEMNLY AVE RRING THEREIN THAT HE COULD NOT PASS ON THE LOWER APPELLATE ORDER TO THE ARGUIN G COUNSEL DUE TO INADVERTENCE. LEARNED DEPARTMENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT DISPUTING CORRECTNESS THEREOF DURING THE COURSE OF HEARING. WE THEREFORE CONDONE THE IMPUGNED DELAY OF 11DAYS IN FILING OF ASSESSEES APPEAL ITA NO.210 2/AHD/2014. THE SAME IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3. THE ASSESSEE APPEARS TO HAVE PLEADED THREE SUBST ANTIVE GROUNDS IN ITS INSTANT APPEAL INTER ALIA CHALLENGING THE CIT(A)S ORDER UPHOLDING ASSESSING OFFICERS ACTION REJECTING ITS BOOKS U/S.145 OF THE ACT AS WELL AS PARTLY AFFIRMING HIS ASSESSMENT ACTION MAKING UNACCOUNTED MACHINERY/ DG SETS/ENGINE SET OF RS.55LACS TO THE EXTENT OF RS.10LACS ON LUMP SUM BA SIS AS WELL AS IN PARTLY CONCURRING WITH UNACCOUNTED OIL SALE OF RS.10,57,24 0/- TO THE EXTENT OF RS.1LAC ONLY; RESPECTIVELY. THE REVENUES APPEAL ITA NO.22 76/AHD/2014 ON THE OTHER HAND RAISES ONLY THE LATTER TWO ISSUES HEREINABOVE IN SEEKING TO REVIVE THE ORIGINAL UNACCOUNTED ADDITION FIGURES OF RS.55LACS AND RS.10 ,57,240/- (SUPRA); RESPECTIVELY IN ENTIRETY. 4. WE NOW ADVERT TO ASSESSEES FIRST GRIEVANCE OF R EJECTION OF BOOKS OF ACCOUNTS BY LOWER AUTHORITIES AFTER INVOKING SECTIO N 145 OF THE ACT. THE ASSESSEE ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 3 - ADMITTEDLY IS ENGAGED IN SHIP BREAKING BUSINESS. T HE ASSESSING OFFICER REJECTED ITS BOOKS AFTER CONSIDERING AVERAGE PURCHASE PRICE OF SHIPS AVERAGE PRODUCTION COST, AVERAGE SALE PRICE, AVERAGE PURCHASE PRICE ET C. IN ASSESSMENT ORDER DATED 14.03.2013. HE WAS INTER ALIA OF THE VIEW THAT HE HAD NOT BEEN MAINTAIN THE BOOKS OF ACCOUNTS SHOWING ACCURATE CONSUMPTION OF RAW MAT ERIALS, FINISHED GOODS, REMAINING STOCK/SHORTAGE SINCE IT DISCLOSED ONLY TH E FINISHED GOODS, IT HAD NOT PLACED ON RECORD DAY TO DAY CONSUMPTION OF RAW MATE RIAL, SHORTAGE DETAILS HAD NOT BEEN DISCLOSED SINCE THE SAME WAS TAKEN BALANCING F IGURE ONLY. IT HAD MERELY ESTIMATED UNCUT SHIPS ETC. ALL THESE REASONING RESU LTED IN REJECTION OF ASSESSEES BOOKS U/S.145 OF THE ACT. 5. THE CIT(A) CONFIRMS ASSESSING OFFICERS ACTION A S FOLLOWS: DECISION: 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE APPELLANT. THE AO HAS INVOKED THE PROVISIONS OF SEC TION 145(1) OF I.T. ACT BY OBSERVING THAT THE APPELLANT HAS NOT MAINTAINED THE ACCOUNTS WHICH MAY SHOW THE CORRECT POSITION OF CONSUMPTION OF THE RAW MATERIAL AND PRODUCTION OF FINISHED GOODS. FURTHER NO DETAILS OF THE DAY-TO-DAY CONSUMP TION OF THE RAW MATERIAL AND PRODUCTION OF GOODS HAVE BEEN MAINTAINED. NO DAY-TO -DAY DETAILS OF THE SHORTAGE OCCURRED IN PRODUCTION HAS BEEN MAINTAINED. FURTHER , THE PRODUCTION OF THE FINISHED GOODS IS ONLY DISCLOSED IN THE ACCOUNTS WH EN IT WAS SOLD. THE SHORTAGE IS TAKEN AS BALANCING FIGURE. THE STOCK OF REMAINING R AW MATERIAL I.E. UN-CUT SHIP PIECE IS SHOWN ON ESTIMATE BASIS ETC. 4.4. WHILE THE APPELLANT HAS SUBMITTED THAT IT IS E NGAGED IN SHIP BREAKING INDUSTRY WHEREBY OLD AND USED VESSELS ARE CUT INTO THE PLATES/SCRAP ETC. THE OLD SHIPS ARE PURCHASED ONLY FOR DISMANTLING THEM. SHIP S ARE PURCHASED ON WEIGHT BASIS WHICH WAS TAKEN ALWAYS AT THE TIME OF THE MAN UFACTURING AND SUBSEQUENTLY CHANGES MADE THEREIN. THESE RECORDS ARE MAINTAINED IN THE TRIM AND STABILITY BOOK OF THE VESSEL. THOUGH THE SHIPS ARE PURCHASED ON ORIGINAL WEIGHT BASIS BUT IT IS NOT POSSIBLE TO WEIGH THE SHIPS BEFORE OR WHILE TAKING THE DELIVERY THEREOF. AFTER BEACHING OF THE SHIP THOSE ARE DIS-MANTLED IN LARGE CHUNKS WITH THE HELP OF GAS CUTTERS. THESE CHUNKS ARE THEN PULLED TOWARDS THE P LOT WITH THE HELP OF WINCH. LATER ON THESE LARGE CHUNKS ARE DISMANTLED INTO SMA LL PIECES. THUS CONSIDERING THE COMPLICACY OF THE TRADE, IT IS NOT POSSIBLE TO MAINTAIN RECORDS OF THE DAILY CONSUMPTION OF THE RAW MATERIAL. ONCE THE DISMANTLI NG OF THE SHIP IS STARTED THE RECOVERY OF THE TOTAL WEIGHT CAN BE ASCERTAINED ONL Y AFTER THE GOODS WEIGHED AND SOLD. LIKEWISE, IT IS IMPOSSIBLE TO ARRIVE AT THE D AILY SHORTAGES OCCURRED IN THE MANUFACTURING PROCESS BECAUSE NEITHER THE CHUNKS OF BROKEN SHIPS COULD BE WEIGHED NOR THE PRODUCTION DERIVED THERE FROM COULD BE MEASURED. FURTHER, THE GOODS ARE SUBJECT TO THE WATCH OF THE CENTRAL EXCIS E AUTHORITIES AND VAT ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 4 - AUTHORITIES OF THE STATE GOVERNMENT ALSO. IT WAS AL SO ARGUED BY THE APPELLANT THAT IN THE PAST THE BOOK RESULTS IN THE CASES OF SHIP B REAKERS HAVE NEVER BEEN DISTURBED FOR THE REASONS AS ATTRIBUTED BY THE A.O. THE LD. A.O. OUGHT TO HAVE CONSIDERED THESE FACTORS IN ITS RIGHT AND TRUE SPIR IT CONSIDERING THE OVERALL FACTORS AND CIRCUMSTANCES AFFECTING TO THE SHIP BREAKING AC TIVITY. 4.5. IT IS TRUE THAT CONSIDERING THE NATURE OF THE SHIP BREAKING INDUSTRY IT IS DIFFICULT TO MAINTAIN THE DAY-TO-DAY CONSUMPTION AN D SHORTAGE RECORDS BECAUSE OF THE VOLUME AND VARIOUS COINCIDENCES IN MEASURING TH E SAME. EVEN THE PURCHASES MADE AT THE SPECIFIED WEIGHT OF THE SHIP IS ALSO UN -MEASURABLE BECAUSE OF THE PRACTICAL DIFFICULTIES. BUT AT THE SAME TIME, IT IS ALSO NOT POSSIBLE TO CHECK THE VERACITY OF THE BOOK RESULTS SHOWN BY THE APPELLANT . THE SHORTAGES ARE ALSO SHOWN ON ESTIMATE BASIS. THERE IS NO CHECK OR CONTROL OVE R THE CONSUMPTION/PRODUCTION AND SHORTAGE SHOWN IN THE BOOKS OF ACCOUNTS. THUS, THE POSSIBILITIES FOR LEAKAGE OF THE REVENUE CANNOT BE RULED OUT. THUS, THE AO'S ACTION FOR REJECTING THE BOOK RESULTS BY INVOKING THE PROVISIONS OF SECTION 145(1 ) IS CORRECT AND JUSTIFIED AND THE SAME IS CONFIRMED. 