ACIT CIR 13(3), MUMBAI V. GOYAL TRADERS, MUMBAI

ITA 4431/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59826 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 09-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 4431/MUM/2010 (ASSESSMENT YEAR: 2003-04) ASSTT.C.I.T. CIRCLE-13(3) GOYAL TRADERS ROOM NO.430, 4 TH FLOOR 212-A, STEEL CHAMBERS AAYAKAR BHAVAN, MK ROAD CARNAC BUNDER NEW MARINE LINES,MUMBAI 400009 VS MUMBAI 400 009 PAN AAAFG 2924 R APPELLANT RESPONDENT C.O. NO.63/MUM/2010 (ARISING OUT OF ITA NO. 4431/MUM/2010) (ASSESSMENT YEAR: 2007-08) GOYAL TRADERS ASSTT.C.I.T. CIRCLE-13(3) 212-A, STEEL CHAMBERS ROOM NO.430, 4 TH FLOOR CARNAC BUNDER AAYAKAR BHAVAN, MK ROAD MUMBAI 400 009 PAN NO.AAAFG 2924 R VS NEW MARINE LINES, MUMBAI 400009 APPELLANT RESPONDENT ASSESSEE BY: SHRI PAVAN VED, DR REVENUE BY: SHRI VIJAY MEHTA, AR DATE OF HEARING: 9-2-2012 DATE OF PRONOUNCEMENT:15-2-2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDERS OF THE CIT (A)-24 MUMBAI DATED 31.03.2010 AND THE CROSS OBJECTION BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE CIT (A). WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND THE LEARNED COUNSEL IN THIS REGARD. THE REVENUE APPEAL IS DECIDED AS UNDER. GROUND NO.1. THE LEARNED CIT (A), ON THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 2 OF 10 ` 10,48,68,269/- MADE OUT OF BOOKS IGNORING THE FACT POINTED OUT BY THE ASSESSING OFFICER IN RESPONSE TO ASSESSEES SUBMISSION FORWARDED BY THE LEARNED CIT (A) THAT THE DIFFERENCE BETWEEN LDT AND TOTAL WEIGHT OF THE SHIP WAS NEVER BROUGHT ON RECORDS 2.1 THE MAIN ISSUE IN THIS GROUND INVOLVES DETERMIN ATION OF WEIGHT LOSS ON DISMANTLING OF SHIPS-WHETHER THE WEI GHT LOSS IS IN RELATION TO THE TOTAL WEIGHT OF THE SHIP OR IT IS I N RELATION TO THE LIGHT DISPLACEMENT TONNAGE WEIGHT OF THE SHIP (LDT). 2.2 THE ASSESSING OFFICER FOR REASONS MENTIONED IN DETAIL IN THE ASSESSMENT ORDER PARTICULARLY IN PARAS 6.1 TO 6.2 3 HAS ENUMERATED THE FACTORS ON THE BASIS OF WHICH HE IS OF THE OPINION THAT THE WEIGHT LOSS IS ALWAYS A MEASURE OF THE TOT AL WEIGHT OF THE SHIP AND IS NORMALLY 2% OF THE TOTAL WEIGHT OF TH E SHIP AND NEVER AT 12%-18% OF THE LDT AS CLAIMED BY THE ASSESSEE AN D ON THIS BASIS THE ASSESSING OFFICER HAS CONCLUDED IN PARA 6 .23 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED A HI GHER WEIGHT LOSS/BURNING LOSS AND THEREBY SUPPRESSED THE SALES OF SCRAP TO THE EXTENT OF ` .10,48,68,269/- WHICH ASSESSING OFFICER HAS ADDED B ACK TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED SALES. 2.3 THE ASSESSEE HAS CHALLENGED THE ABOVE FINDING O F THE ASSESSING OFFICER AND STATED THAT AS IN THE PAST TH E WEIGHT LOSS/BURNING LOSS IN RELATION TO THE SHIP BREAKING INDUSTRY HAS ALWAYS BEEN MEASURED AND ESTIMATED WITH REFERENCE T O THE LDT AND NEVER TO THE TOTAL WEIGHT. IT IS FOR THE FIRST TIME THAT AN ATTEMPT HAS BEEN MADE TO LINK THE WEIGHT /BURNING LOSS TO THE T OTAL WEIGHT- AND THIS IS NOT BASED UPON ANY CONCRETE FACTS AND FINDI NGS OF THE SHIPPING INDUSTRY AND IS THEREFORE NOT ACCEPTABLE AS IT GOES AGAINST THE ACCEPTED NORMS OF THE INDUSTRY. 