M/s. Sunita Transport Pvt.Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 2657/AHD/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57153 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation
• Section: 143(3); 133A; 234B

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY AM ITA NO.2657/AHD/2007 (ASSESSMENT YEAR:-2003-04) M/S SNITA TRANSPORT PVT. LTD., OPP. YOGESHWAR PETROL PUMP, DUMUD CHOKDI, N.H. NO.8, BARODA V/S THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4, BARODA PAN: AAFCS 4221 D [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N SOPARKAR, AR REVENUE BY:- SHRI VINOD TANWANI, SR. DR DATE OF HEARING:- 25-01-2012 DATE OF PRONOUNCEMENT:- 09-02-2012 O R D E R PER D K TYAGI (JM) :- THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 16-02-2007 PASSED BY THE LEARNED CIT(A) -III, BARODA FOR ASSESSMENT YEAR 2003-04. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THIS APPEAL:- [1] THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE A0 IN MAKING AMOUNT OF RS.1,65,250/- ON THE GROUND THAT THESE ARE BOGUS CREDITORS. [2] THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.1,33,044/- OUT OF RS.11,30,247/- MADE BY THE AO ON ACCOUNT OF DEDUCTION FOR SHORTAGE IN MATE RIAL 2 TRANSPORTED IN THE VEHICLES OF THE APPELLANT FOR WH ICH DEDUCTIONS ARE MADE BY THE CUSTOMERS FROM THE PAYMENTS OF APPE LLANT. [3] THE LEARNED CIT(A) HAS ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION ON ACCOUNT OF STOCK OF SPARES AMOUNTING TO RS.1,67,418/-. IT WAS MENTIONED AT THE TIME OF ASSESSMENT THAT TH E SAID STOCK IS NOT UNACCOUNTED STOCK. FURTHER, IT WAS ALSO EXPLAIN ED THAT THESE ITEMS ARE REVENUE ITEMS AND ARE EXPENSED OUT AT THE TIME OF PURCHASE ITSELF. THEREFORE THERE IS NO QUESTION OF ACCOUNTING THE SAID ITEMS AS CLOSING STOCK. THE AO HAS MADE THE AD DITION WITHOUT PROPERLY APPRECIATING THE FACTS RELEVANT TO THE APPELLANT. [4] THE LEARNED CIT(A) HAS ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN CHARGING INTEREST U/S 234B AND 234D OF THE ACT. [5] THE LEARNED CIT (A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. [6] YOUR APPELLANT CRAVES A RIGHT TO ADD TO OR AMEN D, ALTER, SUBSTITUTE, DELETE OR WITHDRAW ALL OR ANY OF THE GR OUNDS OF APPEAL. 2 AS REGARDS GROUND NO.1 IN THIS ASSESSEES APPEAL, THE FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE Y EAR UNDER CONSIDERATION HAS BEEN FILED BY THE ASSESSEE COMPAN Y ON 30-11- 2003 DECLARING THEREIN TOTAL INCOME OF RS.44,36,263 /-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 27-04-2004, ACCEPTING THE TOTAL INCOME AS RETURNED BY THE ASSESSEE COMPANY. T HE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY A NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 14-10-2004 WHICH WAS SERVED O N THE ASSESSEE. THE AO HAS NOTED THE FOLLOWING FACTS:- 3 2 THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTI CE U/S. 143(2) OF THE ACT WAS ISSUED ON 14-10-2003 WHICH WAS DULY SER VED UPON THE ASSESSEE BY RPAD, IN RESPONSE TO NOTICES ISSUED ON TIME TO TIME, SHRI ABASS GULAMHUSSAINWALA, & AKSHAY DAVE C.A., FROM K C MEHTA & CO. ATTENDED ALONG WITH SHRI PRASHANT, ACCOUNTANT O F THE ASSESSEE FROM TIME TO TIME AND SUBMITTED THE DETAILS AND EXP LANATIONS CALLED FOR DURING THE PROCEEDINGS. 