TMI Blog2015 (9) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimated addition should be restricted to ₹ 50,00,000/in place of ₹ 83,15,244/. - Decided partly in favour of assessee. - ITA No.2924/Mum/2013 - - - Dated:- 31-8-2015 - Sh. A.D. Jain and Rajendra, JJ. For The Assessee : Shri Satish R. Mody For The Revenue : Shri S.S. Rana-DR ORDER PER RAJENDRA, AM Challengingthe order dated 09.01.2012of the CIT(A)24, Mumbai,the Assessing Officer(AO) and the assessee have filed cross appeal raising following Grounds of Appeal: ITA No.3000/Mum/2013 (Assessee s appeal): The Leaned CIT(A) erred in valuing the scrap at estimated market rate and confirming the addition of notional imaginary income of ₹ 83,15,244 and not considering the prudent decision of appellant based on quality of rusted scraps and commercial expediency in disposing the scraps at various sites practically as per business exigencies seeing the operations in Naxalite Hilly areas, non availibity of transports , excise issues and other environmental factors. 2 The Learned CIT(A) erred in taxing the estimated income of scrap which had not accrued to the appellant and thereby brushing aside the concept of real income. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t compared to intake of material in terms of quantity and cost the generation of scrap and amount received from sale of scrap had been very low. He conducted enquiries in the case of M/s.Kamdar Bros.(KB)and M/s. C.J.Steel Corp.(CJSC) i.e.the suppliers of materials to the assessee and held that the transactions between them and assessee were not supported by the delivery challans and/or Weigh Bridge slips.He held that the purchase of material (1225 tons of steel) for repairs was not be acceptable, that the debit of amount under repairs to machinery was not reasonable and excessive. Accordin gly, the accounts of the assessee,to that limited extent,were rejected.But,no specific addition was made towards the scrap generation.The AO also held that expenditure worked out to 51.85% of the revenue generated,that it was is not in tune with the standards of other persons engaged in similar business activity,that he was left with no choice but to estimate the reasonable and allowable expenditure on that account.Finally,he held that 35% of the revenue could be allowed as expenditure on Repair to Machinery.He restricted the claim of expenditure to ₹ 4,97,00, 350/out of ₹ 7,36,29,750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty style, grade and specifications of materials required by the assessee were well known to them,that the assessee would place verbal orders as per their requirements,that the owners were themselves operating the cranes at various sites across the country,that preparing and submitting a physical purchase order for everyday purchases was not feasible for them,that both the suppliers would supply the goods from their godown at Kalambili/Taloja,that the assessee owned a garage near Kalamboli and the supplies from those parties were transported in tempos and trucks to its garage which was 5 kms.from the delivery place,that for that purpose it had incurred expenditure of ₹ 7,04,548 during the year,that the above modus operandi was duly supported by the affidavits given by KB and CJSC along with confirmation of accounts.With regard to the weigh bridge slips it was stated that there was no reliable weight bridge in Kalamboli area,that the weighment shown in the purchases of KB was taken to be correct since it was made at the manufacturing unit of M/s. Uttam Galva or M/s.Jindal Steel or their distributors,that similar was the case CJSC,that a statement on oath of one of the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Chartered Engineer was of no help because same was given on 12/12/2011,that the scrap was not inspected during the relevant period,that the value mentioned by the Engineer could not be taken into cognigance,that the observation of the AO with respect to low generation of scrap was appeared to be correct. However,the FAA was of the opinion that the conclusion drawn by the AO in estimating 35% of the revenue generated as expenditure incurred for repairs to machinery was not acceptable.He held that the conclusion of the AO was not supported by any corroborative evidence nor was supported by any comparable cases in similar business activity, that the correct method of arriving at the probable income on account of sale of scrap earned by the assessee was ascertaining the average purchase cost of the material used for repairs and the value of scrap at a percentage of average purchase cost of the material which would fetch in the market,that out of total repair and maintenance expenditure of ₹ 7,36,29,350/, ₹ 6.36 Crores related to purchase of major items like patra,iron angles and bushings,that balance amount of ₹ 99,69,848/pertained to other small items and labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He contended that the assessee had claimed 51% of the gross receipts towards repairing expenses,that one of the bills produced by it did not bear anybody s signature, that the valuation was done by the chartered engineer after three years, that there was no proof of delivery of goods from KB and CJSC. 5. We have heard the rival submissions and perused the material before us.We find that the AO had made an addition of ₹ 2.39 Crores to the income of the assessee ,that the FAA reduced it to ₹ 90.04 lacs,that the assessee was doing its business in hilly and naxalite areas also, that it had produced necessary documentary evidences like delivery challans and transportation of goods before the AO. The fact of assessee carrying out its business operations in naxal area is proved by the documents submitted in the paper book.We have gone through the comparison of hiring charge received vis a vis scrap generated and repairs claimed by it for the AY.s.0304, 0607 and 0708 respectively.From the statastics (Pg no.41 and 42 of the paper book) it is found that the repairs claimed by the assessee amounted to 47.02%, 51%, 52.62% respectively in the above mentioned AY.s.with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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