2.4 IT WAS FURTHER SUBMITTED BEFORE THE CIT (A) THA T THE ISSUE OF WEIGHT LOSS/BURNING LOSS VARIES FROM 12% TO 20% OF THE LDT AND IN THE PRESENT CASE THE NET LOSS CLAIMED BY THE ASSESS EE IS WITHIN THE ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 3 OF 10 NORMS AND THAT ASSESSING OFFICER HAS NOT FOLLOWED T HE DECISIONS OF THE CIT (A) IN OTHER CASES AND ALSO OF THE ITAT ON THE SAME ISSUE INCLUDING THAT OF REPORTS OF EXPERT COMMITTEES, REP RESENTATIVE OF SHIPPING SCRAPS DEALERS AND THE NORMS PRESCRIBED BY THE CIT-7 MUMBAI. THE ASSESSEE ALSO FURTHER SUBMITTED THAT TH E ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT AND F OR THE FIRST TIME BROUGHT OUT A CONCEPT OF ISSUE OF TOTAL WEIGHT WHIC H WAS NOWHERE MENTIONED IN ANY OF THE REPORTS. CONSIDERING THE AS SESSEES SUBMISSIONS THE CIT (A) DELETED THE ADDITION BY STA TING AS UNDER: 2.6 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL, THE REPLY FILED BY THE ASSESSING OFFICER T O THESE SUBMISSIONS AND I AM OF THE OPINION THAT THE DECISI ONS OF LEARNED CIT (A), HON'BLE ITAT AND THE DIRECTIONS OF CIT- VIII MUMBAI CLEARLY ESTABLISH THE FACT THAT THE BUR NING LOSS/WEIGHT LOSS AND LDT HAVE A DIRECT NEXUS AND TH E RANGE IS EASILY FROM 12 TO 20% AND THERE IS NO DOUB T AS TO THE DEFINITION OF THE LDT IN THE ORDER OF LEARNED C IT (A) IN THE CASE OF SS JAIN & CO.(BOM) DT. 23/6/1989 WHEREI N IN PARA 2 IT HAS BEEN CLEARLY DESCRIBED AND THEN THE CONCLUSION HAS BEEN DRAWN THAT THE BURNING LOSS/WEI GHT LOSS IS ANYWHERE FROM 12 TO 20% OF THE LDT. HENCE, FOLLOWING THE PRINCIPLES OF JUDICIAL CONSISTENCY, R EASONING AND ABSENCE OF ANY CONCRETE EVIDENCE TO THE CONTRAR Y TO DEVIATE FROM THE ABOVE THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF CALCULATION IN RE LATION TO TOTAL WEIGHT OF ` 10,48,68,269/- IS HEREBY DELETED. IT WOULD BE NOT OUT OF PLACE TO MENTION THAT THE OB JECTIONS OF THE ASSESSING OFFICER RELATING TO THE IMPOSSIBIL ITY OF SUCH HEAVY LOSS DUE TO CORROSION AND THE FACT THAT IT WOULD MAKE THE SHIP UNEVEN ETC. ARE PROBABLY NOT BO RNE OUT BY THE CONCRETE EVIDENCE ON RECORD IN THE FORM OF EARLIER ORDERS OF LEARNED CIT (A) STATED ABOVE AND HON'BLE ITAT STATED ABOVE, CLEARLY DISCUSSING THIS ISSUE AN D AUDITED BOOKS OF ACCOUNT OF THE APPELLANT UNDER SEC TION 44AB IN WHICH NO DISCREPANCY HAS BEEN FOUND. THUS, THE SAME IS NOT ACCEPTED AND THE ADDITION MADE IS DELET ED AS STATED ABOVE . 2.5 BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTAT IVE REFERRED TO THE ORDER OF THE ASSESSING OFFICER AND EXPLAINED THE CONCEPT OF LDT, TOTAL WEIGHT AND HOW THE ASSESSING OFFICER ARR IVED AT THE NET ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 4 OF 10 SCRAP WHICH THE ASSESSEE SHOULD HAVE GOT AND HOW TH E ASSESSING OFFICER ESTIMATED THE SHORTFALL IN YIELD OF SCRAP. IN REPLY, THE LEARNED COUNSEL SUBMITTED THAT ALL THE REPORTS RELIED ON BY THE ASSESSING OFFICER AS WELL AS THE EXPERTS REPORTS SUBMITTED BE