9911796707
TMI Blog2018 (2) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... of during the course of hearing. We therefore condone the impugned delay of 11days in filing of assessee's appeal ITA No.2102/Ahd/2014. The same is now taken up for adjudication on merits. 3. The assessee appears to have pleaded three substantive grounds in its instant appeal inter alia challenging the CIT(A)'s order upholding Assessing Officer's 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 basis as well as in partly concurring with unaccounted oil sale of Rs. 10,57,240/- to the extent of Rs. 1lac only; respectively. The Revenue's appeal ITA No.2276/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 assessee's first grievance of rejection of books of accounts by lower authorities after invoking Section 145 of the Act. The assessee admittedly is engaged in ship breaking business. The Assessing Officer rejected its books after considering average purchase price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of the total weight can be ascertained only after the goods weighed and sold. Likewise, it is impossible to arrive at the daily 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 excise Authorities and VAT authorities of the state government also. It was also argued by the appellant that in the past the book results in the cases of ship breakers 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 spirit considering the overall factors and circumstances affecting to the ship breaking activity. 4.5. It is true that considering the nature of the ship breaking industry it is difficult to maintain the day-to-day consumption and shortage records because of the volume and various coincidences in measuring the 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 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with these types of items are mentioned. These bills also do not indicate the name of ship from which the same have been recovered and sold; therefore there is no clue as to whether the ship from which it was recovered was a war-ship or a small fishing-trawler. Be that as it may, it certainly indicates that the engine / DG set are capable of being sold as such. 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 presumed that though the engine / DG set may be old, still they are in running condition. 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 situation, 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 light of detailed clarification given by the assessee at the time of hearing. The AR 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 evidences. 5.8. I have considered the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Likewise 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. Similar 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 concrete was of 460 MT which was part of the total purchased tonnage. If the cement 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 claim of shortage by the appellant is found reasonable as per the expert committee report (supra) and also in view the various decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 breakers 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 immediately 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 reason has reduced the gross profit by Rs. 43,34,850/- for the total weight of 17339.399 MT. 5.14. Similarly the average sale price during the year under consideration was at Rs. 16,697/- per M.T. as against Rs. 19,916/- in the immediately preceding year. Thus, there was heavy fall in the average sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with the decision taken in the above referred appellate order. Considering, therefore the totality of the facts, the Assessing Officer is directed to delete the addition. " 22. We have considered rival contentions and find from 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 sales of chain, electrical equipment, life boat, empty gas cylinder, steel bunker, air tanks, electric motors, films, engine parts, timber, TV, furniture, etc., which are included in inventories and the Assessing Officer has even not given credit for such sales recorded by the assessee. 23. The learned AR cited the decision of co-ordinate Bench in the case of M/s. Western Ship Breaking Corporation (supra) wherein under similar circumstances, deletion of addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Haryana Steel Company (supra). 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 finds place in Annexure- 2 prepared by the AO himself. We find that AO has not brought anything on record to prove that recovery of non ferrous metal 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 engines amounting to Rs. 15 lacs. While finalising the order, AO has mentioned that the sale of the main engines of the ships; which were heavy machineries; had not been reflected at all by the assessee in its books of accounts. In the appellant proceedings, FAA found that assessee had sold the engines, that Annexure-2 of the assessment order and the description therein given by the AO proved the fact of sale of engines. He deleted the addition made by the AO. 3.3.a. We find that FAA has given categorical finding of fact abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom alleged dismantled ships by the appellant also does not contain any specific detail. In this background of what is discussed 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 such engine and sell the same by weight as scrap. The details furnished also do not indicate the nature of sale of important spare parts retrieved from alleged breaking of engine. In such circumstances, I am not fully inclined to accept the 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 any help because the name of ship from which it was retrieved is not even mentioned much less any technical details or at least the HP of such engine. The appellant 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 without cut or by cutting them in pieces as scrap has been shown or lying in the closing stock. On totality of the facts and circumstances, I partly agree with the AO's observation but not with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd substantive ground. 11. This leaves us with the last common issue of unaccounted sales of oil addition of Rs. 10,57,240/- made in course of assessment 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 submission 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.l0,57,240/- on account of unaccounted sales of oil. The AO has discussed the relevant facts in the assessment order. The assessee's reply is also reproduced 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 out by the Customs officials in the high-seas where the ship is delivered and anchored. The quantity of oil can only be estimated as such oil is lying in tanks. There has to be some consumption of oil when the ship is brought from high sea to the plot for breaking .However, when the ship is in the process of dismantling, there is no guarantee that the assessee will get the same quantity of oil mainly because there was no actual weighment done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring 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 bottom of tank. The quantity of oil and other items are being inventorised as soon as the ship reaches anchorage point for duty purpose. Ships remain at anchorage point waiting for permission for beaching. Thus it remains at the anchorage for four-five days depending on availability of a berth and other climatic condition at beaching point. It consumes oil during these days. Such consumption is dependent 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 by installing temporary pipe fittings. The appellant is engaged in business of ship breaking and its attention is mainly on breaking of ship and sale of scrap obtained. Sale of oil and other items is not their main job. The AO has not pinpointed any unaccounted sale. He has totally disregarded the fact that at Alang ship breaking yard there is 24 hours Excise barrier a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted by the Assessing Officer between the date of anchorage and date of beaching is also not known. We 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 must have consumed oil and thereafter, during the voyage from the point *of anchorage to the beaching point also oil must have been consumed. It was clarified to the Assessing officer that the bunker report was prepared on the date of anchoring. The said report never considers the frozen "waste at the bottom of the tanks. While making the addition, the AO has failed to appreciate the fact that substantial oil being consumed from the date of arrival of ship at anchorage to the date of beaching which depends upon various factors such as life of ship, type of engine/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 always inclusive of the frozen waste, in reality the actual available oil is even less than -what is shown in the bunker report. As far as the consumption of oil during the anchorage is concerned, the same depends on BHP of the ship. 18. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) relied upon the order of the AO. Authorised Representative submitted that the AO had committed mistake while passing the assessment order, that out of 301 MT oil, 224 MT oil was sold by the assessee and information 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 the paper book. 2.4. We have heard the rival submissions and perused 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. Page 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 furnace oil.FAA has verified the sale bills along with the details of purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) deleted the addition by stating as under:- 4.2. I have considered the submission of the learned Counsel and it is seen that the above addition has been made on the basis 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 back merely on the basis of the bill of entries as it cannot be presumed 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 are 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 and further the CIT(A) followed the Coordinate Bench decision where similar issue was considered. Accordingly the ground is rejected. " - In the case of M/s. Western Ship Breaking Corporation, Bhavnagar the Hon'ble ITAT, Rajkot Bench in ITA No.4651/Ahd/1995 vide order dtd. 01.09.2004 has made the observations as under:- "We have considered rival submission of both the parties, looking to the facts and circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making the addition. But at the same time, the possibilities for leakage of revenue cannot be ruled out and therefore I confirm the estimated 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." 12. Heard rival submissions reiterating both parties' respective stands. The Assessing Officer admittedly made the impugned addition after holding that the assessee had sold oil in ship's engines after they were taken to its ship breaking yard. We find at this stage that neither the assessee has discharged its onus that none of the ships concerned had oil in its fuel tank nor Revenue has proved the exact quantity thereof since the Assessing Officer chose to make the impugned addition on estimation basis. We accordingly see no reason to interfere with learned CIT(A)'s conclusion restricting the impugned addition to a lump sum amount of Rs. 1lac only. Both assessee's as well as Revenue's substantive ground(s) fail accordingly. 13. We quote our above detailed discussion to partly accept assessee's appeal ITA No.2102/Ahd/2014. The Revenue's cross appeal ITA No.2276/Ahd/2014 is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