6. HEARD BOTH THE PARTIES. CASE FILE PERUSED. LEA RNED COUNSEL REPRESENTING ASSESSEE SEEKS TO QUOTE VARIOUS PECULIARITIES IN SH IP BREAKING BUSINESS SO AS TO CHALLENGE THE IMPUGNED REJECTION OF BOOKS OF ACCOUN TS. HE ALSO QUOTES CASE LAW CIT VS. SMT. POONAM RAI 326 ITR 223 (DELHI) AS WELL AS ITO VS. MANSI PRINTS PVT. LTD. ITA NOS. 498 & 872/AHD/2009 FOR PLEADING THAT NON MAINTENANCE OF DAY TO DAY STOCK REGISTER DOES NOT FORM A VALID GROUND TO REJECTION OF BOOKS OF ACCOUNTS. HIS CASE THEREFORE IS THAT THE ASSESSEE HAD NOT BEEN MAINTAINING ALL THE RELEVANT DETAILS. MR. HEMANI SEEKS TO JUSTIFY THE FALL IN ASSESSEES NP @ 2.65% IN THE RELEVANT PREVIOUS YEAR FROM PRECEDING ASSESSMEN T YEAR NP RATE OF 5.8% INVOLVING CORRESPONDING SALES FIGURES OF RS.28,80,6 8,611/- & RS.3,33,60,971/-; RESPECTIVELY. LEARNED COUNSEL HOWEVER FAILS TO REB UT BOTH THE LOWER AUTHORITIES MULTIPLE REASONING SUPPORTING REJECTION OF ASSESSEE S BOOKS U/S.145 OF THE ACT AFTER QUOTING VARIOUS SHORTAGES FORMING HALLMARK OF SHIP BREAKING BUSINESS. WE THEREFORE SEE NO REASON TO ACCEPT ASSESSEES INSTAN T SUBSTANTIVE GRIEVANCE THAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AS WELL AS ON FACTS IN REJECTING ITS BOOKS. THE ASSESSEES INSTANT FIRST SUBSTANTIVE GROUND IS THEREFORE DECLINED. 7. WE NOW PROCEED TO UNACCOUNTED SALES OF MACHINERI ES/DG SETS, ENGINES ADDITION ISSUE AMOUNTING TO RS.55LACS MADE IN ASSES SMENT ORDER AS RESTRICTED TO RS.10LACS ONLY IN COURSE OF THE LOWER APPELLATE PRO CEEDINGS AS FOLLOWS: ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 5 - 5.6. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECO RD AND THE ARGUMENTS OF THE LD. AR. I FIND FROM THE ASSESSMENT RECORDS THAT THE AO HAS ANNEXED CERTAIN BILLS OF OTHER ASSESSEES' IN THE SAME LINE OF BUSINESS AN D THESE BILLS INDICATE THAT THESE ASSESSEES HAVE IN FACT SOLD ENGINES/DG SET RECOVERE D FROM SHIPS DISMANTLED BY THEM. ON PERUSAL OF THESE BILLS, IT IS SEEN THAT TH ERE IS ABSOLUTELY NO TECHNICAL DETAIL NOT EVEN HP OF ANY ENGINE WHICH IS THE MOST ELEMENTARY TECHNICAL CHARACTER ASSOCIATED WITH THESE TYPES OF ITEMS ARE MENTIONED. THESE BILLS ALSO DO NOT INDICATE THE NAME OF SHIP FROM WHICH THE SAME H AVE BEEN RECOVERED AND SOLD; THEREFORE THERE IS NO CLUE AS TO WHETHER THE SHIP F ROM WHICH IT WAS RECOVERED WAS A WAR-SHIP OR A SMALL FISHING-TRAWLER. BE THAT AS I T MAY, IT CERTAINLY INDICATES THAT THE ENGINE / DG SET ARE CAPABLE OF BEING SOLD AS SU CH. THIS IS FURTHER TO BE INFERRED FROM THE FACT THAT WHEN THE SHIP CAME FOR DISMANTLING, IT CAME ON ITS OWN I.E. WITHOUT BEING TOWED. IT IS THEREFORE TO BE PRE SUMED THAT THOUGH THE ENGINE / DG SET MAY BE OLD, STILL THEY ARE IN RUNNING CONDIT ION. 5.7. THE AR HAS, ON HIS PART, CONTENDED THAT IT IS GENERALLY NOT POSSIBLE TO SELL ENGINE OF A BROKEN SHIP AS SUCH AND IN SUCH SITUATI ON, THE ASSESSEE HAS TO DISMANTLE THE ENGINE ALSO AND SELL MACHINERY PARTS. IT IS FURTHER STATED BY HIM THAT THE AO HAS NOT DEALT WITH THE ABOVE ISSUE IN THE LI GHT OF DETAILED CLARIFICATION GIVEN BY THE ASSESSEE AT THE TIME OF HEARING. THE A R HAS VEHEMENTLY ARGUED THAT AO'S BELIEF OF SALE OF THE ENGINES AND D G SETS AND FURTHER BELIEF OF UNRECORDED RECEIPT OF RS.55,005000/- IS NOT BASED UPON ANY EVI DENCES. 5.8. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT THE A O FAILED TO ADDRESS HIMSELF ABOUT THE PECULIAR NATURE OF BUSINESS IN WHICH IT I S DIFFICULT TO MAINTAIN QUANTITATIVE DETAILS IN THE DESIRED MANNER. THIS IS LARGELY BECAUSE OF THE FACT THAT WHEN A SHIP IS PURCHASED, ITS ACTUAL WEIGHT AT THE TIME OF PURCHASE IS NOT AT ALL EITHER TAKEN PHYSICALLY OR OTHERWISE CORRECTLY ASCE RTAINABLE, THE APPELLANT HAS POINTED OUT THAT IT IS THE INTERNATIONAL STANDARD P RACTICE TO SHOW THE WEIGHT OF THE SHIP TO BE DISMANTLED AS THE ONE AS MENTIONED IN TH E SHIP REGISTRY DOCUMENT AND IT REFERS TO THE ACTUAL WEIGHT WHEN THE SHIP WAS BUILT , MOSTLY 3 TO 4 DECADES BACK. THE SHIP REGISTRY PAPERS SHOW THIS WEIGHT AND THE S HIP BREAKER AGREES TO PURCHASE SUCH SHIP FOR DISMANTLING AND THE FIGURE O F TONNAGE SHOWN IN SUCH REGISTERED DOCUMENT IS NOT ACTUALLY RELEVANT WITH T HE ACTUAL WEIGHT OF THE SHIP. IT IS A MATTER OF COMMON KNOWLEDGE THAT DURING THE OPE RATIONAL LIFE OF 3 TO 4 DECADES, THERE WOULD BE HUGE CORROSION OF THE OUTER SURFACE OF THE SHIP AND THEREFORE THE ACTUAL WEIGHT OF THE SHIP, AFTER SUCH LONG PERIOD, WOULD BE LESS. THE APPELLANT HAS POINTED OUT THAT A DETAILED STUDY WAS MADE BY GROUP OF METALLURGICAL AND ENGINEERING CONSULTANTS FORMED BY THE FERROUS SCRAP COMMITTEE OF MINISTRY OF STEELS, GOVERNMENT OF INDI A. THE REPORT OF THE CONSULTANTS KNOWN AS 'MECON REPORT' IS AVAILABLE ON THE NET. IN PARA 2.4 OF THE SAID REPORT, RANGE OF SHORTAGE IN RESPECT OF DIFFER ENT TYPES OF SHIPS COMING FOR BREAKING IS MENTIONED. THE SAME IS AS UNDER: 'TABLE 2.4: PERCENTAGE OF ITEMS OBTAINED ON BREAKIN G DIFFERENT TYPES OF SHIPS: SL. NO. TYPE OF VESSEL WEIGHT LOSS (%) 1. GENERAL CARGO 9-15 ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 6 - 2. BULK CARRIERS 10-16 3. ORE CARRIERS 10-15 4. PASSENGER SHIPS 11-17 5. OIL TANKERS 10-12 6. ORE BULK ORE CARRIERS 10-13 7. NAVAL SHIPS 15-22 8. CONTAINER VESSELS 10-13 9. FISHING TRAWLER/FISH FACTORY 12-18 THE VALUES ARE APPROXIMATE AS THE PERCENTAGE VARIES WITH SIZE OF THE SHIPS. OF THE WEIGHT LOSS SHOWN ABOVE, IT MAY BE N OTED THAT THE WEIGHT LOSS AT YARD IS ONLY 2-3%. THE REST IS THE WEIGHT L OSS DUE TO CORROSION IN 20-25 YEARS OF THE SHIP'S ACTIVE LIFE. ' 5.9. THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE MUMBAI IT AT 'H' BENCH IN ITA NO.7522/MUMBAI/2007 DTD, 7.8.2013 IN T HE CASE OF AAPEE SHIP BREAKERS PVT. LTD. VS. CIT(A) CENTRAL XXVII AND DY. CIT, CIRCLE-3(L) WHEREBY THE SHORTAGE CAME UPTO 15% WAS HELD TO BE REASONABLE. L IKEWISE THE HON'BLE IT AT MUMBAI BENCH IN -THE CASE OF GOYAL TRADERS, MUMBAI VS. AO IN ITA NO.4431/MUMBAI/2010 AND CO 63 OF 2011 HAS OBSERVED THAT THE SHORTAGE CLAIM VARIES FROM 10% TO 20% IN SHIP BREAKING BUSINESS. S IMILAR VIEW HAS ALSO BEEN TAKEN BY THE HON'BLE IT AT MUMBAI BENCH IN THE CASE OF ANUPAMA STEEL LTD. IN ITA NO.2949/MUM/2004 DTD. 12.9.2007 AND IN THE CASE OF HARIYANA STEEL CO. IN ITA NO.L861/MUM/1998 DTD. 26.7.2004. 5.10. IT HAS BEEN SUBMITTED THAT AS PER THE MOU FOR PURCHASE OF ONE VESSEL MV WINDSOR RUBY THE VESSEL HAS 1150 PERMANENT BALLAST WHICH CONSISTED OF PIG IRON AND CEMENT CONCRETE. THE QUANTITY OF CEMENT CO NCRETE WAS OF 460 MT WHICH WAS PART OF THE TOTAL PURCHASED TONNAGE. IF THE CEM ENT CONCRETE WEIGHT IS REDUCED FROM THE SHORTAGE THEN THE SHORTAGE WOULD BE WORKED OUT TO 11.11% AS COMPARED TO THE SHORTAGE SHOWN AT 13.42%. IN VIEW OF THE ABOVE DISCUSSION, CONSIDERING THE CL AIM OF SHORTAGE BY THE APPELLANT IS FOUND REASONABLE AS PER THE EXPERT COM MITTEE REPORT (SUPRA) AND ALSO IN VIEW THE VARIOUS DECISIONS OF THE AUTHORITIES CI TED ABOVE. 