FORE THE CIT (A) INCLUDING THAT OF THE MINISTRY OF SHIPPING, CUSTOMS AUTHORITIES INDICATE THE WEIGHT OF THE SHIP ALWAYS ON THE CONCE PT OF LDT AND NOT ON TOTAL WEIGHT AS WAS CONSIDERED BY THE ASSESS ING OFFICER. IT WAS FURTHER SUBMITTED THAT THE CIT-7 AFTER THE REPR ESENTATION FROM THE SHIP BREAKING INDUSTRY PLACED THE NORMS OF BURN ING LOSS/LOSS UPTO 20% AND THE ASSESSING OFFICER HAD IGNORED THE EXISTING GUIDELINES ON THE SUBJECT. IT WAS FURTHER SUBMITTED THAT WITHOUT ANY BASIS OR CONSIDERATION THE ASSESSING OFFICER ARRIVE D AT 2% LOSS ON THE TOTAL WEIGHT. THE LD. COUNSEL EXPLAINED THE ISS UE BY GIVING THIS EXAMPLE: INDUSTRY NORMS : LDT- 100 TONNES, LOSS PERMITTED( 15%) 15 TONNES NET REALISABLE SCRAP= 85 TONNES ACCORDING TO THE ASSESSING OFFICER : LDT 100 TONNES ADD WEIGHT ADDED LATER 15 TONES TOTAL WEIGHT 115 TONNES - 2% LOSS = 3 TONES (APPROX) NET WEIGHT= 112 TONNES. LOSS 12%. 12 TONNES. (APPROX) REALISABLE SCRAP : 100 TONES. IT WAS SUBMITTED THAT THIS METHODOLOGY OF THE ASSES SING OFFICER WAS NEVER ADOPTED BY ANY AUTHORITY AND REFERRED TO VARI OUS REPORTS AND ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 5 OF 10 CHARTS INCLUDING THAT OF ASSESSING OFFICER TO SUBMI T THAT LDT IS ALWAYS CONSIDERED THE WEIGHT OF THE SHIP AT THE TIM E OF SALE FOR BREAKING THE SHIP AND ON THAT UPTO 20% LOSS IS PERM ITTED DEPENDING ON THE NATURE OF SHIP AND IN ASSESSEES C ASE IT IS ACTUALLY 14.7% WHICH IS REASONABLE. HE FURTHER SUBMITTED THA T THE ASSESSING OFFICER NEVER REJECTED THE BOOKS OF ACCOU NT AND THEREFORE THE CIT(A) ORDER IS CORRECT ON THE FACTS OF THE CAS E. 2.6 WE HAVE EXAMINED THE ISSUE AND CONSIDERED THE R IVAL CONTENTIONS. EVEN THOUGH THE ASSESSING OFFICER TRIE D TO MAKE OUT A CASE OF LIGHT DISPLACEMENT TONNAGE (LDT) AND TOTAL WEIGHT, WE ARE UNABLE TO ACCEPT HIS METHODOLOGY AS THE SHIP WAS SO LD ALWAYS ON THE BASIS OF LDT AND THAT IS THE STANDARD NORM IN T HE SHIPPING INDUSTRY WHICH WAS ADOPTED BY EVERY AUTHORITY OF CU STOMS AND CENTRAL EXCISE AND ALSO THE SHIPPING MINISTRY. EVEN THE EXPERT COMMITTEES WHO STUDIED THE BUSINESS OF SHIP BREAKIN G BUSINESS AND ENVIRONMENT IMPACT ALSO ACCEPTS LOSS IN SHIP BR EAKING VARYING FROM 10 TO 20%, THE STATEMENT OF WHICH WAS EXTRACTE D BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ITSELF IN PARA 5.10 IN PAGE5. THEREFORE, THE CONCEPT OF TOTAL WEIGHT CONS IDERED BY THE ASSESSING OFFICER CANNOT BE ACCEPTED AS IT HAS NO B ASIS AT ALL. THEREFORE, WE AGREE WITH CIT (A) FINDINGS IN DELETI NG THE AMOUNT AS IT IS IN CONFORMITY WITH THE ORDERS ON THE ISSUE OF THE ITAT AS WELL. THE GROUND IS ACCORDINGLY REJECTED. GROUND NO.2 THE LEARNED CIT (A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF ` .25 LAKHS MADE ON ACCOUNT OF LABOUR CHARGES IGNORIN G THE FACT POINTED OUT BY THE ASSESSING OFFICER IN RE SPONSE TO ASSESSEES SUBMISSION FORWARDED BY THE LEARNED C IT (A). 3.1 AFTER COMPARING THE ISSUE OF LABOUR CHARGES CLA IMED BY THE ASSESSEE WITH THAT OF ASSOCIATED COMPANY, THE ASSES SING OFFICER ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 6 OF 10 WAS OF THE OPINION THAT THE ASSESSEE HAS SHORT CHAR GED LABOUR CHARGES TO THE EXTENT OF ` .25 LAKHS AND BROUGHT THE AMOUNT AS INCOME STATING THAT THE ASSESSEE COULD HAVE SPENT T HIS AMOUNT OUTSIDE BOOKS OF ACCOUNT. THE CIT (A) DELETED THE A DDITION BY STATING AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL AND THE ASSESSING OFFICER AND I AM OF THE OPINION THAT AS POINTED OUT BY THE LEARNED COUNSEL THAT IN THE CASE OF THE SISTER CONCERN THE TOTAL WAGES R ELATING TO THE PAYMENT TO LABOURERS IS ONLY ` .7,65,076/- AND NOT ` .38,45,350/- BECAUSE A SUM OF ` .30,80,274/- REPRESENTS WAREHOUSING CHARGES IN MUMBAI AND FURTHE R THAT THE PAYMENTS MADE TO LABOURERS HAVE BEEN DULY RECORDED IN THE BOOKS AND REGISTERS MAINTAINED AND HAVE NOT BEEN DISPUTED AND THEREFORE, ON MERE SUSPI CION CANNOT BE REJECTED AND THUS THE ADDITION OF ` .25 LAKHS MADE BY THE ASSESSING OFFICER IS BASED UPON CONSIDERATIONS WHICH CANNOT BE USED TO ASSAIL THE RECORDS OF THE APPELLANT WHEN NO SPECIFIC DEFECTS H AS BEE POINTED OUT AND THUS THE ADDITION OF ` .25 LAKHS IS HEREBY DELETED. 3.2 AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO CONSIDER THE REVENUE GROUN DS AS NO BASIS WAS MADE FOR MAKING THE ADDITION. AS DISCUSSED BY C IT(A) THE FIGURES WERE WRONGLY COMPARED. ON THE ONE HAND THE ASSESSING OFFICER BROUGHT AMOUNT OF SCRAP SALE AS MENTIONED I N GROUND NO.1 WITHOUT REJECTING THE BOOKS OF ACCOUNT AND FURTHER MADE AN ADDITION OF ` .25 LAKHS STATING THAT THE ASSESSEE COULD HAVE SPEN T AMOUNTS OUTSIDE THE BOOKS OF ACCOUNT WITHOUT ANY EV IDENCE. WE APPROVE THE ORDER OF THE CIT (A) AND REJECT THE GR OUND. GROUND NO.3 THE LEARNED CIT (A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDITION OF ` .10,35,095/- ON SALE OF FURNACE AND LUBRICANT OILS WITHOUT APPRECIATING THE FACT THAT THE ADDITION WAS MADE ON THE BASIS OF AUTHENTICATED DOCUMENTS LIKE BILL O F ENTRIES ETC.. ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 7 OF 10 4.1 THE ASSESSING OFFICER DISCUSSED THE ISSUE VIDE PARA 8 OF THE ORDER AND CAME TO CONCLUSION THAT THE ASSESSEE COUL D HAVE SOLD LUBRICANT OIL AND FURNACE OIL OUTSIDE THE BOOKS OF ACCOUNT AND MADE AN ADDITION OF ` .10,35,095/-CALCULATED AS PER PARA 8.4 OF THE ORDER . IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT (A) THAT THE ABOVE ADDITION HAS BEEN MADE WITHOUT APPRECIATING THAT WH ATEVER OIL IS RECOVERED IS SOLD AND DULY ACCOUNTED FOR. ALSO THE FIGURES FOR GREASE, OIL, THINNER ETC MENTIONED IN THE BILL OF ENTRY ARE INDICATIVE-BASED UPON THE SURVEY REPORT DETERMINED ON THE TANK CALCU LATION BOOK AVAILABLE ON THE BOARD AND NOT PHYSICALLY VERIFIED. THE SHIP BREAKERS DO NOT DISPUTE SUCH FIGURES TO AVOID DELAY IN BEACHING OF THE SHIP. THE OIL AVAILABLE INCLUDES VARIOUS IMPURI TIES 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 INTERNATIONAL PRICE OF PURE OIL, WHEREAS THESE ARE USED OR CONTAM INATED OIL WITH IMPURITIES. THE DETAILS SHOW THAT GREASE IS WORTH O NLY ` .21,463/- FROM 2 SHIPS AND NOTHING FROM THE THIRD SHIP. THIS GREASE IF RECOVERED IS USED IN OWN PROCESS OF CUTTING IN MACH INERY EMPLOYED SUCH AS WHICH, CRANES OR GENERATOR. REGARDING LUBRI CATING OIL, THESE ARE SOLD 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 I N THE DISMANTLING PROCESS OR USED FOR CLEANING PURPOSES. THUS, THE AB OVE ADDITION DESERVES TO BE DELETED, IN VIEW OF THE DECISION OF THE HON'BLE ITAT H BENCH MUMBAI IN THE CASE OF M/S ANUPAMA STEEL L TD AY 1998- 99 (ITA NO. 5136/MUM/2002, PARA-6). 4.2 AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, T HE CIT (A) DELETED THE ADDITION BY STATING AS UNDER: 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL AND IT IS SEEN THAT THE ABOVE ADDITION HAS BEEN MADE ON THE BASIS OF CERTAIN CALCULATIONS TAKEN FRO M THE BILL OF ENTRIES AND AS HELD BY THE HON'BLE ITAT H ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 8 OF 10 BENCH MUMBAI IN THE CASE OF M/S ANUPAMA STEEL LTD AY 1998-99 (ITA NO. 5136/MUM/2002, THE SAME CANNOT BE ADDED BACK MERELY ON THE BASIS OF THE BIL L OF ENTRIES AS IT CANNOT BE PRESUMED THAT SALE HAS ALSO BEEN MADE AT HIGHER PRICE. THUS, THIS ADDITION OF ` .10,35,095/- IS HEREBY DELETED. 4.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE FINDINGS OF TH E CIT (A) AS THERE IS NO BASIS FOR MAKING THE ADDITION BY THE ASSESSIN G OFFICER AND FURTHER THE CIT (A) FOLLOWED THE COORDINATE BENCH D ECISION WHERE SIMILAR ISSUE WAS CONSIDERED. ACCORDINGLY THE GROUN D IS REJECTED. GROUND NO.4 (I) THE LEARNED CIT (A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDIT ION OF ` .40,41,847/- BEING A VALUE OF SPARE PROPELLER NOT FORMING PART OF LDT WITHOUT APPRECIATING THE FACT T HAT PROPELLER INSTALLED IN THE SHIP FORMS PART OF LDT A ND NOT SPARE FOR CONTRACTUAL SALE. (II) THE LEARNED CIT (A), ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, ERRED IN DELETING THE ADDIT ION OF ` .40,41,847/- AS A VALUE OF SPARE PROPELLER IGNORING THE FACT THAT SALE IN SUBSEQUENT YEAR HAS NOT BEEN INCORPORATED IN THE CLOSING STOCK OF THE YEAR EITHE R AS INDIVIDUAL ITEM OR A PART OF TOTAL SCRAP. 5.1 THE ASSESSING OFFICER WHILE COMPLETING THE ASSE SSMENT WAS OF THE OPINION THAT THERE WILL BE SPARE PROPELLERS WHI CH ARE NOT CONSIDERED AS LDT AND ARRIVED AT TOTAL WEIGHT OF TH E INSTALLED PROPELLER AND SPARE PROPELLER VIDE PARA 9.1 AT 73.8 8 TONES. VIDE PARA 9.5 HE ALSO ACCEPTED THAT THE PROPELLER OF SHIP MT AVICENA OF ABOUT 27.24 TONES WAS MADE OUT OF FERROUS METAL LIKE STEE L AND HAS VALUE OF IRON SCRAP. HE ACCEPTED ASSESSEES CONTENTION TH AT THIS VALUE HAS COME WITHIN THE SHIP SCRAP AND THE WEIGHT OF THE PR OPELLER WAS ALSO ACCEPTED AS THREE PROPELLERS ARE FITTED AT THE TIME TO THE SHIP AND THEIR WEIGHT AS PER THE PARAMETERS GIVEN BY THE ASS OCIATION AND THE SHIP SURVEYOR REPRESENTS THE COMBINED WEIGHT OF THE SHIP. HOWEVER, ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 9 OF 10 HE ARRIVED AT SALE OF PROPELLERS OUTSIDE THE BOOKS OF ACCOUNT WITH REFERENCE TO MT AVICENA TO THE EXTENT OF 4.4 MT ONL Y AND OTHERS MAKING ADDITION OF 40.41 LAKHS. BEFORE THE CIT (A) THE ASSESSEE SUBMITTED THAT THE APPELLANT RECOVERED THE PROPELLE RS FROM THE SHIP AVICENA WHICH ARE MADE OF FERROUS METAL AND SOLD AS SCRAP UNDER THE CLASSIFICATION OF STEEL SCRAPS AND INCLUDED IN TOTAL SALE. THE PROPELLERS RECOVERED FROM CASTOR WERE TWO PIECES- ONE WORKING AND ONE SPARE-AS PER MOA-THE SAME HAVE BEEN ACCOUNTED F OR BECAUSE THE TWO PROPELLERS HAVE BEEN SOLD ON 5/6/2007-NEXT ACCOUNTING YEAR AND THERE IS NO SALE WHICH IS NOT ACCOUNTED FOR. 5.2 THIS MATTER WAS ALSO REMANDED TO THE ASSESSING OFFICER AND HIS REPORT WAS OBTAINED IN WHICH THE ASSESSING OFFI CER IGNORING HIS OWN FINDINGS ON MV AVICENA REITERATED THE SALE OF SCRAP ON PROPELLER AT 73.88 MT AND REQUESTED THE CIT (A) TO CONSIDER I T WHILE CONSIDERING ON ADDITION. THE CIT (A) VIDE PARA 5.3 DELETED THE ADDITION STATING AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED COUNSEL AND THE ASSESSING OFFICER AND I AM OF THE OPINION THAT AS STATED BY THE APPELLANT THAT THE SA ME IS NOT ACCOUNTED FOR SEPARATELY BECAUSE THE APPELLANT BEING A SCRAP DEALER ACCOUNTS FOR THE TOTAL SCRAP O F THE SHIP AS SUCH WITHOUT SEPARATELY CLASSIFYING THE SAM E. ALSO, THE FACT OF SELLING THE PROPELLER IN THE SUBS EQUENT YEAR IS CLEAR AND UNDISPUTED THEREFORE, THE ADDIT ION OF ` .40,41,847/- IS DELETED. 5.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXA MINING THE FACTS, WE ARE OF THE OPINION THAT THE REVENUE GROUN DS ARE MISPLACED. FIRST OF ALL THERE IS NO BASIS FOR ARRIV ING AT UNDISCLOSED SALE OF PROPELLERS WHEN THE ASSESSEE HAS ACCOUNTED FOR ALL THE PROPELLERS AT THE TIME OF SCRAP AND FURTHER THERE I S NO BASIS FOR OBSERVATION, AFTER THE REMAND REPORT REGARDING THE ADDITIONAL PROPELLER OF MT AVICENA AS HE HIMSELF ACCEPTED AT P ARA 9.5 THAT THE PROPELLER WERE FOUND AS PART OF IRON SCRAP. THEREFO RE, THE REPLY GIVEN ITA NO 4431 AND CO 63 OF 2011 GOYAL TRADERS MUMBAI PAGE 10 OF 10 TO THE CIT (A) IN REMAND IS NOT IN CONFORMITY WITH HIS OWN FINDINGS IN THE ASSESSMENT ORDER. MOREOVER THE ASSESSEE HAS EXPLAINED THAT THE PROPELLERS WERE SOLD IN THE SUBSEQUENT YEAR THE FACT OF WHICH WAS VERIFIED BY THE ASSESSING OFFICER AND THE CIT ( A). THE REVENUE HAS RAISED GROUND NO.2 STATING THE SAME IS NOT INCO RPORATED IN THE CLOSING STOCK OF THE YEAR IGNORING THE REASON FOR M AKING THE ADDITION BY ASSESSING OFFICER ITSELF THAT THE PROPE LLERS ARE OUTSIDE THE BOOKS OF ACCOUNT. THE GROUNDS ARE NOT ONLY INCO NSISTENT WITH THE FINDINGS ON RECORD, BUT ALSO DIFFERENT FROM THE REASONS FOR MAKING ADDITION AND OTHER FACTS ON RECORD. WE HAVE NO HESITATION IN REJECTING THE GROUND. 2. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. T HE CROSS OBJECTION IS IN SUPPORT OF THE ORDER OF THE CIT (A) WHICH DOES NOT REQUIRE ANY ADJUDICATION. THEREFORE, THE CO IS ALSO TREATED AS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2012. SD/- SD/- ( V.DURGA RAO ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 15 TH FEBRUARY, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI