The ACIT, Circle-1, Bhavnagar V. M/s. Apollo Vikas Steel Pvt.Ltd., Bhavnagar

ITA 2272/AHD/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7563 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VARTIK CHOKSHI BIREN SHAH
• Section: 143(3)

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER &SMT.MADHUMITA ROY, JUDICIAL MEMBER ./I.T.A. NO. 2272/AHD/2014 ( / ASSESSMENT YEAR:2010-11) ACIT CIRCLE-1, JASHONATHCHOWK, BHAVNAGAR 364 001 / VS. M/S. APOLLO VIKAS STEEL PVT. LTD. JIVAN MENTION, LATI BAZAR, BHAVNAGAR 364 001 ./ ./PAN/GIR NO. : AAF CA9 760 M ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MUDIT NAGPAL , SR. DR / RESPONDENTBY: SHRI VARTIK CHOKSHI, BIREN SHAH, AR ! /DATE OFHEARING 19/06/2019 '# ! / DATE OF PRONOUNCEMENT 24/07/2019 $% /O R D E R PER AMARJIT SINGH - AM: THE APPEAL FILED BY THE REVENUE FOR A.Y. 2010-11, A RISE FROM ORDER OF THE CIT(A)-XX, AHMEDABAD DATED 16.05.2014, IN PROCEEDING S UNDER SECTION 143(3)OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE FACT IN BRIEF IS THAT RETURN OF INCOME DECLAR ING TOTAL INCOME OF RS. 4,12,45,630/- WAS FILED ON 28.09.2010. SUBSEQUENTL Y THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING NOTICE U/S. 143(2) OF THE ACT O N 14.09.2011. THE ASSESSEE WAS IN THE BUSINESS OF SHIP BREAKING AND MANUFACTURING OF MILD STEEL INGOTS. THE FURTHER FACT OF THE CASE ARE DISCUSSED WHILE ADJUDI CATING THE TWO GROUNDS OF APPEAL FILED BY THE REVENUE AS UNDER:- ITA NO. 2272/AHD/2014 A.Y. 2010-11 2 1. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN ACCEPTING LUMPSUM AMOUNT OF RS. 10 L AC AS UNACCOUNTED SALES INSTEAD OF RS. 55,00,000/- ADDED BY THE AO U/S. 143 (3) OF THE ACT, EVEN WHEN CIT(A) HAS HIMSELF ACCEPTED THAT ASSESSEE HAS NOT D ISCLOSED SALE OF SUCH MACHINERIES AND EVEN WHEN AO HAS SCIENTIFICALLY EST IMATED THE SALE PRICE OF MACHINERIES REFERRING TO BILLS/INVOICES OF OTHER CO NCERNS. 2. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN ACCEPTING LUMPSUM AMOUNT OF RS. 4 LA C AS UNACCOUNTED SALES OF OIL INSTEAD OF RS. 21,99,935/- ADDED BY THE AO U/S. 143(3) OF THE ACT, EVEN WHEN ASSESSEE HAS FAILED TO EXPLAIN WITH EVIDENCE, THE LOSS OF OIL MEASURED INITIALLY AND THAT CIT(A) HAS RELIED ON MERELY THEO RETICAL SUBMISSIONS OF THE ASSESSEE. FIRST GROUND OF APPEAL:- LUMPSUM ADDITION ON ACCOUNT OF UNACCOUNTED SALES (D G SETS):- 3. DURING THE COURSE OF ASSESSMENT PROCEEDING THE A O NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DISCLOSED TOTAL SALE OF RS. 53,08,22,797/- WITH GROSS PROFIT OF RS. 6,67,81,915/- @ 12.58%. TH E AO OBSERVED THAT THE GROSS PROFIT DECLARED WAS ON HIGHER SIDE AS COMPARED TO L AST YEAR BUT THE SHORTAGE CLAIMED IN SHIP BREAKING BUSINESS BY THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION WAS 11.48% AS COMPARED TO