5.11. IT IS PERTINENT TO NOTE THAT THE AO WAS INITI ALLY OF THE VIEW THAT THE GROSS PROFIT AND NET PROFIT OF THE ASSESSEE WAS CONSIDERA BLY LOWER AS COMPARED TO EARLIER YEARS. IT HAS BEEN NOTICED THAT THE APPELLA NT HAS SHOWN THE G.P. RATE OF 5.95% ON TOTAL SALES OF RS.28,80,68,611/- IN THE YE AR UNDER CONSIDERATION AS AGAINST THE G.P. RATE OF 24.18% ON TOTAL SALES OF R S.3,33,60,971/- IN THE IMMEDIATELY PRECEDING YEAR. SIMILARLY THE N.P. RATE SHOWN IN THE YEAR UNDER CONSIDERATION WAS AT 2.65% AS AGAINST THE N.P. RATE OF 5.82% IN THE IMMEDIATELY PRECEDING YEAR. SO THERE WAS FALL IN THE G.P. RATE AS WELL AS IN THE N.P. RATE IN THE YEAR UNDER CONSIDERATION. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 7 - 5.12. THE APPELLANT SUBMITTED THAT THERE WAS SUBSTA NTIAL INCREASE IN THE TURNOVER DURING THE YEAR UNDER CONSIDERATION WHICH WAS ABOUT 8.63 TIMES AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR.' THE AP PELLANT FURTHER SUBMITTED IN THE ASSESSMENT PROCEEDINGS AND ALSO IN THE APPELLAT E PROCEEDINGS THAT THERE WAS IN TOTAL 1150 MT PERMANENT BALLAST OF WHICH 460 MT WAS CEMENT CONCRETE. THE CEMENT CONCRETE DOES NOT FETCH A PENNY AND HUGE AMO UNT OF COST IS INVOLVED IN REMOVING AND DISPOSING THE SAME WHICH HAS ADVERSELY IMPACTED THE G.P. AND N.P. RATES. IT WAS FURTHER SUBMITTED THAT THE G.P. RATE IN THE SHIP BREAKING BUSINESS HAS NEVER BEEN CONSTANT. THE APPELLANT HAS SUBMITTED THAT IN THE FOLLOWING CASES THE ASSESSMENTS U/S.143(3) OF THE I .T. ACT HAVE BEEN COMPLETED BY THE AO ALTHOUGH THE G.P. RATE AND N.P. RATE IN EACH OF THE CASES WAS WIDELY VARYING FOR THE A.Y. 2010-11 AND ALSO IN THE PRECED ING YEARS. MADHAV STEEL A.Y. 2008-09 2009-10 2010-11 G.P 27.54 5.61 4.07 N.P 37.63 6.74 2.80 BURNING LOSS 13.11 12.10 12.67 SACHDEVA STEEL PRODUCAT (SBD) A.Y. 2008-09 2009-10 2010-11 G.P 8.10 1.20 7.90 N.P 4.48 0.20 5.31 BURNING LOSS 5.03 5.58 12.07 SHIVSHIP BREAKING CO. A.Y. 2008-09 2009-10 2010-11 G.P 82.39 LOSS LOSS N.P 8.85 LOSS LOSS BURNING LOSS SHETH SHIP EREAKIG CORP A.Y. 2008-09 2009-10 2010-11 G.P 6.21 6.58 14.44 N.P 27.64 0.97 3.48 BURNING LOSS 0.0 0.0 0.0 P.PATEL SHIP BREAKING CO. A.Y. 2008-09 2009-10 2010-11 G.P NO BUSINESS 24.18 5.95 N.P 05.82 2.65 BURNING LOSS 9.00 13.42 ALANG SHIP BREAKING CORP. A.Y. 2008-09 2009-10 2010-11 G.P NO BUSINESS 7.52 6.28 N.P 2.18 2.77 BURNING LOSS 9.00 12.11 MAHADEVSHIP BREAKING CO. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 8 - A.Y. 2008-09 2009-10 2010-11 G.P NO BUSINESS 1.24 1.07 N.P 0.81 2.56 BURNING LOSS 9.25 10.00 IT HAS BEEN CONTENDED THAT THERE WERE SOME SHIP BRE AKERS WHO INCURRED HEAVY LOSSES IN THE YEAR UNDER CONSIDERATION AND ALSO IN OTHER CASES THE G.P. RATE RANGED BETWEEN 1% TO 14%. 5.13. FURTHER, IT WAS ALSO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION THE AVERAGE PURCHASE PRICE OF THE SHIP WAS RS.13,382/- PER M.T. AS AGAINST THE AVERAGE PURCHASE PRICE AT RS. 13,132/- IN THE IMMED IATELY PRECEDING YEAR. THUS, THERE WAS INCREASE IN THE AVERAGE PURCHASE PRICE BY RS.250/- PER M.T. WHICH WAS ABOUT 1.90% OF THE PURCHASE PRICE. THIS SINGLE REAS ON HAS REDUCED THE GROSS PROFIT BY RS.43,34,850/- FOR THE TOTAL WEIGHT OF 17 339.399 MT. 5.14. SIMILARLY THE AVERAGE SALE PRICE DURING THE Y EAR UNDER CONSIDERATION WAS AT RS. 16,697/- PER M.T. AS AGAINST RS. 19,916/- IN TH E IMMEDIATELY PRECEDING YEAR. THUS, THERE WAS HEAVY FALL IN THE AVERAGE SALE PRIC E OF RS.3,219/- PER M.T. (RS. 19,916/- (-) RS. 16,697/-) WHICH HAS RESULTED INTO THE REDUCTION OF THE TOTAL SALE PROCEEDS AND THEREBY THE GROSS PROFITS BY RS.5,55,3 4,188/- ON TOTAL SALES OF 17252.379 MT. THUS, THE APPELLANT'S CONTENTION WITH REGARD TO FALL IN G.P. RATE AND N.P. RATE ARE FOUND CONVINCING. 5.15. IT HAS BEEN ARGUED THAT THE AO HAS MADE THE A DDITION OF RS.55 LAKHS ON ACCOUNT OF SALE OF DG SETS ENGINE AND OTHER MACHINE RIES BUT AS PER THE DETAILS SUBMITTED IT HAS ALREADY SHOWN THE SALES THEREOF BY SCRAPING THEM TOTALING TO RS.58.72 LAKHS. SO, THE APPELLANT HAS SHOWN MORE SA LE PROCEEDS UNDER VARIOUS HEADS AS WHAT THE A.O. HAS ESTIMATED ON THIS ACCOUN T. 5.16. THE APPELLANT HAS RELIED UPON CERTAIN CASE LA WS AS BELOW WHICH ARE ON UNACCOUNTED SALE OF VARIOUS MOVABLES, CRANES, GENER ATOR SETS, SPARE PROPELLER WHICH ARE SIMILAR IN NATURE TO THE ADDITION IN THE PRESENT CASE WHEREBY THE AUTHORITIES HAVE DELETED THE ADDITIONS SO MADE. - IN THE CASE OF ACIT(INV.) CIR.2, BHAVANAGAR VS. M /S.MALVI SHIP BREAKING COMPANY, BHAVNAGAR IN ITA NO.91/RJT/1996 D TD. 24.1.2005 HAS OBSERVED AS UNDER.- '20. WITH REGARD TO SALE OF MOVABLES THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE FIRM HAS NOT SHOWN ANY SALES OF M OVABLES AND ALSO NOT SHOWN ANY CLOSING STOCK UNDER THIS HEAD. THE ASSESS ING OFFICER ACCORDINGLY RAISED A QUERY. AFTER HAVING CONSIDERED THE ASSESSEE'S REPLY THE ASSESSING OFFICER HELD THAT IN ABSENCE OF ITEM- WISE VERIFICATION OF MOVABLES FROM MISCELLANEOUS SALES DECLARED BY THE A SSESSEE, THE ASSESSEE MUST HAVE SOLD THE MOVABLE OUTSIDE THE BOOKS. HE ACCORDINGLY TOOK THE COST OF MOVABLES SOLD OUTSIDE THE BOOKS AT RS.8,66, 933/- THAT IS AS SHOWN IN THE INVENTORY MADE BY THE CUSTOMS AUTHORITIES AN D PRESUMING GP OF 20% WORKED OUT THE SALES OF SUCH MOVABLES AT RS.10, 40,322/-. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 9 - 21. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 'THERE IS NO DENYING THE FACT THAT THE ITEMS SUCH A S FURNITURE AND APPLIANCES HAVE OUTLIVED THEIR UTILITY PERIOD. AT T HE TIME OF TAKING INVENTORY, THE ITEMS ARE VALUED AS PER THEIR IDENTI TY I.E. AIR- CONDITIONER, WASHING MACHINE, ETC., AND NOT AS PER THEIR ACTUAL CONDITION. UNDER THE CIRCUMSTANCES IT IS RIGHTLY PO INTED OUT BY THE AR THAT THE VALUATION SHOWN IN THE INVENTORY CANNOT BE AN INDICATOR TO THE AMOUNT TO BE REALIZED ON SALES OF THESE ITEMS. I ' AM, THEREFORE, IN AGREEMENT WITH THE DECISION TAKEN IN THE ABOVE REFERRED APPELLATE ORDER. CONSIDERING, THEREFORE TH E TOTALITY OF THE FACTS, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. ' 22. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FIND F ROM THE RECORDS THAT THE FIRM'S BUSINESS OF SHIP BREAKING AND ITS SALES ARE MOSTLY OF IRON AND STEEL SCRAPS. ONLY ITEMS FOUND IN FACT AND IN GOOD CONDITION ARE SOLD IN THEIR OWN IDENTITY. IT IS PRACTICALLY IMPOSSIBLE TO CO-RELATE THE SALES WITH REFERENCE TO EACH ENTRY IN INVENTORY E.G. SALES ARE MADE OF ELECTRICAL GOODS, SCRAP OF MOTORS, SCRAP OF MACHINERIES, SCRAP OF ENGINE PARTS, TIMBER IN LOT ALSO AND THEREFORE SUCH ITEMS CANNOT BE COMPARED WITH ENTRIES IN INVENTORY, HOWEVER, THERE ARE BILLS OF S ALES OF CHAIN, ELECTRICAL EQUIPMENT, LIFE BOAT, EMPTY GAS CYLINDER, STEEL BUN KER, AIR TANKS, ELECTRIC MOTORS, FILMS, ENGINE PARTS, TIMBER, TV, FURNITURE, ETC., WHICH ARE INCLUDED IN INVENTORIES AND THE ASSESSING OFFICER HAS EVEN N OT GIVEN CREDIT FOR SUCH SALES RECORDED BY THE ASSESSEE. 23. THE LEARNED AR CITED THE DECISION OF CO-ORDINAT E BENCH IN THE CASE OF M/S. WESTERN SHIP BREAKING CORPORATION (SUPRA) WHER EIN UNDER SIMILAR CIRCUMSTANCES, DELETION OF ADDITION WAS CONFIRMED B Y THE TRIBUNAL WITH THE FOLLOWING OBSERVATION: 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PA RTIES, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS VERIFIED THE SALES MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS SHOWN THE MAJOR SAL ES OF GOODS AS ITEMS SHOWN IN THE INVENTORY PREPARED BY THE CUSTOM DEPARTMENT. THE ASSESSEE HAS ALSO SHOWN THE SALE OF FURNITURE, ELECTRICAL GOODS, LIFE BOATS ETC. AND ID.DR COULD NOT BRING ANY EVIDE NCE TO SHOW THAT THE ASSESSEE HAS SOLD ANY GOODS OUTSIDE THE BOOKS O F ACCOUNT'. 24. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE C1T(A) FOR DELETING T HE ADDITION OF RS.10,40,322/-.' - IN THE CASE OF AAPEE SHIP BREAKERS PVT. LTD. MUMB IA VS. CIT(CENTRAL)-XXVII AND DCIT, CIR.3(1) IN ITA NO.752 2/MUMBAI/2007 DTD. 7,8.2013 HAS OBSERVED AS UNDER:- ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 10 - ' 3.2.NEXT GROUND OF APPEAL IS IN RESPECT OF ADDITI ON OF SUPPRESSED SALES OF NON FERROUS METAL OF 124,743 MT, VALUED AT RS. 1,75 ,15,601@OF RS.L40LACS PER MT.AS PER THE AO, THE ASSESSEE HAD S HOWN SALE OF 97.987 MT NON FERROUS METAL WHEREAS AS PER HE SHOULD HAVE SOLD 192.73 MT. ASSESSEE-COMPANY PREFERRED AN APPEAL BEFORE THE FAA . AFTER CONSIDERING THE ASSESSMENT ORDER ALONG WITH THE ANNEXURE-1 AND ANNEXURE~2,HE FOUND THAT RECOVERY AND SALE OF THE NON FERROUS METAL WAS ABOUT 208 MT(1.3% OF THE LDT), THAT ACCORDING TO GOVERNMENT HIGH POWE R COMMITTEE RECOVERY HAS TO BE TAKEN BETWEEN THE .5% TO 1% OF L DT, THAT TRIBUNAL HAD TAKEN .8% RECOVERY AS NORMAL. CONSIDERING THE ABOVE , HE HELD THAT RECOVERY AND SALE IN THE CASE UNDER CONSIDERATION W AS WITHIN THE PARAMETER GENERALLY ACCEPTED IN THE INDUSTRY, THAT THERE WAS NO MATERIAL AVAILABLE ON THE RECORD TO SHOW THAT APPELLANT HAD DIVERTED ANY PART OF THE RECOVERY OF NON FERROUS METAL OUTSIDE THE BOOKS OF ACCOUNTS. FINALLY, HE DIRECTED THE AO TO DELETE THE ENTIRE ADDITION AM OUNTING TO RS. 1.75 CRORES. 3.2.A.BEFORE US, DR SUPPORTED THE ORDER OF THE AO A ND AR RELIED UPON THE ORDER OF THE FAA. WE HAVE HEARD THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT FAA HAS, WHILE DEC IDING THE ISSUE, TAKEN INTO CONSIDERATION THE FINDINGS OF HIGH POWER COMMI TTEE ON SHIP BREAKING INDUSTRY ESTABLISHED BY GOVERNMENT OF INDI A AS WELL AS REPORT OF LEADING INTERNATIONAL SURVEYORS. HE HAS ALSO CONSID ERED THE ORDER OF THE TRIBUNAL IN THE CASE OF HARYANA STEEL COMPANY (SUPR A). WE FIND THAT AO HAS NOT TAKEN INTO CONSIDERATION SALE OF 81.925 MT NON FERROUS METAL WHICH WAS SOLD BY THE ASSESSEE COMPANY AND THAT FIN DS PLACE IN ANNEXURE- 2 PREPARED BY THE AO HIMSELF. WE FIND THAT AO HAS N OT BROUGHT ANYTHING ON RECORD TO PROVE THAT RECOVERY OF NON FERROUS MET AL BY THE ASSESSEE WAS MORE THAN SHOWN IN THE BOOKS OF ACCOUNTS. THEREFORE , WE ARE OF THE OPINION THAT SUCH A HUGE ADDITION SHOULD HAVE BEEN MADE BY THE AO WITHOUT BRINGING SOME POSITIVE EVIDENCE ON RECORD. UPHOLDING THE ORDER OF THE FAA, WE DECIDE GROUND NO .3.1 AGAINST THE AO. 3.3.NEXT GROUND OF APPEAL IS ABOUT SALE OF MAIN ENG INES AMOUNTING TO RS. 15 LACS. WHILE FINALISING THE ORDER, AO HAS MENTION ED THAT THE SALE OF THE MAIN ENGINES OF THE SHIPS; WHICH WERE HEAVY MACHINE RIES; HAD NOT BEEN REFLECTED AT ALL BY THE ASSESSEE IN ITS BOOKS OF AC COUNTS. IN THE APPELLANT PROCEEDINGS, FAA FOUND THAT ASSESSEE HAD SOLD THE E NGINES, THAT ANNEXURE-2 OF THE ASSESSMENT ORDER AND THE DESCRIPT ION THEREIN GIVEN BY THE AO PROVED THE FACT OF SALE OF ENGINES. HE DELET ED THE ADDITION MADE BY THE AO. 3.3.A.WE FIND THAT FAA HAS GIVEN CATEGORICAL FINDIN G OF FACT ABOUT THE SALE OF ENGINES BASED ON THE ANNEXURE PREPARED BY THE AO HIMSELF. IN THESE CIRCUMSTANCES, IN OUR OPINION, THERE IS NO NEED TO DISTURB THE FINDING OF THE FAA. GROUND NO. 3.2 IS DECIDED AGAINST THE AO. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 11 - 3.4.GROUND NO.3.3. IS ABOUT SALE OF CRANES AMOUNTIN G TO RS. 40 LACS. ON PAGE 7 OF THE ASSESSMENT ORDER, AO HAS MENTIONED TH AT NO SALE OF ANY CRANES HAD BEEN REFLECTED IN THE BOOKS OF THE ASSES SEE, THOUGH THE IT HAD RECEIVED MANY CRANES IN THE SHIPS. HE ESTIMATED THA T ASSESSEE HAD 17 CRANES ON THE SHIPS AND MADE AN ADDITION OF RS.50 L ACS ON ALLEGED SALE OF THE CRANES. IN THE APPELLANT PROCEEDINGS FAA HELD T HAT THERE WAS NO BASIS FOR ESTIMATING THE NUMBER OF CRANES AT 17, THAT AFT ER BEING USED FOR 20-25 YEARS IN SALTY WEATHER ON SEA IT WAS NOT POSSIBLE T O REALISE/ RECOVER SUBSTANTIAL AMOUNT FROM SALE OF THE CRANES, THAT CR ANES HAD TO BE SOLD AS SCRAP OF IRON AND STEEL. 