Evaporation loss in petrol and diesel stock accounts: 1% was treated as reasonable, and only excess loss was added.

In petrol and diesel stock accounts, evaporation or handling loss of up to 1% was treated as a reasonable norm, so only the excess over that level could justify an addition. The Tribunal relied on an earlier co-ordinate Bench view accepting 1% as normal in similar circumstances and found no reason to depart from that approach. On that basis, the restriction of the addition to the amount beyond 1% was upheld, and the Revenue's challenge failed.

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Issues: Whether the Revenue was justified in challenging the restriction of addition made on account of excess evaporation or handling loss in petrol and diesel accounts, and whether 1% loss could be treated as reasonable.

Analysis: The assessee, a petrol pump operator, had claimed evaporation and handling losses in petrol and diesel stocks. The Assessing Officer treated the loss as excessive and made an addition for alleged suppression of sales. The appellate authority restricted the disallowance by accepting 1% loss as a reasonable norm. The Tribunal noted that an earlier co-ordinate Bench had accepted evaporation loss up to 1% as normal in similar circumstances and found no reason to depart from that view.

Conclusion: The restriction of the addition to the extent of loss beyond 1% was upheld and the Revenue's challenge failed.

Final Conclusion: The allowance of evaporation or handling loss at 1% and the consequent deletion of the balance addition stood affirmed, resulting in dismissal of both Revenue appeals.

Ratio Decidendi: Where comparable precedent accepts a prescribed or normal evaporation loss of 1% in petrol and diesel accounts, only the excess beyond that level can be added as income.

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