3 THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS O F TRANSPORTATION OF OIL/CHEMICALS THROUGH TRUCK TANKE RS. THE ASSESSEE COMPANY IS OWING ITS OWN TANKERS AND ALSO TAKES TAN KERS ON HIRE FROM OUTSIDE PARTIES AS AND WHEN REQUIRED. THE RETURN OF INCOME IS ACCOMPANIED BY LAX AUDIT REPORT U/S 44AB OF THE ACT IN FORM NO. 3CA AND 3CD, COPIES OF AUDITED PROFIT AND TOSS ACCO UNT, BALANCE SHEET, ETC. ALONG WITH ITS ANNEXURES. 4 THERE WAS A SURVEY U/S 133A ON THE BUSINESS PREMI SES OF THE ASSESSEE ON 30.1.2003. DURING THE COURSE OF SURVEY, THE TRIAL BALANCE WAS DRAWN FROM THE BOOKS OF ACCOUNTS OF ASSESSEE AP PEARING IN ITS COMPUTER. ON A COMPARISON OF THIS TRIAL BALANCE WIT H THE RETURN OF INCOME FILED BY THE ASSESSEE, IT WAS GATHERED THAT ASSESSEE COMPANY HAS DEBITED BOGUS EXPENSES IN THE BOOKS OF ACCOUNTS , THROUGH CERTAIN ACCOUNTS WHICH WERE NOT APPEARING IN THE AUDITED RE GULAR BOOKS OF ACCOUNTS. THESE EXPENSES WERE OUTSTANDING AS CREDIT ORS IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND WERE PAID AS AN D WHEN CASH WAS REQUIRED BY THE ASSESSEE. THESE EXPENSES HAVE BEEN LISTED AND WERE REPRODUCED IN THE BODY OF ASSESSMENT ORDER AT PAGE- 3 FOR A.Y. 2001- 02 PASSED U/S 143(3) OF THE ACT. THE DISCREPANCY WO RKED OUT FOR THE CURRENT FINANCIAL YEAR WAS ON ACCOUNT OF THREE PART IES, NAMELY, M/S. AUTO CARE, RS.86,735/-, M/S AUTO LINK, RS.77,300/- AND M/S BACHU GARAGE, RS.1,215/- TOTALING TO RS.1,65,250/-. 5 DURING THE COURSE OF SURVEY, STATEMENT OF SHRI VI JAY R. NAIR, MANAGING DIRECTOR OF ASSESSEE COMPANY WAS RECORDED U/S 13 3A OF THE ACT. VIDE QUEST. NO.5, HE WAS ASKED TO EXPLAIN ABOUT THE DISCREPANCY FOUND IN TRIAL BALANCE VIS-A-VIS AUDITE D BOOKS OF ACCOUNTS. AFTER GOING THROUGH THE AUDITED BOOKS OF ACCOUNTS, AS WELL AS LIST OF CREDITORS, HE STATED THAT ALL THE 34 PARTIES IDENTI FIED BY THE SURVEY TEAM WERE NONEXISTENT AND NON-GENUINE, OUT OF THESE 34 P ARTIES, THE TRANSACTIONS APPEARING FOR THE CURRENT FINANCIAL YE AR ARE WITH RESPECT TO ONLY TWO PARTIES STATED ABOVE. HE FURTHER STALED TH AT NO BILLS / VOUCHERS 4 WERE AVAILABLE/ PREPARED FOR EXPENSES DEBITED AGAIN ST THESE CREDITORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 01-02, THE STATEMENT OF SHRI VIJAY K. NAIR WAS RECORDED ON 24. 2.03 WHEREIN HE HAS ADMITTED THAT ENTRIES DEBITING BOGUS EXPENSES A ND CREDITING NON- GENUINE PARTY (AS IDENTIFIED BY SURVEY TEAM) WERE D IRECTLY LED ON COMPUTERS BY WAY OF JOURNAL ENTRY. THEREFORE, THESE ACCOUNTS AND JOURNAL ENTRIES WHICH WERE NOT GENUINE WERE NOT APP EARING IN REGULAR BOOKS OF ACCOUNTS WHICH WERE PREPARED FOR AUDIT AND FOUND DURING THE COURSE OF SURVEY. 