3.4.A.BEFORE US, DR AND THE AR SUPPORTED THE ORDERS OF THE AO AND THE FAA RESPECTIVELY. WE FIND THAT WHILE MAKING THE ADD ITION AO HAS ESTIMATED THE NUMBER OF CRANES OF 17 BUT HAS NOT GI VEN ANY BASIS FOR SUCH ESTIMATION. HE HAS NOT MENTIONED ANY BASIS FOR CALC ULATING THE SALE PRICE OF THE CRANES AT RS. 40 LACS. IN THESE CIRCUMSTANCES, UPHOLDING THE ORDER OF THE FAA WE DECIDE GROUND NO. 3.3 AGAINST THE AO. - THE HON'BLE IT AT, RAJKOT BENCH IN THE CASE OF M/ S WESTERN SHIP BREAKING CORPORATION VS. ACIT IN ITA NO. 1741/AHD/1 997 AND 2267/AHD/1997 WHEREBY THE SIMILAR ADDITION OF RS. 8 LAKHS WAS RED UCED TO RS.50,0007-. THE OBSERVATION OF HON'BLE ITAT AT PARA 15 ARE REPRODUC ED BELOW: 'WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THR OUGH THE ORDERS OF AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT TH E AO HAS NOT FOUND ANY ITEM BEING SOLD OUT OF BOOKS OF ACCOUNT. HE HAS JUST ASSUMED THAT THESE ITEMS ARE GENERALLY FOUND AT THE SHIP, WHICH WAS JUST BASED ON ESTIMATION. KEEPING IN VIEW THE TOTALITY OF THE FAC TS AND CIRCUMSTANCES OF THE CASE, WE DIRECT THE AO TO RETAIN THE ADDITION O F RS.50,000/- IN PLACE OF ADDITION OF RS. 1.50 LAKHS RETAINED BY THE CIT(A).' 5.17. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECO RD AND THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE AO AS WELL AS BEFORE ME AN D I AM NOT FULLY CONVINCED WITH THE SAME. WHILE, ON ONE HAND, THE SALE BILLS A PPENDED WITH THE ASSESSMENT ORDER DO NOT CONTAIN ANY DETAILS, IN THE SAME WAY, THE PURPORTED SALE OF SPARE PARTS FROM ALLEGED DISMANTLED SHIPS BY THE APPELLAN T ALSO DOES NOT CONTAIN ANY SPECIFIC DETAIL. IN THIS BACKGROUND OF WHAT IS DISC USSED ABOVE, WHEN ENGINE / DG SET OF SHIP FINALLY BROKEN WAS IN WORKING CONDITION , THOUGH MAY BE VERY OLD, IT DOES NOT MAKE ANY COMMERCIAL SENSE TO DISMANTLE SUC H ENGINE AND SELL THE SAME BY WEIGHT AS SCRAP. THE DETAILS FURNISHED ALSO DO N OT INDICATE THE NATURE OF SALE OF IMPORTANT SPARE PARTS RETRIEVED FROM ALLEGED BREAKI NG OF ENGINE. IN SUCH CIRCUMSTANCES, I AM NOT FULLY INCLINED TO ACCEPT TH E CLAIM OF THE LD. AR THAT THE ENGINES WERE ALSO DISMANTLED AND SOLD AS SCRAP. THE SALE PRICE SHOWN IN THE SALE BILLS APPENDED TO THE ASSESSMENT ORDER IS NOT OF AN Y HELP BECAUSE THE NAME OF SHIP FROM WHICH IT WAS RETRIEVED IS NOT EVEN MENTIO NED MUCH LESS ANY TECHNICAL DETAILS OR AT LEAST THE HP OF SUCH ENGINE. THE APPE LLANT HAS SPECIFICALLY FAILED TO DEMONSTRATE FROM THE BOOKS OF ACCOUNTS THAT IN WHAT MANNER THE SALE PROCEEDS OF THE ENGINES, D.G. SETS/OTHER MACHINERIES EITHER WIT HOUT CUT OR BY CUTTING THEM IN ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 12 - PIECES AS SCRAP HAS BEEN SHOWN OR LYING IN THE CLOS ING STOCK. ON TOTALITY OF THE FACTS AND CIRCUMSTANCES, I PARTLY AGREE WITH THE AO 'S OBSERVATION BUT NOT WITH THE ESTIMATE OF SALE PROCEEDS AS DONE BY HIM WHICH IS W ITHOUT ANY BASIS AT ALL AND HENCE I CONFIRM THE LUMPSUM AMOUNT OF RS. 10,00,000 /- WHICH WOULD TAKE CARE OF THE POSSIBLE LEAKAGE OF REVENUE IN RESPECT OF ABOVE ITEMS AND MEET THE END OF JUSTICE. I THEREFORE SUSTAIN ADDITION OF RS.10,00,0 00,/- ON THIS ACCOUNT. THUS, THE GROUND OF THE APPELLANT IS PARTLY ALLOWED. 8. MR. HEMANI VEHEMENTLY ARGUES THAT BOTH THE LOWER AUTHORITIES HAVE COMMITTED ERROR IN LAW AS WELL AS FACTS IN MAKING T HE IMPUGNED ADDITION OF UNACCOUNTED SALE OF MACHINERIES /DG SETS AND ENGINE S. HE REITERATES ASSESSEES STAND ADOPTED THROUGHOUT THAT THE ASSESSEE HAD MERE LY SOME NON FUNCTIONAL SHIP PARTS ONLY. 9. HIS ARGUMENTS FAIL TO REBUT THE FACT THE RELEVAN T MACHINERY PARTS IN QUESTION WERE VERY MUCH FUNCTIONAL SINCE THE ASSESSEE HAD PU RCHASED THE SHIPS CONCERNED CONTAINING VERY MUCH FUNCTIONAL ENGINE PART BEFORE BEING TAKEN TO THE SHIP BREAKING YARDS ON THEIR OWN. WE THUS EXPRESS OUR C ONCURRENCE WITH LEARNED CIT(A)S DETAILED DISCUSSION AS EXTRACTED HEREINABO VE IN PRINCIPLE. THE ASSESSEES CORRESPONDING ARGUMENTS QUA THIS FORMER LIMB OF ITS GRIEVANCE ARE THEREFORE REJECTED. 10. NOW COMES TO EQUALLY IMPORTANT LATTER QUESTION AS TO WHETHER THE CIT(A) OUGHT TO HAVE AFFIRMED THE IMPUGNED DISALLOWANCE OF RS.55LACS IN ENTIRETY OR TO THE TUNE OF LUMP SUM FIGURE OF RS.10LACS ONLY. THE REVENUES CASE IS THAT IT IS ENTIRE DISALLOWANCE AMOUNT WHICH SHOULD HAVE BEEN C ONFIRMED IN LOWER APPELLATE PROCEEDINGS WHEREAS THE ASSESSEE SEEKS TO ADD ONLY GP COMPONENT THEREIN. WE FIND IN THIS BACKDROP THAT A CO-ORDINATE BENCH ORDE R IN M/S. MADHAV STEELS VS JCIT ITA NOS. 1963 & 2274/AHD/2014 HAS RESTRICTED A N IDENTICAL DISALLOWANCE OF UNACCOUNTED SALES OF MACHINERY/ENGINE SETS TO THE E XTENT OF PROFIT ELEMENT EMBEDDED THEREIN ONLY THAN THE ENTIRE AMOUNT. WE A CCORDINGLY SUPPORT THERE FROM TO REJECT REVENUES GRIEVANCE IN SUPPORTING AS SESSING OFFICERS ACTION ADDING THE ENTIRE SUM OF ESTIMATE SALE PRICE. MR. HEMANI HIGHLIGHTS ASSESSEES NP IN THE IMPUGNED ASSESSMENT YEAR @2.65% ONLY. WE FI ND NO SUBSTANCE IN THE INSTANT APPEAL FOR THE REASON THAT PROFIT ELEMENT I N ACCOUNT AND UNACCOUNTED SALES ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 13 - FIGURES MAY NOT BE UNIFORM ON PRESUMPTION BASIS. W E THEREFORE DIRECT THE ASSESSING OFFICER TO COMPUTE THE IMPUGNED ADDITION BY TAKING NP @4.5% QUA THE ADDITION AMOUNT OF RS.55LACS. THE ASSESSEE GETS PA RT RELIEF IN ITS SECOND SUBSTANTIVE GROUND. 11. THIS LEAVES US WITH THE LAST COMMON ISSUE OF UN ACCOUNTED SALES OF OIL ADDITION OF RS.10,57,240/- MADE IN COURSE OF ASSESS MENT AS AFFIRMED TO THE EXTENT OF RS.1LAC ONLY IN CIT(A) DETAILED FINDINGS READING AS UNDER: 6.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION MADE BY THE APPELLANT. I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSION MADE BY THE APPELLANT. THIS GROUND PERTAINS TO ADDITION OF RS.L 0,57,240/- ON ACCOUNT OF UNACCOUNTED SALES OF OIL. THE AO HAS DISCUSSED THE RELEVANT FACTS IN THE ASSESSMENT ORDER. THE ASSESSEE'S REPLY IS ALSO REPR ODUCED IN THE ASSESSMENT ORDER. IT IS THE CASE OF THE ASSESSEE THAT PRIOR TO BEACHING OF THE SHIP FOR DISMANTLING, AN INSPECTION OF THE SAME IS CARRIED O UT BY THE CUSTOMS OFFICIALS IN THE HIGH-SEAS WHERE THE SHIP IS DELIVERED AND ANCHO RED. THE QUANTITY OF OIL CAN ONLY BE ESTIMATED AS SUCH OIL IS LYING IN TANKS. TH ERE HAS TO BE SOME CONSUMPTION OF OIL WHEN THE SHIP IS BROUGHT FROM HIGH SEA TO TH E PLOT FOR BREAKING .HOWEVER, WHEN THE SHIP IS IN THE PROCESS OF DISMANTLING, THE RE IS NO GUARANTEE THAT THE ASSESSEE WILL GET THE SAME QUANTITY OF OIL MAINLY B ECAUSE THERE WAS NO ACTUAL WEIGHMENT DONE BY THE CUSTOMS OFFICIALS WHILE INSPE CTING THE SHIP. I ALSO AGREE WITH THE FACT THAT THERE WILL BE CONSUMPTION OF OIL WHEN FINALLY THE SHIP IS BROUGHT FROM HIGH SEAS TO THE PLOT FOR BEACHING AND BREAKIN G. IT HAS SPECIFICALLY POINTED OUT BY THE APPELLANT THAT DURING THE YEAR IT HAS PU RCHASED THREE SHIPS ON DIFFERENT DATES. FIRST OF ALL THEY HAD TO OBTAINED THE SURVEY REPORT FROM THE SURVEYOR AND THEREAFTER THE SHIP IS BEACHED ACCORDING TO THE TID E TIME. FURTHER SURVEY IS CARRIED OUT IN THE PRESENCE OF CUSTOM AUTHORITIES A T OUTRAGE AND ANCHORAGE WHICH IS ABOUT 12 K.M. AWAY FROM BEACHING POINT. SH IP IS WAITING FOR THEIR BEACHING PERMISSION FROM CUSTOM AUTHORITIES AND SUB SEQUENTLY BEACHED ACCORDING TO THE TIDE TIME SCHEDULE. THUS, THE PERM ISSION FOR BEACHING OF VESSEL IS FOLLOWED AFTER THE SURVEY REPORT OBTAINED. THE APPE LLANT SUBMITTED THAT ALL THE SHIPS WERE BEACHED WITH 5 TO 7 DAYS DELAY AFTER THE DATE OF SURVEY REPORT. THE DATE OF SURVEY AND THE PERMISSION FOR BEACHING THE SHIP ARE AS UNDER:- SR. NO. NAME OF VESSEL. DATE OF SURVEY REPORT DATE OF PERMISSION FOR BEACHING. 1 M.V. DURBAN STAR 21-05-2009 28-05-2009 2 M.V. WINDSUR 18-11-2009 22-11-2009 3 M.V. ICON 15-01-2009 20-01-2009 AS PER THE TECHNICAL REPORT WHEN SHIP IS AT ANCHORA GE IT MAY CONSUME FUEL OIL OF BETWEEN 2 TO 6 TONS PER DAY AND CONSIDERING THE DEL AY IN BEACHING BECAUSE OF THE WAIT OF THE BEACHING PERMISSION, IT HAS CONSUMED AP PROXIMATELY 25 TONE OF THE FUEL OIL FOR THE DELAY OF 5 TO 7 DAYS AND THE CONSU MPTION OF THE 2 TO 3 TONS OF OIL ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 14 - PER DAY WHICH IS A GENUINE REASON FOR SHORTAGE IN T HE ACTUAL AVAILABILITY OF OIL ON THE SHIP. FURTHER THERE WAS NO ADVERSE VIEW ON THE OUTPUT OF THE OIL FROM THE VAT DEPARTMENT, AS NO DISCREPANCY ABOUT SUCH UNACCOUNTE D SALES AS ALLEGED BY THE A.O HAS BEEN POINTED OUT BY THEM. 6.4. IT HAS BEEN CONTENDED BY THE APPELLANT THAT TH E AO HAS PROCEEDED ON THE ASSUMPTION THAT ACTUAL QUANTITY OF OIL IN TANK OF V ESSELS WAS AS MENTIONED IN THE BUNKER REPORT. WHILE PREPARING THE BUNKER REPORT AT THE ANCHORAGE POINT, QUANTITY OF OIL IN TANK IS MEASURED THROUGH A MEASU RING RODE BY TAKING DEPTH ON ESTIMATED BASIS AND THERE IS ALWAYS VARIATION IN QU ANTITY ACTUALLY FOUND. WHEN THE MEASUREMENT IS TAKEN THROUGH MEASURING RODE THERE I S SCOPE FOR VARIATION IN QUANTITY OF ACTUAL STOCK AVAILABLE IN THE BANK. BES IDES WHILE TAKING MEASUREMENT BY A MEASURING RODE QUANTITY OF FROZEN WASTE AT THE BOTTOM OF THE TANKER IS NOT BEING CONSIDERED. SHIPS PURCHASED BY SHIP BREAKERS ARE VERY OLD AND ALWAYS THERE REMAINS SUBSTANTIAL FROZEN WASTE AT THE BOTTO M OF TANK. THE QUANTITY OF OIL AND OTHER ITEMS ARE BEING INVENTORISED AS SOON AS T HE SHIP REACHES ANCHORAGE POINT FOR DUTY PURPOSE. SHIPS REMAIN AT ANCHORAGE P OINT WAITING FOR PERMISSION FOR BEACHING. THUS IT REMAINS AT THE ANCHORAGE FOR FOUR-FIVE DAYS DEPENDING ON AVAILABILITY OF A BERTH AND OTHER CLIMATIC CONDITIO N AT BEACHING POINT. IT CONSUMES OIL DURING THESE DAYS. SUCH CONSUMPTION IS DEPENDEN T UPON WEIGHT WEATHER ETC. THIS ASPECT HAS NOT BEEN APPRECIATED BY THE A.O. AT ALL. THE AO HAS NOT CONSIDERED LOSS DUE TO LEAKAGES AND SPILLAGE, WHICH IS INEVITABLE IN THIS LINE OF BUSINESS AS THE OIL, IS TAKEN OUT FROM THE TANKER B Y INSTALLING TEMPORARY PIPE FITTINGS. THE APPELLANT IS ENGAGED IN BUSINESS OF S HIP BREAKING AND ITS ATTENTION IS MAINLY ON BREAKING OF SHIP AND SALE OF SCRAP OBTAIN ED. SALE OF OIL AND OTHER ITEMS IS NOT THEIR MAIN JOB. THE AO HAS NOT PINPOINTED AN Y UNACCOUNTED SALE. HE HAS TOTALLY DISREGARDED THE FACT THAT AT ALANG SHIP BRE AKING YARD THERE IS 24 HOURS EXCISE BARRIER AND NOT A SINGLE ITEM CAN BE TAKEN O UT FROM SUCH BARRIER WITHOUT A VALID GATE PASS. APPELLANT'S ALL SALES ARE SUPPORTE D BY BILLS AND PASSES. 6.5. THE APPELLANT HAS RELIED UPON VARIOUS CASE LAW S BRIEFLY AS UNDER WHEREBY THE AUTHORITIES HAVE HELD THAT IN SUCH CIRCUMSTANCES NO ADDITION OF UNACCOUNTED SALE OF OIL IS WARRANTED WHEN THERE IS NOTHING ON RECORD SHOWING UNACCOUNTED SALES AND ALSO CONSIDERING THE VARIOUS REASONS FOR THE SH ORT FALL IN OIL OUTPUT FROM THE SHIP. - IN THE CASE OF ACIT(INV.) CIR.2, BHAVANAGAR VS. M /S.MALVI SHIP BREAKING COMPANY, BHAVNAGAR IN ITA NO.91/RJT/1996 D TD. 24.1.2005 HAS OBSERVED AS UNDER:- '15. WITH REGARD TO ADDITION MADE ON ACCOUNT OF UNR ECORDED SALES OF OIL WE FIND THAT THE ASSESSING OFFICER HAS COMPUTED THE OIL AVAILABLE IN THE THREE SHIPS PURCHASED BY THE ASSESSEE DURING THE YE AR UNDER CONSIDERATION ON THE BASIS OF BUNKER REPORT. HE HAS ACCORDINGLY C OMPUTED THE TOTAL OIL AVAILABLE IN THE SHIPS AT 149,673 ITRS. SINCE THE A SSESSEE HAD SHOWN SALES OF ONLY 95,260 ITRS. OF OIL, AFTER DISCOUNTING 20% OF OIL AVAILABLE FOR THE PURPOSE OF ANCHORING AND BEACHING, THE ASSESSING OF FICER HELD THAT 43,530 ITRS. WAS SOLD BY THE ASSESSEE OUTSIDE THE B OOKS. HE ACCORDINGLY CALCULATED THE VALUE OF 43,530 LTRS. OIL AT RS. 1,7 ,602/- AND ADDED THE SAME TO THE INCOME DECLARED BY THE ASSESSEE. THE AS SESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS HAD GIVEN DETAILED REPLY SUB STANTIATING THE ACTUAL ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 15 - AVAILABILITY OF OIL IN THE SHIPS AND EMPHASIZING TH E ACT THAT THE FIGURES ARRIVED AT BY THE ASSESSING OFFICER FOR AVAILABILIT Y OF OIL AT THE TIME OF PURCHASE OF THE SHIPS IN QUESTION WAS SUBJECT TO VA RIOUS CONDITIONS AND WAS THEREFORE, NOT THE ACTUAL FIGURE OF OIL AVAILAB LE IN THE SHIPS PURCHASED. 16. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE A DDITION BY OBSERVING THAT CONSUMPTION RATE OF OIL AND FROZEN W ASTE WAS REASONABLE AND THE ASSESSING OFFICER HAS NO MATERIAL FOR COMIN G TO THE CONCLUSION THAT THE ASSESSEE HAS UNDERTAKEN ANY SALE WITHOUT R ECEDING SALE IN ITS BOOKS OF ACCOUNT. 17. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FIND F ROM THE RECORDS THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON CERTAIN ASSUMPTIONS WHICH IS NOT FULLY SUPPORTED BY FACTS A ND FIGURES. THE OIL AVAILABLE IN THE THREE SHIPS WAS 106,343 ITRS. AND NOT 149,673 LITERS AS COMPUTED BY THE ASSESSING OFFICER. WE ALSO FOUND TH AT THE BASIS OF ALLEGED CONSUMPTION OF OIL ADOPTED BY THE ASSESSING OFFICER BETWEEN THE DATE OF ANCHORAGE AND DATE OF BEACHING IS ALSO NOT KNOWN. W E ALSO FOUND THAT M V KOTA WANGI AND M V DON PERTAINED AT ANCHORAGE FOR 13 DAYS AND 9 DAYS RESPECTIVELY. DURING THESE DAYS THE VESSELS MU ST HAVE CONSUMED OIL AND THEREAFTER, DURING THE VOYAGE FROM THE POINT *O F ANCHORAGE TO THE BEACHING POINT ALSO OIL MUST HAVE BEEN CONSUMED. IT WAS CLARIFIED TO THE ASSESSING OFFICER THAT THE BUNKER REPORT WAS PREPAR ED ON THE DATE OF ANCHORING. THE SAID REPORT NEVER CONSIDERS THE FROZ EN 'WASTE AT THE BOTTOM OF THE TANKS. WHILE MAKING THE ADDITION, THE AO HAS FAILED TO APPRECIATE THE FACT THAT SUBSTANTIAL OIL BEING CONS UMED FROM THE DATE OF ARRIVAL OF SHIP AT ANCHORAGE TO THE DATE OF BEACHIN G WHICH DEPENDS UPON VARIOUS FACTORS SUCH AS LIFE OF SHIP, TYPE OF ENGIN E/GENERATOR AND WEATHER, ETC. FURTHER DEPTH OF THE FROZEN WASTE VARIES FROM SHIP TO SHIP. FURTHER, SINCE THE READING SHOWN IN THE BUNKER REPORT IS ALW AYS INCLUSIVE OF THE FROZEN WASTE, IN REALITY THE ACTUAL AVAILABLE OIL I S EVEN LESS THAN -WHAT IS SHOWN IN THE BUNKER REPORT. AS FAR AS THE CONSUMPTI ON OF OIL DURING THE ANCHORAGE IS CONCERNED, THE SAME DEPENDS ON BHP OF THE SHIP. 18. THE LEARNED AR HAS CITED A DECISION OF CO-ORDIN ATE BENCH IN THE CASE OF IN IT A NO,4651/AHD/1995 & 46521 AMI 199 6 M/S. WESTERN SHIP BREAKING CORPORATION WHEREIN UNDER SIMILAR FACTS AN D CIRCUMSTANCES THE DELETION OF ADDITION MADE BY THE CIT(A) WAS CONFIRM ED BY THE TRIBUNAL AFTER HAVING THE FOLLOWING OBSERVATION: 'WE HAVE CONSIDERED RIVAL SUBMISSIONS OF BOTH THE P ARTIES, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS RELIED UPON THE TECHNICAL REPORT REGARDING THE CONSUMPTION OF OIL. BEFORE SHIP COMES INTO THE SHIP DOC-YARDS, THE SAME IS CLEARED BY THE CUSTOM AUTHORITIES. THE MASER OF SHIP PREPAR ES THE INVENTORY OF THE SHIP INCLUDING OIL AND THERE IS NO ANY EXACT FORMULA HOW MUCH OIL WAS IN THE SHIP. BEFORE THE SHIPS COME TO DOCK YARDS THE OIL CONSUMES IN LARGE QUANTITY. THER EFORE, ON COMING TO THE CONCLUSION FOR EXCESS OIL, THERE IS N O EXACT FORMULA. IT IS TO BE ESTIMATED ONLY. IN THE INSTANT CASE, THE AO HAS NOT ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 16 - POINTED OUT ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAS SOLD ANY OIL OUTSIDE THE SHIP. THEREFORE, WE ARE OF THE VIEW THA T THE CIT(A) IS JUSTIFIED IN DELETING THE SAME AND OUR INTERFERENCE IS NOT REQUIRED. 19. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN DELETING THE IMPUGNED ADDITI ON OF RS. 1,77,602/- MADE ON ACCOUNT OF OIL. ' - IN THE CASE OF AAPEE SHIP BREAKERS PVT. LTD. MUMB IA VS. CIT(CENTRAL)-XXVII AND DCIT, CIR.3(1) IN ITA NO.752 2/MUMBAI/2007 DTD. 7,8.2013 HAS OBSERVED AS UNDER:- 2.1 THE FIRST GROUND OF APPEAL IS ABOUT ADDITION M ADE ON ACCOUNT OF SUPPRESSED SALE OF OIL. AS PER THE AO FROM THE BILL S OF ENTRY PREPARED BY THE CUSTOM AUTHORITIES, THE SHIPS WERE HAVING 301 M T OIL AND SAME WAS VALUED AT RS. 39,73,120/-.AS PER THE AO NO SALE OF OIL WAS SHOWN BY THE ASSESSEE. THEREFORE, HE HELD THAT ASSESSEE HAS SUPP RESSED SALE VALUE OF THE OIL AND HE ADDED RS. 43.7 LAKHS TO THE INCOME OF TH E ASSESSEE, AS STATED EARLIER. 2.2. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HELD THAT THERE AN APPARENT MISTAKE WAS COMMITTED BY THE AO WHILE GIVING NARRATION OF THE ITEMS SOLD, THAT WHILE ACCOUNTING FOR SALE OF OIL (PER BARREL) AO MENTIONED THE NARRATION FURNITURE INSTEA D OF FURNACE OIL, THAT OIL WAS ALSO REQUIRED FOR OPERATING EQUIPMENTS LIKE CRANES, THAT HOME CONSUMPTION BY THE ASSESSEE IN RESPECT OF OIL COULD NOT BE IGNORED, THAT ASSESSEE HAS SOLD 224 MT FURNACE OILS, THAT DETAILS OF SALE OF OIL WAS AVAILABLE IN THE PAPER BOOK, THAT DETAILS SUPPLIED BY THE ASSESSEE CONTAINED BILL NUMBER, DATE OF BILL, PARTIES' NAMES , DESCRIPTION OF OIL, QUANTITY, UNIT AND VALUE OF OIL SOLD. 2.3. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RE LIED UPON THE ORDER OF THE AO. AUTHORISED REPRESENTATIVE SUBMITTE D THAT THE AO HAD COMMITTED MISTAKE WHILE PASSING THE ASSESSMENT ORDE R, THAT OUT OF 301 MT OIL, 224 MT OIL WAS SOLD BY THE ASSESSEE AND INFORM ATION ABOUT THE SALE OF THE OIL WAS MADE AVAILABLE TO THE AO, THAT BALANCE 76 MT OIL WAS USED BY THE ASSESSEE. HE REFERRED TO PAGE NO. 22 TO 24 OF T HE PAPER BOOK. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL BEFORE US. WE FIND THAT WHILE PASSING THE ORDER AO HAD NOT CONSIDERED THE DETAILS OF OIL SOLD, AS POINTED OUT BY THE FAA. PAG E NO.1 OF ANNEXURE-2 OF THE ASSESSMENT ORDER SPEAKS ABOUT THE ITEM SOLD BY THE ASSESSEE COMPANY. WE FIND THAT HE HAS MENTIONED THE SALE OF OIL SOLD (IN BARREL),BUT IN THE NARRATION HE HAS MENTIONED FURNITURE IN PLACE OF FU RNACE OIL.FAA HAS VERIFIED THE SALE BILLS ALONG WITH THE DETAILS OF P URCHASERS AND QUANTITY OF OIL SOLD. IN THESE CIRCUMSTANCES, WE ARE OF THE OPI NION THAT ORDER OF THE FAA DOES NOT NEED ANY INTERFERENCE FROM OUR SIDE. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 17 - GROUND NO.1 IS DECIDED AGAINST THE AO. IN THE CASE OF GOYAL TRADERS MUMBAI, THE HON'BLE IT AT 'G' BENCH OF MUMBAI IN ITA NO.4431/MUMBAI AND CO 63 OF 2011 DTD. 15.2.2012 HAS OBSERVED AS UNDER:- 'THE LEARNED CIT(A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF RS. 10,35,09 5/- ON SALE OF FURNACE AND LUBRICANT OILS WITHOUT APPRECIATING THE FACT TH AT THE ADDITION WAS MADE ON THE BASIS OF AUTHENTICATED DOCUMENTS LIKE B ILL OF ENTRIES ETC. 4.1. THE ASSESSING OFFICER DISCUSSED THE ISSUE VIDE PARA 8 OF THE ORDER AND CAME TO CONCLUSION THAT THE ASSESSEE COULD HAVE SOLD LUBRICANT OIL AND FURNACE OIL OUTSIDE THE .BOOKS OF ACCOUNT AND MADE AN ADDITION OF RS.10,35,095/- CALCULATED AS PER PARA 8.4 OF THE OR DER. IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) THAT THE ABOVE AD DITION HAS BEEN MADE WITHOUT APPRECIATING THAT WHATEVER OIL IS RECOVERED IS SOLD AND DULY ACCOUNTED FOR. ALSO THE FIGURES FOR GREASE, OIL, TH INNER ETC MENTIONED IN THE BILL OF ENTRY ARE INDICATIVE-BASED UPON THE SURVEY REPORT DETERMINED ON THE TANK CALCULATION BOOK AVAILABLE ON THE BOARD AND NO T PHYSICALLY VERIFIED. THE SHIP BREAKERS DO NOT DISPUTE SUCH FIGURES TO AV OID DELAY IN BEACHING OF THE SHIP. THE OIL AVAILABLE INCLUDES VARIOUS IMP URITIES ACCUMULATED OVER A PERIOD OF TIME. THE APPELLANT IS NOT IN THE TRADE OF SALE OF OIL AND IS ONLY A SCRAP DEALER. CUSTOMS DUTY LEVIES IT AT INTE RNATIONAL PRICE OF PURE OIL, WHEREAS THESE ARE USED OR CONTAMINATED OIL WIT H IMPURITIES. THE DETAILS SHOW THAT GREASE IS WORTH ONLY RS.21,463/- FROM 2 SHIPS AND NOTHING FROM THE THIRD SHIP. THIS GREASE IF RECOVER ED IS USED IN OWN PROCESS OF CUTTING IN MACHINERY EMPLOYED SUCH AS WH ICH, CRANES OR GENERATOR. REGARDING LUBRICATING OIL, THESE ARE SOL D AS LUBE OIL AND INCLUDED IN TOTAL SALE OF OIL-COPIES OF SALE BILLS ARE DULY ENTERED. REGARDING PAINT, THINOL AND CHEMICALS-THEY ARE NOT RECOVERABLE AND THEY EITHER GET DESTROYED IN THE DISMANTLING PROCESS QR USED FOR CLEANING PURPOSES. THUS, THE ABOVE ADDITION DESERVES TO BE D ELETED, IN VIEW OF THE DECISION OF THE HON'BLE IT AT 'H' BENCH MUMBAI IN T HE CASE OF M/S. ANUPAMA STEEL LTD, A.Y. 1998-99. 4.2. AFTER CONSIDERING THE ASSESSEE'S SUBMISSION, T HE CIT(A) DELETED THE ADDITION BY STATING AS UNDER:- 4.2. I HAVE CONSIDERED THE SUBMISSION OF THE LEARNE D COUNSEL AND IT IS SEEN THAT THE ABOVE ADDITION HAS BEEN MADE ON THE B ASIS OF CERTAIN CALCULATIONS TAKEN FROM THE BILL OF ENTRIES AND AS HELD BY THE HON'BLE ITAT 'H' BENCH MUMBAI IN THE CASE OF M/S. ANUPAMA STEEL LTD. A.Y. 1998-99 (ITA NO.5136/MUM/2002, THE SAME CANNOT BE ADDED BAC K MERELY ON THE BASIS OF THE BILL OF ENTRIES AS IT CANNOT BE PRESUM ED THAT SALE HAS ALSO BEEN MADE AT HIGHER PRICE. THUS, THIS ADDITION OF RS. 10,35,095/- IS HEREBY DELETED. ' 4.3. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE FINDINGS OF THE CIT (A) AS THERE IS NO BASIS FOR MAKING THE ADDITION BY THE ASSESSING OFFICER AN D FURTHER THE CIT(A) ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 18 - FOLLOWED THE COORDINATE BENCH DECISION WHERE SIMILA R ISSUE WAS CONSIDERED. ACCORDINGLY THE GROUND IS REJECTED. ' - IN THE CASE OF M/S. WESTERN SHIP BREAKING CORPORA TION, BHAVNAGAR THE HON'BLE ITAT, RAJKOT BENCH IN ITA NO. 4651/AHD/1995 VIDE ORDER DTD. 01.09.2004 HAS MADE THE OBSERVATION S AS UNDER:- 'WE HAVE CONSIDERED RIVAL SUBMISSION OF BOTH THE PA RTIES, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS RELIED UPON THE TECHNICAL REPORT REGARDING THE CONSUMPTION OF OIL. BEFORE SHIP COMES TO THE SHIP DOC YARDS, THE S AME IS CLEARED BY THE CUSTOM AUTHORITIES, THE MASTER OF SHIP PREPARES THE INVENTORY OF THE SHIP INCLUDING OIL AND THERE IS NO EXACT FOR MULA HOW MUCH OIL WAS IN THE SHIP. BEFORE THE SHIPS COME TO DOCKY ARDS THE OIL CONSUMES IN LARGE QUANTITY. THEREFORE, ON COMING TO THE CONCLUSION FOR EXCESS OIL, THERE IS NO EXACT FORMUL A. IT IS TO BE ESTIMATED ONLY. IN THE INSTANCE CASE, THE AO HAS NO T POINTED OUT ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAS SOLD ANY OIL OUTSIDE THE SHIP. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN DELETING THE SAME AND OUR INTERFERENCE IS NOT REQUI RED. ' SIMILARLY ADDITION MADE MORE OR LESS ON THE SAME GR OUND IN THE CASE OF M/S VIJAY SHIP BREAKING CORPORATION, BHAVNAGAR FOR A.Y. 1994-95 WAS DELETED BY HONBLE CIT(A) HAS BEEN UPHELD BY HON 'B LE IT AT, 'A' BENCH IN ITA NO. 258/RJT/1999 VIDE ORDER DATED 31.07.2009 . 6.6 AFTER CAREFUL CONSIDERATION OF THE ABOVE FACTS, VARIOUS DECISIONS OF THE ITAT'S BRIEFLY DISCUSSED ABOVE, AND KEEPING IN VIEW THE DETAILED SUBMISSION OF THE APPELLANT, THE AO'S OBSERVATION A BOUT THE SUPPRESSION OF OIL IN PRODUCTION/OUTPUT OF FUEL OIL, MGO AND LU BRICANT OIL AND CONSEQUENTLY TO ARRIVE AT THE SUPPRESSION OF SALES IS NOT A REASONABLE VIEW FOR VARIOUS REASONS DISCUSSED ABOVE. THE TYPE OF TH E THREE SHIPS, THEIR YEAR OF MANUFACTURING WERE DIFFERENT TO EACH OTHER AND HENCE THEIR CONSUMPTION OF OIL DURING THE PERIOD FROM THE DATE OF SURVEY TO THE DATE OF BLEACHING IS OBVIOUSLY DIFFERENT. THUS THE FORMULA OF CONSUMPTION OF OIL OF A PARTICULAR SHIP CANNOT BE APPLIED TO ARRIVE AT TH E CONSUMPTION OF OIL OF THE ANOTHER SHIPS. IT HAS BEEN AN UNDISPUTED FACT T HAT THE QUANTITY SHOWN IN SHIP RECORDS AS PER THE SURVEY REPORT CANNOT BE THE ACTUAL QUANTITY OF THE OIL AVAILABLE IN THE SHIP. FURTHER, THERE IS SL UDGE DEPOSITED IN THE BOTTOM OF THE OIL TANK WHICH COULD NEVER BEEN ESTIM ATED AND THE SAME REDUCES THE ACTUAL QUANTITY OF OIL. SO CONSIDERING VARIOUS FACTORS, THE ACTUAL AVAILABILITY OF OIL IN THE TANK IS IMPOSSIBL E TO BE MEASURED. FURTHER, NO EVIDENCES/ DETAILS IN RESPECT OF ANY UNACCOUNTED SALES OF THE OIL BY THE APPELLANT HAVE BEEN BROUGHT ON RECORD BY THE A.O. M ERELY HAVING THE SUSPICION OF THE SALES OUT OF BOOKS CANNOT BE THE B ASIS FOR MAKING THE ADDITION. BUT AT THE SAME TIME, THE POSSIBILITIES F OR LEAKAGE OF REVENUE CANNOT BE RULED OUT AND THEREFORE I CONFIRM THE EST IMATED UNRECORDED SALES OF RS.1 LAKHS IN LUMPSUM ON AD-HOC BASIS FOR WANT OF VERIFICATION WHICH WOULD BE SUFFICIENT. THUS, THE GROUND OF THE APPELLANT IS PARTLY ALLOWED. ITA NOS. 2102 & 2276/AHD/2014 [M/S. P. PATEL SHIP B REAKING CO.] A.Y. 2010-11 - 19 - 12. HEARD RIVAL SUBMISSIONS REITERATING BOTH PARTIE S RESPECTIVE STANDS. THE ASSESSING OFFICER ADMITTEDLY MADE THE IMPUGNED ADDI TION AFTER HOLDING THAT THE ASSESSEE HAD SOLD OIL IN SHIPS ENGINES AFTER THEY WERE TAKEN TO ITS SHIP BREAKING YARD. WE FIND AT THIS STAGE THAT NEITHER THE ASSES SEE HAS DISCHARGED ITS ONUS THAT NONE OF THE SHIPS CONCERNED HAD OIL IN ITS FUEL TAN K NOR REVENUE HAS PROVED THE EXACT QUANTITY THEREOF SINCE THE ASSESSING OFFICER CHOSE TO MAKE THE IMPUGNED ADDITION ON ESTIMATION BASIS. WE ACCORDINGLY SEE N O REASON TO INTERFERE WITH LEARNED CIT(A)S CONCLUSION RESTRICTING THE IMPUGNE D ADDITION TO A LUMP SUM AMOUNT OF RS.1LAC ONLY. BOTH ASSESSEES AS WELL AS REVENUES SUBSTANTIVE GROUND(S) FAIL ACCORDINGLY. 13. WE QUOTE OUR ABOVE DETAILED DISCUSSION TO PARTL Y ACCEPT ASSESSEES APPEAL ITA NO.2102/AHD/2014. THE REVENUES CROSS APPEAL I TA NO.2276/AHD/2014 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF JANUARY, 2018.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD: DATED 31/01/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0