SHORTAGE OF 7.35% CLAIMED IN THE IMMEDIATE PRECEDING YEAR. THE ASSESSEE EXPLAINED T HAT DURING THE YEAR THE PERCENTAGE OF SHORTAGE WAS 11.48% WHILE IN THE PAST YEAR I.E. IN THE ASSESSMENT YEAR 2009-10 AND ASSESSMENT YEAR 2007-08 IT WAS 9.3 7% AND 10.34 % RESPECTIVELY. THE ASSESSEE EXPLAINED THAT THE SMALL DIFFERENCE IN PERCENTAGE OF SHORTAGE WAS THERE BECAUSE THERE WAS VERY SMALL AMOUNT OF PRODUC TION IN THE EARLIER THREE YEAR OF 3996.090 M.T, HOWEVER, DURING THE YEAR UNDER CONS IDERATION THERE WAS TREMENDOUS INCREASE IN THE PRODUCTION OF THE ASSESS EE COMPANY WHICH WAS AT 26933.958 M.T. IN VIEW OF THE ABOVE THE ASSESSEE EX PLAINED THAT THERE WAS SIX TIME INCREASED IN THE PRODUCTION AND ALSO THERE WAS SUBSTANTIAL INCREASED IN THE YIELD AND THERE WAS ALSO DECREASE IN THE SHORTAGE I N THE CASE OF FURNISH DIVISION. THE RELEVANT PART OF THE SUBMISSION OF THE ASSESSEE IS REPRODUCED AS UNDER:- ITA NO. 2272/AHD/2014 A.Y. 2010-11 3 A.Y. RAW MATERIAL YIELD %OF YIELD SHORTAGE OF% 2007-08 5753 (M/T) 5217-505 (M/T) 90.66% 10.34% 2008-09 221-124 (M/T) 201-480(M/T) 91.12% 8.88% 2004-05 4782 (M/T) 4319.480 (M/T) 90.33% 9.67% 2009-10 2081-876(M/T) 1894.165 (M/T) 90.63% 9.37% 2009-10 FURNESH DIVI.* 4327.111 (M/T) 3996.090 (M/T) 92.34% 7.66% 2010-11 20276 MT. 17948.48 MT 88.52% 11.48% 2010-11 FURNESHDIVI. 9698.719 MT 8955.910 MT. 92.65% 7.35% THE ASSESSEE HAS ALSO EXPLAINED THAT THE PROCESS OF SHIP BREAKING CONSISTED OF DISMANTLING OF SHIP BY CUTTING, SORTING, FABRICA TING ETC. AND THERE WAS ALWAYS SHORTAGE AND WASTAGE IN PRODUCTION. HOWEVER, THE A O HAS NOT ACCEPTED THE SUBMISSION OF THE ASSESSEE, AND HE WAS OF THE VIEW THAT ASSESSEE MUST HAD RECOVERED AT LEAST TWO SHIP ENGINE, SIX DG SET BESI DE OTHER MACHINERY THEREFORE ADDITION OF RS. 20,00,000/- WAS MADE FOR TWO MAIN E NGINE, RS. 25,00,000/- FOR SALE OF FIVE DG SETS AND RS. 10,00,000/- WAS ADDED FOR O THER TYPE OF MACHINERIES. 4. AGGRIEVED ASSESSEE FILED BEFORE THE LD. CIT(A). T HE LD. CIT(A) HAS RESTRICTED THE ADDITION STATING THAT THE AO HAS EST IMATED THE SALE PROCEED WITHOUT ANY BASIS THEREFORE A LUMPSUM AMOUNT OF RS. 10,00,0 00/- WAS SUSTAINED BY THE LD. CIT(A) CONSIDERING THE POSSIBLE LEAKAGE OF REVENUE I N RESPECT OF THE ITEM LIKE ENGINE, DG SET, AND OTHER MACHINERY ETC. SECOND GROUND OF APPEAL :- LUMPSUM ADDITION ON ACCOUNT OF UNACCOUNTED SALES (O IL):- 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS REQUIRED TO GIVE DETAIL OF SALE OF DIFFERENT TYPES OF OIL AS RE PORTED AT PARA NO. 6 OF THE ASSESSMENT ORDER BY THE AO. THE ASSESSEE WAS ALSO A SKED TO EXPLAIN THE REASON FOR DIFFERENCE IN QUANTITY OF OIL FOUND IN THE DIFFEREN T SHIPS. THE ASSESSEE HAS EXPLAINED THAT THERE WAS NO MUCH DIFFERENCE OF TOTA L QUANTITY OF OIL. MOST OF THE QUANTITY OF OIL SOLD WAS TALLIED WITH THE SURVEY RE PORT AND THERE WAS SOME LEAKAGE ITA NO. 2272/AHD/2014 A.Y. 2010-11 4 SHORTAGE WHILE UNLOADING/HANDLING AND TRANSFERRING OIL FROM SHIP TO FLOOR AND AT THE STAGE OF TRANSPORTATION. THE AO HAS NOT ACCEPTED T HE EXPLANATION OF THE ASSESSEE AND WORKED OUT DIFFERENCE IN SALE AND RECEIVED OF D IFFERENT TYPE OF OIL AS UNDER:- FUEL OIL 1482600 LTR. MGO 121530 LTR. LUB. OIL 53300 LTR. SUMP OIL 34860 LTR. THUS THERE WAS DIFFERENCE IN SALE AND RECEIPT OF DI FFERENT TYPE OF OILS AS UNDER- FUEL OIL 1524160 -1482600 = 41560 LTR. MGO 134080- 121530 =12550 LTR. LUB. OIL 96540-53300 =43240 LTR. SUMP OIL 26400-34860 = - 8460 LTR. THE AO HAS STATED THAT THERE MAY BE SOME CONSUMPTIO N OF OIL DURING ANCHORING AND BEACHING. THEREFORE, FROM THE ABOVE D IFFERENCE 5000 FUEL OIL, 2000 MGO AND 1000 LUB. OIL WAS CONSIDERED AS CONSUMPTION DURING ANCHORING AND BEACHING. AFTER REDUCING THIS CONSUMPTION FIGURE T HE DIFFERENCE IN OIL REMAINS OF 36560 FUEL OIL 10550 MGO AND 42240 OF LUB. OIL TO TH E AMOUNT OF RS. 21,99,935/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. THE ASSESSEE HAS FILED BEFORE THE LD. CIT(A). TH E LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND RESTRICTED T HE DISALLOWANCE TO THE EXTENT OF RS. 4,00,000/- IN LUMPSUM ON AD-HOC BASIS FOR WANT OF VERIFICATION TO COVER UP THE POSSIBLE LEAKAGE. 7. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE US THE LD. DR HAS SUPPORTED THE ORDER OF AO. 8. ON THE OTHER HAND LD. COUNSEL HAS FURNISHED PAPE R BOOK COMPRISING OF VARIOUS SUBMISSION MADE BEFORE AO AND CIT(A) DURING THE COURSE OF ASSESSMENT OF APPELLATE PROCEEDING. THE LD. COUNSEL HAS CONTEN DED THAT CASE OF THE ASSESSEE WAS COVERED BY THE ORDER OF ITAT AHMEDABAD CO-ORDINA TE BENCH IN THE CASE OF ITA NO. 2272/AHD/2014 A.Y. 2010-11 5 THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2010-11 AND THE CASE OF SAIBABA SHIP BREAKING CORPORATION IN ITA NO. 2152/AHD/2014. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MATERI AL ON RECORD. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE WE HAVE GONE TH ROUGH THE DECISION OF CO- ORDINATE BENCH OF THE ITAT IN THE CASE OF THE ASSES SEE ITSELF VIDE ITA NO. 2153/AHD/2014. WHEREIN, THE ISSUE WAS DECIDED IN F AVOUR OF THE ASSESSEE AFTER FOLLOWING THE DECISION OF SAIBABA SHIP BREAKING COR PORATION VS. ACIT IN ITA NO. 2152/AHD/2014. IT IS FURTHER NOTICED THAT ASSESSEE HAS PRODUCED ITS BOOKS OF ACCOUNT ALONG WITH AUDITED ACCOUNTS AND OTHER RECOR D HOWEVER, THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT IS FURTHER NOTICED THAT ASSESSEE HAS ALSO MAINTAINE D DAY TO DAY SALE REGISTER SHOWING THE DESCRIPTION OF THE GOODS, WEIGHT AND MAINTAIN T HE EXCISE RECORDS FOR FERROUS AND NON-FERROUS MATERIALS, AND IT IS ALSO OBSERVED THAT ITEMS OBTAINED FROM DIFFERENT SHIPS WERE NOT IN UNIFORM WEIGHT, QUALITY, QUANTITY AND SHAPES AND THE MAIN ENGINE OF THE SHIP WAS SOLD IN VARIOUS PARTS OF IRON AND S TEEL. WE FURTHER OBSERVE THAT THE FINDING OF THE AO THAT ASSESSEE HAS SOLD THE ITEM O UT OF BOOKS WAS NOT BASED ON ANY RELEVANT MATERIAL. IN THE LIGHT OF THE ABOVE F ACTS AND CIRCUMSTANCES AND AFTER CONSIDERING THE DETAILED FINDING OF THE LD. CIT(A) WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. ACCORDINGLY, THE APPEAL STA ND DISMISSED. 9. REGARDING ADDITION ON ACCOUNT OF UNACCOUNTED SAL ES OF OIL IT IS NOTICED THAT AO HAS MADE COMPUTATION ON ESTIMATION BASIS. IT IS REPORTED THAT THE MEASUREMENT OF AVAILABILITY OF OIL WAS TAKEN THROUGH MEASURING ROD AND THE QUANTITY OF FROZEN WASTE AT THE SHIP WAS NOT CONSIDERED WHICH REMAINED AS A FROZEN WASTE AT THE BOTTOM OF TANK. FURTHER IT WAS ALSO REITERATED THA T AO HAS NOT CONSIDERED LOSS DUE TO LEAKAGE AND SPILLAGE. IT IS ALSO STATED THAT TH ERE WAS SOME CONSUMPTION OF OIL WHEN THE SHIP WAS BROUGHT FROM HIGH SEA TO THE PLOT FOR BREAKING AND WHEN THE SHIP WAS IN THE PROCESS OF DISMANTLING THERE WAS NO GUARANTEE THAT THE ASSESSEE WILL GET THE SAME QUANTITY OF OIL BECAUSE THERE WAS NOT ACTUAL WEIGHMENT DONE BY THE ITA NO. 2272/AHD/2014 A.Y. 2010-11 6 CUSTOM OFFICIAL WHILE INSPECTING THE SHIP. THE SURV EY WAS CARRIED OUT IN THE PRESENCE OF CUSTOM AUTHORITIES WHICH AT ABOUT 12 KI LOMETRE AWAY FROM BEACHING POINT. WHEN THE MEASUREMENT WAS TAKEN THROUGH MEAS URE ROD THERE WAS SCOPE FOR VARIATION IN QUANTITY OF ACTUAL STOCK AVAILABLE IN THE BANK. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES WE OBSERVE THAT THERE WAS N O ACCURACY IN THE ESTIMATION MADE BY THE AO IN RESPECT OF UNACCOUNTED SALE OF OI L THEREFORE WE CONSIDER THAT LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE UNACCOUN TED SALE TO THE EXTENT OF RS. 4,00,000/- ON LUMPSUM BASIS FOR WANT OF VERIFICATIO N AND TO COVER UP THE POSSIBLE LEAKAGE. ACCORDINGLY, THIS APPEAL OF THE REVENUE I S ALSO DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCO UNTANT MEMBER AHMEDABAD: DATED 24/07/2019 TANMAY TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. $ / ASSESSEE 3. &' ( / CONCERNED CIT 4. ( - / CIT (A) 5. )*+ ' , ! ' , ,-$&$ / DR, ITAT, AHMEDABAD 6. +. / / GUARD FILE. BY ORDER / $% , 0 / , ! ' , ,-$&$ 1 1.DATE OF DICTATION ON 17.07.2019 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 18.07.2019 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 24.07.2019 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 24.07.2019 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 24.07.2019 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25.07.2019 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER THIS ORDER PRONOUNCED IN OPEN COURT ON 24/07/2019