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEES REPRESENTATIVE HAS FAILED TO PROVIDE ANY EXPLANATIO N WITH REGARD TO THESE NON-EXISTENT CREDITORS AND AGREED TO ADD BACK TO THE INCOME OF ASSESSEE COMPANY. THE FOLLOWING BOGUS CREDITORS ARE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. A) AUTO CARE RS.86,735/- B) AUTO LINK RS.77,300/- C) BACHU GARAGE RS. 1,215/- --------------- TOTAL RS.1,65,250/- AFTER CONSIDERING THE REPLY / EXPLANATION OF THE AS SESSEE, THE AO MADE AN ADDITION OF RS.1,65,250/- TO THE INCOME OF THE ASSESSEE, HOLDING THAT THESE WERE BOGUS EXPENSES DEBITED BY T HE ASSESSEE FOR THE PURPOSE OF SUPPRESSING ITS TRUE INCOME CHAR GEABLE TO LAX. 3 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE LE ARNED CIT(A) CONFIRMED THE ADDITION IN THE FOLLOWING MANNER:- 3.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. AR AND THE FACTS OF THE CASE. I FIND THAT THE ISSUE UNDER CONSIDERATION HAS BEEN CONSIDERED BY ME IN THE EARLIER ASSESSMENT YEAR I.E. AY 2002-0 3. FOR THE REASONS MENTIONED IN MY ORDER DATED 15-2-2007 IN APPELLANT S OWN CASE IN APPEAL NO. CAB/III/12/05-06 FOR AY 2002-03, IT WAS HELD THAT THE AO 5 WAS JUSTIFIED IN ADDING BACK THE AMOUNT. FOLLOWING MY EARLIER ORDER FOR AY 2002-03 AS ABOVE, THIS ADDITION OF RS.1,65,2 50/- IS CONFIRMED, AND THIS GROUND OF APPEAL THUS FAILS. 4 NOW, THE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE THAT THE FACTS ARE SIMILAR AS THOSE IN AY 2002-03. WE, THEREFORE, FOLLOWING OUR ORDER FOR AY 2002-03 IN THE ASSESSEE S OWN CASE IN ITA NO.2656/AHD/2007, UPHOLD THE ORDER OF THE LEARN ED CIT(A) AND DISMISS GROUND NO.1 RAISED BY THE ASSESSEE. 5 GROUND NO.2 IN THE ASSESSEES APPEAL, THE FACTS O F THE CASE ARE THAT THE AO HAS MADE AN ADDITION OF RS.11,30,24 7/- IN THE FOLLOWING MANNER:- ON THE PERUSAL OF THE PROFIT AND LOSS A/C IT IS NO TED THAT THERE IS CLAIM OF SHORTAGES AMOUNTING TO RS.11,30,247/-. THERE IS NO CORRESPONDING INCOME SHOWN AGAINST THESE SHORTAGES. ON THE OTHER HAND RECORD OF A.Y. 2001-02 SHOWS THAT IT IS THE ASSESSEE'S PRACTI CE TO RECOVER SUCH SHORTAGES FROM THE DRIVERS. HOWEVER, IN THE YEAR UN DER CONSIDERATION, NO RECOVERY HAS BEEN SHOWN. AS THERE WAS NO INCOME SHOWN ON ACCOUNT OF RECOVERY FROM DRIVERS AGAINST THESE SHOR TAGES, THE ASSESSEE'S REPRESENTATIVE WAS ASKED TO EXPLAIN ABOU T THE INCOME AGAINST THESE EXPENSES. THE ASSESSEE' REPRESENTATIV E HAS SUBMITTED VIDE SUBMISSION DATED 16-1-2006 AS UNDER: 'WE SUBMIT THAT AS PER THE CONTRACT, CONTRACTEE ALL OWS US FOR CERTAIN PERCENTAGE OF SHORTAGES INCURRED AT THE TIM E OF TRANSPORTATION OF THE FUEL / CHEMICAL. HOWEVER, ANY SHORTAGES INCURRED ABOVE THE PERMISSIBLE LIMIT IS TO BE BORNE BY US. WE SUBMIT THAT IT IS NOT POSSIBLE TO RECOVER SUCH LOSS ES FROM TRUCK DRIVERS HAVING VERY LOWER SALARY AND THE SAME ARE T O BE BORNE BY US. IT IS ALSO NOT POSSIBLE TO RECOVER SUCH SHOR TAGES FROM THE PERSON WHOSE TRUCK IS HIRED BY US AS WE DO NOT HAVE CONTRACT FOR RECOVERY OF SHORTAGES. WE CONFIRM THAT WE DO NOT HA VE PRACTICE 6 TO RECOVER SUCH LOSSES FROM THE DRIVERS AND DURING THE PERIOD WE HAVE BORN TOTAL SHORTAGES OF RS.11,30,246/'.' THE REPLY OF THE ASSESSEE CANNOT BE ACCEPTED ON THE BASIS OF THE FACT THAT, THERE HAVE BEEN RECOVERIES IN THE PAST, WHICH HAVE BEEN SHOWN AS INCOME AND EVEN EXCESS RECOVERIES HAVE BEEN MADE AN D TAXED IN A.Y, 2001-02. FURTHER, THE ASSESSEE IS HIRING LOT OF VEH ICLES FOR ITS BUSINESS, FOR WHICH SUCH RECOVERIES WOULD NOT BE FOREGONE AS ASSESSEE IS PAYING FOR SUCH SHORTAGES. IT IS NOT POSSIBLE TO BELIEVE T HAT NO RECOVERIES WERE MADE THIS YEAR AT ALL. THE ASSESSEE'S CONTENTION TH AT RECOVERIES WERE SHOWN IN THE PAST OUT OF BOGUS EXPENSES IS FOUND TO BE SELF SERVING AND NOT SUPPORTED BY ANY MATERIAL EVIDENCE. ON THE CONTRARY, DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDING F OR A.Y. 2001-02 THE ASSESSEE HAD MAINTAINED THAT RECOVERIES WERE IN DEED MADE FROM DRIVERS. THERE IS NO EVIDENCE THAT SURPLUS CASH GEN ERATED BY THE ASSESSEE HAS BEEN SHOWN AS CREDIT BALANCE OF RECOVE RIES AGAINST THESE SHORTAGES IN THE PAST. IN THESE CIRCUMSTANCES, THE SHORTAGES CLAIMED BY TH E ASSESSEE ARE DISALLOWED IN VIEW OF THE FACT THAT THE RECOVERIES AGAINST THESE SHORTAGES ARE THE PRACTICE OF THE ASSESSEE AND INCO ME AGAINST THESE RECOVERIES HAS NOT BEEN OFFERED FOR TAX. THE TOTAL ADDITION WORKS OUT TO BE RS.11,30,247/-. 6 THE LEARNED CIT(A) CONFIRMED THE ADDITION OF RS.1 ,33,043/- OUT OF TOTAL ADDITION OF RS.11,30,246/- WITH THE FO LLOWING OBSERVATIONS:- 4.1 IN APPEAL, THE LD. AR SUBMITTED THAT THIS ISSU E HAS BEEN CONSIDERED BY ME IN THE APPEAL FOR AY 2002-03, AND THE ARGUMENTS MADE THEREIN WERE REITERATED. 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A. R AND THE FACTS OF THE CASE. THIS ISSUE HAS INDEED BEEN CONSIDERED BY ME IN A.Y 2002-03. THE DISALLOWANCE RELATES TO SHORT PAYMENT S MADE BY THE CLIENTS OF THE APPELLANT ON ACCOUNT OF SHORT DELIVE RY OF PETROLEUM PRODUCTS. IN THE BUSINESS OF TRANSPORTATION OF PET ROLEUM PRODUCTS, IT IS A WELL KNOWN FACT THAT DURING TRANSPORTATION A SMAL L PERCENTAGE OF LOSS OCCURS ON ACCOUNT OF EVAPORATION, LEAKAGE, PILFERAG E, ETC. IN THE INSTANT 7 CASE ALSO, THE CLIENTS HAVE DEDUCTED THE .NINE OF M ATERIAL SHORT DELIVERED. FROM THE LIST OF CLIENTS, IT IS SEEN THA T THE HULK OF THE TRANSPORTATION CHARGES (RS.5.81 CRORES) OUT OF GROS S RECEIPTS OF RS.7.82 CRORES RELATES TO TRANSACTIONS WITH ONLY ONE PARTY, I.E., M/S. RELIANCE LOGISTICS LID. SIMILARLY, OUT OF TOTAL SHORTAGE O F RS.11,30,246/-, SHORT PAYMENT RECEIVED FROM M/S. RELIANCE LOGISTICS LTD. AMOUNTED TO RS.7,40,978/-. OTHER REPUTED PARTIES WHO HAVE DEDUC TED CERTAIN AMOUNTS FOR SHORT DELIVERY ARE M/S. ASIAN PAINTS LT D., JAYANT AGRO ORGANICS LTD., DEEPAK NITRATE LTD. AND JAYANT OIL M ILLS LTD. THESE REPUTED COMPANIES WHO HAVE FURNISHED CERTIFIED COPI ES OF ACCOUNTS WHEREIN THE SHORT RECOVERY HAS BEEN DULY REFLECTED. TOTAL OF SHORT RECOVERIES FROM SUCH REPUTED COMPANIES COMES TO RS. 9,97,203/-. THE OTHER PARTIES HAVE NOT FURNISHED COPIES OF ACCO UNTS. THE MODUS OPERANDI ADOPTED BY THE ASSESSEE HAS BEEN EXPLAINED AND IS CONSISTENT WITH THE STATEMENT GIVEN AT THE TIME OF SURVEY. THE PURPORTED RECOVERY FROM THE DRIVERS WAS RESORTED TO IN THE PAST FOR MA NAGING CASH FLOW IN THE BOOKS. SUCH SHORTAGES HAVE BEEN DEBITED TO THE SHORTAGE ACCOUNT AND THE PARTIES' ACCOUNTS HAVE BEEN CREDITED WITH T HE CORRESPONDING FIGURE. THIS MODUS OPERANDI HAS BEEN ACCEPTED BY TH E A.O IN THE EARLIER ASSESSMENTS FRAMED PURSUANT TO THE SURVEY. THERE IS NO INDICATION OR EVIDENCE OR ANY MATERIAL ON RECORD TO SHOW THAT ANY RECOVERIES WERE IN FACT MADE FROM THE SALARIES OF T HE DRIVERS. IN MY OPINION, SUFFICIENT JUSTIFICATION DOES NOT EXIST FO R DISALLOWING THE AMOUNT OF RS.11,30,246/-. AT THE MOST, SUM OF RS.11 ,33.043/- (RS.11,30,246 - RS.9,97,203) COULD BE DISALLOWED SI NCE THE ACCOUNTS HAVE NOT BEEN VERIFIED AND VOUCHED BY THE PARTIES D EDUCTING THE PAYMENT. ACCORDINGLY, OUT OF DISALLOWANCE OF RS.11, 30,246/-, DISALLOWANCE OF RS.L,33,043/- IS CONFIRMED AND THE REMAINING AMOUNT OF RS.9,97,203/- IS DIRECTED TO BE DELETED. 7 THE LEARNED COUNSEL OF THE ASSESSEE REITERATED TH E SUBMISSIONS AS WERE MADE BEFORE THE LEARNED CIT(A). THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 8 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RE CORD. ON SIMILAR FACTS IN THE ASSESSEES CASE FOR AY 2002-03 IN ITA NO.2656/AHD/2007, WE HAVE DELETED THE ADDITION. SIN CE THE FACTS INVOLVED IN THE PRESENT ASSESSMENT YEAR ARE SIMILAR , THE ADDITION 8 OF RS.1,33,043/- SUSTAINED BY THE LEARNED CIT(A) IN THIS YEAR, IS DELETED AND THE GROUND RAISED BY THE ASSESSEE IS AL LOWED. 9 GROUND NO.3 IN THE APPEAL RELATES TO CONFIRMATION OF AN ADDITION OF RS.1,67,418/- ON ACCOUNT OF STOCK OF SP ARES. THE FACTS OF THE CASE ARE THAT THE AO NOTED THAT DURING THE S URVEY PROCEEDINGS, AN INVENTORY OF SPARE PARTS WAS MADE W HICH WAS VALUED AT RS.1,67,418/-. THIS INVENTORY WAS NOT ACC OUNTED FOR UNDER ANY HEAD. IT WAS NOT REFLECTED IN THE BALANCE SHEET NOR DID IT FORM PART OF CLOSING STOCK. THUS, IN THE OPINION OF THE AO, TRUE PROFIT HAS BEEN UNDERSTATED. ACCORDINGLY, THIS AMOU NT OF RS.1,67,418/- WAS ADDED BACK TO THE INCOME OF THE A SSESSEE. 10 THE LEARNED CIT(A) CONFIRMED THE ADDITION WITH T HE FOLLOWING OBSERVATIONS:- 6.1 IN APPEAL, IT WAS SUBMITTED BY THE LD. AR THA T THIS IS NOT A CASE WHERE THE INVENTORY FOUND DURING THE COURSE OF SURV EY PROCEEDINGS WAS OFF THE BOOKS. RATHER THE INVENTORY HAD BEEN E XPENSED OUT BY CLAIMING 100% DEPRECIATION SINCE IT CONSISTED OF SM ALL TOOLS LIKE NUTS, BOLTS, CONSUMABLE ITEMS LIKE LUBRICANTS, GREASE, ET C. HENCE, IT SHOULD BE ALLOWED TO BE WRITTEN OFF AS EXPENSES AND NOT CO NSIDERED AS PART OF INVENTORY. 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND THE FACTS OF THE CASE. THERE IS NO PROVISION IN THE DEPRECIATION SCHEDULE FOR EXPENSING OUT THE ____ ETC. BY CLAIMING DEPRECIATIO N @ 100%. THE TOOLS AND CONSUMABLE STORE OF WHATEVER VALUE WOULD RIGHTLY FORM PART OF INVENTORY, WHICH SHOULD BE REFLECTED IN THE CLOS ING STOCK. FAILURE TO DO SO WOULD RESULT IN UNDER-STATEMENT OF THE CORREC T PROFITS. HENCE, IT IS HELD THAT THE AO WAS FULLY JUSTIFIED IN ADDING T HE SAID AMOUNT TO THE VALUE OF CLOSING STOCK. THE ADDITION OF RS.1,67,418 /- IS CONFIRMED. 9 11 THE LEARNED COUNSEL OF THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 12 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE FIND THAT THE AO HAS MADE THE ADDITION OF RS.1,67,4 18/- ON THE GROUND THAT DURING THE SURVEY PROCEEDINGS, AN INVEN TORY OF SPARE PARTS WAS MADE WHICH WERE VALUED AT RS.1,67,418/-. THE SAME INVENTORY WAS NOT ACCOUNTED FOR UNDER ANY HEAD. THU S, THE AO WAS OF THE VIEW THAT TRUE PROFIT HAS BEEN UNDERSTAT ED TO THIS EXTENT AND THIS AMOUNT WAS ADDED TO THE INCOME OF T HE ASSESSEE. IN APPEAL, THE LEARNED CIT(A) CONFIRMED THIS ACTION OF THE AO. HOWEVER, WE FIND FORCE IN THE CONTENTION OF THE ASS ESSEE THAT IN THE LINE OF BUSINESS, THE ASSESSEE IS REQUIRED TO K EEP MINIMUM STOCK OF VARIOUS SPARE PARTS. THE VALUE OF EACH ITE M IS VERY LOW AND THEREFORE THE SAME WERE EXPENSED OUT AT THE TIM E OF PURCHASE ITSELF. THIS PRACTICE WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE AND WAS ACCEPTED BY THE REVENUE AND THEREFORE NO SU CH ADDITION UNDER THIS HEAD IS CALLED FOR. THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) IS HEREBY DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 13 GROUND NO.4 IN THE APPEAL RELATES TO LEVY OF INT EREST U/S 234B AND 234D OF THE ACT. THIS GROUND IS CONSEQUENT IAL. 14 GROUND NO.5 RELATING TO INITIATION OF PENALTY PR OCEEDINGS IS PREMATURE AND IS NOT REQUIRED TO BE ADJUDICATED NOW . THE SAME IS DISMISSED. 10 15 GROUND NO.6 IN THE APPEAL IS GENERAL IN NATURE A ND DOES NOT REQUIRE ANY ADJUDICATION. 16 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 09-02-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 09-02-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S SNITA TRANSPORT PVT. LTD., OPP. YOGESHWAR PE TROL PUMP, DUMUD CHOKDI, N.H. NO.8, BARODA 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-4, BARODA 3. CIT CONCERNED 4. CIT(A)-III, BARODA 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD